Docoh
Loading...

PLUG Plug Power

Participants
Teal Hoyos Director, Marketing Communications
Andy Marsh Chief Executive Officer
Paul Middleton Chief Financial Officer
Chris Van Horn B. Riley FBR
Eric Stine Craig-Hallum
Colin Rusch Oppenheimer & Company
Jed Dorsheimer Canaccord Genuity
Amit Dayal H.C. Wainwright
Stephen Byrd Morgan Stanley
Craig Irwin Roth Capital Partners
Jeff Osborne Cowen and Company
Call transcript
Operator

Greetings, and welcome to the Plug Power Fourth Quarter and Year End 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Teal Hoyos, Director of Marketing Communications. Thank you.

You may begin.

Teal Hoyos

[Technical Difficulty] and year-end earnings call. I would like to begin by reminding everybody that this call will include forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We believe that it is important to communicate our future expectations to investors.

However, investors are cautioned 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 risks and uncertainties discussed under Item 1A Risk Factors and our most recent annual report on Form 10-K as well as other reports we filed from time to time with the SEC.

These forward-looking statements speak only as of the date in which the statements are made, and we are not under any obligation and expressly disclaim any obligation to update any forward-looking statements after this call.

In today’s call, we will also refer to certain non-GAAP financial measures. Definitions of these non-GAAP financial measures are available in the presentation accompanying this call.

At this point, I would like to turn the call over to Plug Power's CEO, Andy Marsh.

Andy Marsh

Thank you, Teal and thank you everyone for joining our fourth quarter and year-end conference call. My remarks today will be brief since we provided an updated in January. But let me just highlight a few items before Paul and I take questions. The fourth quarter and 2019 were record years for gross billings and EBITDA.

For the fourth quarter, the company had $94.5 million of gross billings; Plug Power achieved $10.9 million in EBITDA.

For the year, the company met our gross billings target and far exceeded our EBITDA target of breakeven achieving $9.2 million. I believe this year's financial results demonstrates the viability of our business call to achieve $1 billion in revenue and $200 billion in EBITDA in 2024.

For 2020, we expect $300 million in gross billings and $20 million in EBITDA. Today, as we speak, we have over 90% require backlog to meet the year. The backlog is supported by over three pedestal customers supported by two large recent orders.

Our investor letters provided more highlights for 2019 and [indiscernible] expected 2020 events.

Paul and I are now happy to answer any questions the analysts may have.

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Chris Van Horn with B. Riley FBR. Please proceed with your question.

Chris Van Horn

Good morning everyone. Thanks for taking my call.

Andy Marsh

Good morning Chris

Chris Van Horn

So, I guess since the last time we spoke there has been some news on a macro level around coronavirus and just wondering if you see any impacts to your business or if there is anything to think about there?

Andy Marsh

Good questioning Chris. I was prepared for that to be the first question. And like most companies we are following the advices of CDC in the World Health Organization, another appropriate authority. The key issues for us has really been monitoring our supply chain. We saw a 2 week to 3 week disruption in China, but you know at the moment all of our Chinese suppliers are operating and we see many of them are working over time.

We’re also tracking our other suppliers that have dependencies in China and their reports are similar to our experience. We don’t see the issues having any impact on the first quarter and we don't expect any revenue impact for the year. We’ve seen no changes with our customers. Like everybody else, we’ll continue to monitor, but to us the key announcement is supply chain and it seems to be back up in functioning and beginning to accelerate.

Chris Van Horn

Okay. Got it. Thank you for that color. And then, since we’ve last spoke, you obviously announced that you’re part partnering with Lightning Systems, you know maybe a little bit more detail there and what role you're going to play and anything more about that partnership?

Andy Marsh

Sure.

So, as you know Chris, we have a number of pedestal customers and some of them that we have in common with Lightning.

We’re working with them to put some class 4 and some class 6 products on the road in the coming half year and that – what we’ll be providing is the engine for the products if you will sell modules, the stacks, the fuelling system and they will do the truck integration, which had a great deal of experience in battery electric vehicles, and now they’re extending into fuel cell electric vehicles of course customers have identified some of the issues associated with these when you start thinking about range and weight.

Chris Van Horn

Got it.

Okay. And then as we look through 2020, maybe you could remind us of what the pipeline looks like? Obviously, you're going to have, you’re guiding for pretty strong growth, and I think a bulk of that is going to come in the back half of the year. Please correct me if I'm wrong there.

Just what does the pipeline look like and you know in the past you’ve highlighted, you know you see certain announcements coming, is there any update to that cadence as well?

Andy Marsh

Sure, Chris. We’ve never been in a better position. We're sitting here today with 90% of what the $300 million we’re targeting for the year already in-house for delivery.

So, when we look at this year, I would say that second and third quarter will actually both be very good with many of the deployments happening in those quarters.

So, it will be a bit more front-end loaded, especially seeing the second quarter, I would think that coming out of the first half of the year, you know probably be close to 37% to 40% of our deliveries for the year.

So, bigger numbers than we’ve traditionally have seen. When it comes to announcements, good deal of the work we’re doing today is associated with hydrogen, and we would expect not only hydrogen, obviously as we outlined in our five year plan we’re targeting another pedestal customer in our material handling business and we expect to see expansion for on-road vehicles in the coming year.

Chris Van Horn

Okay. Thank you so much for the time this morning.

Andy Marsh

Great, Chris.

Operator

Thank you.

Our next question is from Eric Stine with Craig-Hallum. Please proceed with our question.

Eric Stine

Hi, Andy.

Andy Marsh

Good morning, Eric.

Eric Stine

So, I just wanted to start with the third, I guess you call it pedestal customer or mega customer and I know speculated to be Home Depot here, but you know you’re starting to get more details on that and just wondering how we should think about that in the context of a Walmart and an Amazon. I mean do you see them just clearly you gave the number you expect in 2020, do you view this in terms of the overall either per year overall opportunity kind of in the same light as those two other customers?

Andy Marsh

Great question, Eric, and the answer very simply is, yes. Like Amazon and Walmart, we have plans with – shared plans with them, about how our products will roll out over the next 3 years to 5 years and the same goes for the same pedestal customer. And they will be in the same range as Walmart and Amazon on an annual basis.

Eric Stine

Got it.

Okay. Maybe just turning to on-road a little bit, a StreetScooter, you mentioned that program on pause and I know they have been in the press talking about trying to figure out kind of what their strategy is going forward, you mentioned that you’ve got the big plan is seeing a lot of interest, is that something you think revives and that it is going forward with StreetScooter or do you expect to go after that opportunity with some other party?

Andy Marsh

You know, we’re sorry about, we’re sorry to see those StreetScooter is encountering financial difficulties whether it be battery electric vehicle program, you know I will continue the remaining contact and work with them, but look I think that the press has been pretty clear that they’re really stepping back to kind of understand what their next steps are and so we have no choice, but to continue to work with others and look at opportunities for the same end customers.

We do have Eric, a number of vehicles and other activities ongoing, just a step back we are ProGen testing going on with full forward large OEMs and with one of them we’re rather detailed system negotiations discussions, and I think the first question today was about our recent announcement with Lightning Systems, and you know we’re looking at how to leverage that, especially with our pedestal customers, and we are continuing to pursue other areas, maybe not how you think about it on road, but no ground support equipment. When I left my office today, I saw a notice about another ground support equipment deployment we’re looking at.

We have activities going on aviation, which are more long-term, and some large scale back up power, you know I would like to emphasize that we’re really disappointed about the StreetScooter activity and word stands in the pause, but it does have no impact from this year's performance, and with all the other activities going along we see no impact for 2024 and beyond.

Eric Stine

Good.

Okay. Maybe last one for me and just an update, I know you’ve been targeting on something with an industrial gas player or just an expansion of your hydrogen strategies, so maybe you could just kind of give us some updated thoughts there that would be great?

Andy Marsh

So, it is as you know Eric, at the Plug Power symposium we were pretty clear that by 2024 we’ll be selling 85 tons a day. We look to be generating half of that ourselves and we’re looking to have more than half of that being green hydrogen.

We’re engaged with many stakeholders as that includes industrial gas companies, as well as electrolyzer companies and others, and I’d just say that probably the more I spend more time on hydrogen with the team that we have engaged with that led by [Tim Cortez] and I actually do with fuel cells today, and I expect that over the coming years, it will be really clear how we will be in position to generate more than half the hydrogen ourselves and have more than half the hydrogen green.

Eric Stine

Got it. Thanks for that.

Andy Marsh

You're welcome.

Operator

Thank you.

Our next question is from Colin Rusch with Oppenheimer & Company. Please proceed with your question.

Colin Rusch

Thank you so much guys.

Andy Marsh

Good morning, Colin.

Colin Rusch

Hi.

We’re excited about over the road opportunity for you guys, but in shorter-term with the material handling, I appreciate the color on that, but can you talk a little bit about the pipeline of activity you’re looking at and obviously you have these high-profile concentrated customers, but we would love to understand a little bit, you know what the next layer down of smaller customers that can supplement that growth look like and how you see that flowing through the order book and into revenue?

Andy Marsh

Good question Colin. We’ve never had a stronger demand for the product, and I think when you have customers like Amazon and Walmart being really so positive about the technology that that information filters down to others customers.

Over the past four, five months we’ve actually expanded our sales force almost double the size, mainly because of all the inbound interest in being able to manage and help convert these customers.

We have not only looking to sell directly back to the smaller customers; we’ve positioning our products to go through channels. We’ve talked about ENGIE, we've talked about some of the activity in Europe for positioning the products, but here in North America we’ve – there are a number of independent dealer networks that across the country and we’re specifically in areas like Chicago and Detroit we’ve been setting up partnerships with some of them to help position our products.

We have a rather ambitious goal for 2021 also, and we need to add an additional pedestal customer, but we do see, I think that over the coming year you will see lots of smaller customers beginning to help feeling that book. I also, though should add Colin that, and we haven't touched on it today is our activity in Europe.

So, few of our pedestal customers have positions in Europe and we’re in much better position because of the success we’ve had here in the U.S. with them starting to do deployments outside the United States, which will also help grow this business.

Colin Rusch

That I think will be helpful. And then I guess this one is for Paul, you know one of the things that seems like you guys are in a position to do is, optimize your cost of capital on the structured finance side, given some of the PPA agreements and some of the other sources of capital, can you just give us an update in terms of progress on that, you know especially given the rate environment? You know, how soon or how close you might be to be able to refinance some of those pieces of paper and reduce the cost capital?

Paul Middleton

Yes. Thanks Colin. I agree, I think closing the year with positive EBITDAs and closing the year with close to 140 million on my balance sheet in liquid cash that I could use to fund this year's pipeline and guidance this year that we’re, you know we’re solidly moving into positive EBITDAs, where are factors that are driving or strengthening our position and increasing the availability of options to us.

I have more inbound calls from capital players that are kind of moving up the scale of optionality to us than we’ve ever had before, and I’m focused on it full-time and I think you should see something in the near term in terms of structures and improvements as we move through that scale in the course of the year. And, good news, success begets success so we certainly envision that translating into leverage and power to reduce that cost of capital in the near-term.

Colin Rusch

Great. I take them off-line. Thanks guys.

Andy Marsh

Thanks, Colin.

Operator

Thank you.

Our next question comes from the line of Jed Dorsheimer with Canaccord Genuity. Please proceed with your question.

Jed Dorsheimer

Hi, thanks for taking my question.

Andy Marsh

Good morning, Jed.

Jed Dorsheimer

Good morning.

So, I guess first question just on the market for material handling, now that you have, you know you are starting to make decent penetration with the main players in the market, I’m curious what do you estimate your penetration or I should say the penetration of fuel cells into that market is, and then do you define the market is just distribution centers with 15 or over or 50 or over forklifts? Or do you also include sort of the last mile stores?

Andy Marsh

Good question, Jed.

So, when we look at the penetration rate, we still have a large, large market opportunity.

So, today, there is approximately 6 million forklift trucks in the world, which based on the energy source of those forklift trucks it’s kind of a turnaround time of about every four years.

Our penetration rate is relatively minor, compared to the overall opportunity.

So, when you look at it, it’s under 1% today.

So there is a huge, huge market opportunity for the company to continue to expand.

You know, we do focus on distribution centers and manufacturing facilities, and I think over the next 3 years to 5 years that will be the market.

As hydrogen becomes a more ubiquitous fuel. There actually be certain advantages that you could have at stores, you know you take a lumber – your company may sell lumber and add you know 5 or 6 forklift trucks, you know, having used batteries often to create issues, especially when you are hiring 16, 17-year-old young adults and not remembering the charge the batteries and items like that, so long-term we do see opportunities there, but the main focus over the coming 3 years to 5 years will be in distribution centers manufacturing facilities and that’s a huge market that we can continue to penetrate.

As one of the reasons that on an earlier question, I talked about now that we have the larger customers, we’re beginning to spend time thinking about the developing distribution centers to reach smaller customers. Distribution products, yes.

Jed Dorsheimer

Got it.

So, if we – if I just take what I – thank you by the way, so if I just repeat back what I heard, you know if I look at the total penetration still relatively low, but most of that is tied up in sort of the retail stores where you might have like a Home Depot for example, when I go up to my local Home Depot they probably have 10 or 15 stackers that have the led asset, but their distribution centers are going to have 50 with the hydrogen. Of those distribution centers, if you will, where the value proposition is very clear, what percentage of those have you now penetrated?

Andy Marsh

So, again, if you kind of look at the math, call it, again, less than 1% or 2%.

Jed Dorsheimer

1% or 2% of the main [indiscernible]?

Andy Marsh

Right. All the distribution centers. No, so if somebody like Walmart is much higher, so with Walmart that number is over 30% and others obviously Amazon is a higher number, but even with them, I mean, I think one of the beauties of this business model is that there is a recurring aspect so you can see these customers buying new fuel cells every six years or so and then you have the continuous revenue streams associated with hydrogen as well as aftermarket service.

Jed Dorsheimer

Got it.

And so as we start thinking about new applications and segmentations such as the class 3 through 6 medium duty trucks, should we expect that where you’ve had success in the infrastructure is already there at a Walmart or Lowe's or Home Depot, for example, that we should start to see that business grow at a faster rate than the addition of other distribution centre customers?

Andy Marsh

Let me – I hope I answered your questions Jed, right, and re-ask if I don't. When I look at some of our largest customers, this whole issue of hydrogen infrastructure versus fuel cells where you're going to get the fuel, you know we’ve actually are addressing with them.

So, if you look at this year, you know literally with a couple of our pedestal customers, you could drive across the country, maybe get lost to Lowe's in West, you know stopping at distribution centers and refilling the units up. And to me that, you know when we look at we’re adding 35 more this year, you see that continuous growth.

The obvious target for fast growth in these markets, but with customers and we have today who have hydrogen infrastructure who understand the value of hydrogen and that we view and from our discussions view is a key to expanding this market and business. And I think it’s one that integrators and OEMs respect when they understand the breadth and depth of what we’ve done with hydrogen.

Jed Dorsheimer

Got it. That’s useful. I’ll take the rest offline. Thank you so much.

Andy Marsh

Thank you, Jed.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Amit Dayal with H.C. Wainwright. Please proceed with your question.

Amit Dayal

Hi, good morning everyone and thank you for taking my questions.

Andy Marsh

Thank you, Amit.

Amit Dayal

Hi Andy, good morning.

So, in the context of you know your $1 billion revenue guidance for 2024, you know how are we planning for the infrastructure build-out to support these levels of revenues and how much of this will Plug after shoulder?

Andy Marsh

So, Amit let me – I think there is a combination.

I think that Plug has not really shouldered the infrastructure that we’ve done for Walmart and Amazon, you know I do not expect the shouldering large much of that infrastructure build-out.

So, I would say that I don't see that as a large cost to us.

I think what my point on hydrogen meds is that we’re sitting here having build-out infrastructure for five years, having really turned it into a product and that our customers today have the infrastructure and we have our access to the hydrogen that makes it work and because we’re looking at more fleet type vehicles, distribution and distribution centre, the cost of infrastructure to put vehicles on the road is much lower than if someone was starting from scratch. Hope that answers your question?

Amit Dayal

Yes. And I can follow up on that off-line as well, but it’s helpful. Thank you. And then in the context of customer additions, you know more volumes coming through now, you know deployments continuing at a faster pace, what is the trajectory of lowering cost of the ProGen engine and other solutions as you scale, will you be able to capture a little faster then maybe how people are thinking about it? Any color on that would be helpful?

Andy Marsh

So, I’ll talk the cost and I’ll let Paul kind of talk about margins and, you know if you look at – we’ve been on a learning curve of 25% every time we’ve doubled the number of units in the field.

So, the interesting question is, do you remain on that learning curve? And you know if you take a step back, I think the work we’ve done, especially on stacks bringing our own MEA's in-house, the work on the metal plate stack is simplification electronics, I think through now through 2024 of our product roadmap and technology roadmap, you know continues to support those kind of cost declines.

I think I’ll let Paul answer Amit your question about margins.

Paul Middleton

Sure. And you know the good news for blog is the things are consistent. I mean, we’ve talked in the past we’re still only using utilizing this manufacturing capacity around 25%, 30%.

So, as we grow volumes again this year that’s tremendous leverage opportunities.

As we grow scale, we continue to get greater leverage on our supply chain and some of the things Andy talked about, as well as other vertical integration things we’re doing are having very impactful contributions to our margin levels.

And other dynamics, including more sites give us greater leverage on our service techs and our resources there.

So, you're going to continue to see a real strong margin progression this year as we saw last year and we’re going to keep focused to make sure we keep that margin trend moving in the right direction

Amit Dayal

Thank you, Paul.

Just maybe one last one from me, with respect to the StreetScooter news, would there be any interest from you guys to just acquire that at throwaway prices and may be take more control of your on-road strategy?

Andy Marsh

That’s not our approach at the moment Amit. We believe that the real value is in our technology and that we’re not looking to become a system integrator.

Amit Dayal

Understood. That's all I have guys. Thank you so much.

Andy Marsh

Okay.

Operator

Thank you.

Our next question comes from Stephen Byrd with Morgan Stanley. Please proceed with your question.

Stephen Byrd

Hi good morning.

Andy Marsh

Good morning, Stephen.

Stephen Byrd

Most of my questions have been addressed. I just had a high-level question on green hydrogen, there’s certainly, I think it’s fair to say surging interest in the topic, a lot of fairly exciting developments, at a high level, do you have any observations that you could share in terms of progress down the cost curve technology improvements, scale improvements, other drivers that just feels that as you start to deploy green hydrogen that could open up a greater sales growth, more clients will be interested in deploying hydrogen-based solution when it’s completely different by renewable energy, but just any high-level observations from what you’re seeing?

Andy Marsh

Sure. Stephen, I would agree that our customers across the board are interested in reducing their carbon footprint and I think obviously there’s commitments from stakeholders from investors to employees that striving, and customers that’s striving that desire.

So, when we look at there is demand, I think that the key item than becomes how you generate green hydrogen, and ultimately what the economic value is.

Now, I would say that some customers may be willing to pay a slight premium for green hydrogen because it aligns with their corporate sustainability goals.

So, you know when we look at – when we think about hydrogen green, we think about both electrolyzers and renewable natural gas.

As you know that the availability, especially when your curtailed renewable energy from solar or wind in certain areas of the world can be quite attractive if you’re generating that hydrogen through electrolyzers at the right spot. We see that at $0.04 to $0.05 of kilowatt hour.

You can start making hydrogen, which is competitive with the cost of generating hydrogen from natural gas.

When the renewable natural gas, it’s probably a little bit more complicated, I think mainly because of availability. Availability I think the benefit in the subsidies from renewable natural gas is certain areas is quite high, which makes the price look more competitive. Ultimately, I think that there will be a mixture of both, but I think that over the next 2 years to 3 years as the cost for electrolyzers continue to decline that the competitiveness of green hydrogen with green hydrogen with the traditional hydrogen becomes much more interesting.

I guess I would also add, I almost look at it like I look at electric vehicles. Ultimately, whether it’s today or whether it’s four, five years out, the cost of electric vehicles going to be lower cost in internal combustion engine.

Just fundamentally simpler, and I think you see the same kind of, when you start looking at electrolyzers versus reformers you can actually see that become even a simpler when you look at the face of coat structure, it’s just fundamentally going to be lower in cost because it’s less complicated.

And so, I think there was same path.

I think in many ways even though there are different technologies, you know the roadmap for cost downs are very, very similar. Hope that was helpful?

Stephen Byrd

Yes, that was very helpful. It sounds like, as you mentioned, over the next year you do expect to see some fairly significant further improvements in the cost of electrolyzers and the resulting hydrogen that comes out, and if that’s achieved, it sounds like if I’m understanding your comments that that could put green hydrogen in a position to be truly competitive, is that possible or do you think it could take a longer period of time?

Andy Marsh

You know, it’s not only my position. There is the McKinsey hydrogen cost roadmap that was issued in January, and if you go to the hydrogen council website, which was put together by over 80 companies and that their view and the view of Plug Power coincides.

I think that position I kind of outlined, I think more of an industry view, and an industry view coupled with Plug Power’s daily work on subjects.

So, I don't think what I'm suggesting is outside the norms of views of many people.

Stephen Byrd

That's all I had. Super helpful. Thank you very much.

Andy Marsh

You're welcome Stephen.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Craig Irwin with Roth Capital Partners. Please proceed.

Craig Irwin

Good morning and thanks for taking my questions.

Andy Marsh

Good morning Craig.

Craig Irwin

First I should say congratulations on that EBITDA, nice chunky big number, it’s good to see Plug making money.

Andy Marsh

Craig, it is. We concurred.

Craig Irwin

Excellent, excellent.

So, there’s a couple of things that haven't been covered, but most of the issues that I was interested in discussing have been covered at this point, but the first is the potential from Engie right, so I know that there are a bunch of things that you are changing with them and they are a fantastic partner in markets where it would be expensive for you to put in a sales force and develop a support network, but can you make of frame out for us, the potential with NG over the next couple of years, could it possibly end up looking similar to one of your, I guess we're not calling them anchor customers? We're calling them pedestal customers. Could Engie you resemble a pedestal customer over the next couple of years?

Andy Marsh

That’s a great question, and I, I think I'm going to start calling on that. Because I think that absolutely, yes.

I think that the work Jose Crespo, our Executive VP of Sales, is doing with them, outlining our business plans, and I've never really presented it that way, but that is our goal and ambitions when it comes to, I think it’s our goal and ambitions, and probably more important it’s Engie’s goals and ambitions and their reach is obviously way more significant than Plug’s reach today, but we will be in three or four years.

Craig Irwin

Excellent. That’s good to hear.

So, then again another big picture question right. Where we’re standing today your guidance [300 million plus] in revenue in 2020, you know that obviously factors your $172 million customer ramping in the back half of the year.

So, let's just may be annualize that for the full year, we’re basically halfway there for your 700 million goal for the lift truck market in 2024.

As we look down in the runway, the four or five customers that you mentioned on your last call, potential pedestal customers can you maybe frame out for us what you need to do to convert those customers? How many of them have existing installation? What their experience is with the product and are these the customers that you think gets you to 700 million? Or is it possible that others come on to the list and one or two might drop off over the next couple of years to get us to that 2024 goal?

Andy Marsh

Yes.

So, I think that, so anyone who has done this over years of, you know there will be new customers that come to the list, and there will be customers we’re dealing with that because of business conditions that they will – there could be something in their business that Plug can’t control, but if I take a step back, I would say that especially over the past holiday season when I talk to especially our pedestal customers, the question of the value of this technology that they saw during the ramp and you know we have some customers who are moving 10%, 15%, 20% more product out of their distribution centers and they're telling me they could have never done it without fuel cells, and I think that validation, those – that market chatter actually really helps expands and is a recognition to success and the success we’ve had with them, we’re having with these targeted pedestal customers.

We obviously internally, Craig, are driving to add more to that list of five, and we also are driving to convert quicker and that’s the goal and I think the key to us is that as you, these decisions they could decide, I'm going to do everything, don't happen overnight.

I think we’re in position with many of them to convert quicker over the next year than we’ve ever been.

Craig Irwin

Excellent. And then another question if I may, Lightening Systems is a particularly interesting partner, given that you both worked extensively with Amazon, then on the electric truck side you obviously, on the shifts on the lift truck side, can you say whether or not the experience that both of you have serving one of the most demanding customers brings you sort of closer and corporate culture where maybe there is an alignment here that you might not sign with others in the industry and a mutual understanding of how to reach those targets at some of these customers are looking at, I mean, is there anything else you could share with us in a relationship that you think makes this really special?

Andy Marsh

That’s the, you don’t, Craig, I think when you’re dealing with customers like Amazon, you know they are demanding, but they also are extremely technically capable and understand challenges along the way. What they expect to people like Plug and Lightening is that you are continuously looking for ways to improve your product, and help them improve their business. And culturally Lightening matches well up for Plug,

Now, Plug culturally is a company that raises its hand when we’re doing something, as well as we should and put all efforts to be successful.

I think Lightening is the same way, and both companies are very technically [indiscernible] and have done really interesting work.

So, I think that the customer focus, the technology focus on understanding the cost focus needs to be there just about those realistic business model is why it’s a nice match.

Craig Irwin

Great. Well congratulations on maintaining that relationship. I’ll hope back in the queue.

Andy Marsh

Alright great. Thanks Craig.

Operator

Thank you.

Our next question comes from the line of Jeff Osborne with Cowen and Company. Please proceed with your question.

Jeff Osborne

Hi, good morning guys. A couple of questions on my end, I was hoping, you touch on the progress you’ve made in end-sourcing, Andy, is that something you could give an update on and what the cost reductions you’ve achieved in 2019 because of that?

Andy Marsh

Yes, Jeff. I’d be happy to talk about.

So, the fourth quarter more than – so let me take a step back.

You know, the key item we focused on 2019 has been really in sourcing our MEA manufacturing, no, so as well as stacks.

So, in the fourth quarter, stacks represent about 20%, 25% of our product cost. And in the fourth quarter, we manufactured for new products well over 95% of new products went out with Plug Power stacks. And well over 50% of the products went out with Plug Power MEAs.

We’ll continue to work with others for MEAs to diverse, keep the diversified supply chain, but that activity itself has reduced our cost about 30% in 2019, so from a cost of goods sold point of view for the products overall the impact was 5% to 6%.

We are looking to go deeper into MEAs, and I think that over the coming year, you’ll probably hear more news about that, but that has been a real, real focus for the company. I also think that in the coming year, especially in 2020, you will probably hear more about in-sourcing some of the hydrogen generation and how we do that to help reduce the COGS there.

Jeff Osborne

Got it. That’s very helpful. I appreciate the detailed response.

And so as you look at sort of quadrupling your revenue between now and 2024 in broad strokes, what’s the CapEx requirement to get there? I know, Paul touched on the 25%, 30% utilization, my guess is that’s a figure more on your test and assembly there in Latham, but not on the MEAs and stack assembly, but a, can you put that in context and then to get from here to there, what the cadence of CapEx would be?

Andy Marsh

I'm going to let Paul take that one.

Paul Middleton

Yes.

So, I think we’ve been trending around 3% to 4% of sales, I guess, I think about the math.

I think there might be some lumpiness as we go forward as you start thinking about step functions with that adding manufacturing capacity for MEA's production and middle point stamping and some of the other things that we’re talking about, but on a trend basis, I don't expect it to be wildly different.

So, if you think about kind of in the upper end 5%, on a trend basis that’s probably the max that I would assume as we go forward.

Jeff Osborne

That’s helpful. And then you mention Paul the 37% and 40% in the first half for revenue and you’ve got your new customer ramping in the second half, can you give us any indication given that there’s only a few weeks left in Q1? What the mix between Q1 and Q2 would be, I assume a slow start to the year, is it pretty linear between Q1 and Q2?

Andy Marsh

I would say, I'm going to take that one. I would say, if I look at the year, I would say that call it 40% for the year, Jeff, call it, you know the second quarter is probably be two times higher than the first quarter, second quarter is a big quarter.

First [indiscernible].

Jeff Osborne

Okay. That makes sense.

Andy Marsh

Yes.

Jeff Osborne

And then the last question I had, is you touched in detail on the green hydrogen and electrolyzer cost coming down, which was helpful narrative and putting in context, but one of the challenges that we’ve heard about over the past couple of quarters is the lack of compression in price and tanks, is that something that you’re seeing and what’s your outlook there, just as you see greater adaption for fuel cell applications, in particular, in transportation?

Andy Marsh

Yes. That’s actually, Jeff so for us, we have our supply chain secured to meet our needs for the quarter. That being said, when I look at where there’s opportunities to drive down cost in hydrogen infrastructure, let me take a step back on compressors Jeff, we use a lot of liquid pumps, and which is different than the mechanical compressors. And we use liquid pumps because one, they are lower-cost; and two, they've rapidly bring up hydrogen in case you need, if there is any inner rush in that, you know the amount of hydrogen a pump can generate in an hour, and gas is poured from liquid is much higher and it compress it.

That being said, there is many applications where mechanical compressors are required, and I think that there’s a huge opportunity, I think to cost reduced mechanical compressors to make this industry continue to be more competitive. And I think that’s a real area, I think most of us in the industry has spent a great deal of time thinking that.

On the liquid tanks side, I think the issue there is, you need to have a view of, you know it’s a 6, 7 month supply chain issue.

So, you need to work closely with the suppliers, you need to make sure you provide them the ramp, but you know we, I can tell you we’ve spent a lot of time at Tim Cortes with liquid tank providers and make sure that we have sufficient to meet was customer needs. And let me finally take a step back, you know good deal of our focus is thinking about fleets and thinking about contained vehicles.

You don't need as many liquid tanks for that kind of app as if you wanted to build retail fuelling stations.

Jeff Osborne

Got it. That’s helpful. Real quick, any last comments on FedEx, I heard all about you other customers there, but just any update you can offer on the FedEx program would be helpful.

Andy Marsh

I would say Jeff that nothing that’s exciting.

We’re certainly talking with FedEx and you know it’s, I think that we view our relationship with Lightening as an opportunity to think about how better to serve FedEx's needs.

Jeff Osborne

Makes sense. Appreciate it. Thanks guys.

Andy Marsh

Okay. Thank you, Jeff.

Operator

Alright. Ladies and gentlemen, we have reached the end of our question-and-answer session.

So, I’d like to pass the floor back over to Mr. Marsh for any additional concluding comments.

Andy Marsh

I appreciate everyone attending the call today and we look forward to talking to many folks off-line over the coming days.

So, thank you everyone.

Operator

Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect your lines at this time.