On Monday, April 13, I joined a group of investors to tour Plug Power's ($PLUG) Latham facility as well as a nearby $PLUG customer's distribution center. $PLUG CEO Andy Marsh rolled out the red carpet for us, including dinner in exotic Amsterdam, NY. Aside from the beautiful red Ferrari parked outside the restaurant, there weren't too many surprises. Some of my observations, in no particular order:
- The PLUG manufacturing facility seemed to really be rockin' and rollin'. I tweeted a picture of several hundred GenDrive units ready to go to a big customer. Now, I have visited Latham a few times. The first time, in the spring of 2013, when the stock was trading for $0.12. Back then, the facility had a totally different feel. Now it feels much more alive.
- At PLUG's facility, we saw new fueling stations being assembled, as well as parts for several more. From Marsh down to the factory floor, there is focus on providing a soup-to-nuts solution for customers. As Marsh said, this really is customer-driven and results in a much shorter sales cycle.
- Marsh mentioned a focus on hydrogen infrastructure. It is clear that proper infrastructure is critical and also a key cost driver for material handling customers. What is significant is that by setting up proper infrastructure, $PLUG is setting itself up to be at the epicenter of the hydrogen universe. As the popularity of hydrogen power increases, $PLUG's infrastructure will allow the addressable market to grow.
- Marsh seems really focused on connecting with investors and increasing transparency. He is keenly aware of criticisms, particularly those focused on meeting (or exceeding) guidance. The current revenue guidance numbers reflect his desire to increase PLUG's credibility in that area.
- We talked about how the sales process has transitioned with some customers to more of a planning process where there is longer-term clarity. Andy seems very bullish on PLUG's ability to move additional big customers to this type of sales process.
- We talked about gross margins. I believe it is important to show (preferably soon) that PLUG can make solid profits in material handling on a gross basis. Additional applications such as tuggers, refrigerated trucks, etc. are nice but not if the core business is marginal on a gross basis. To this point, we saw a few design innovations on the factory floor that are aimed at cutting costs. In addition, the recent acquisition of ReliOn provides a bit of supplier diversity and sheer volumes drive costs down. All told, Marsh seems pretty confident in PLUG's ability to make good money in material handling. Of course, I want to see the numbers!
- The biggest surprise for me at the customer site visit was the impact of taking out the battery room. A huge room was left vacant. This customer chose to use a small part of it as the PLUG GenDrive maintenance area. But it was clear the space was too big, as they had only one unit in for service (out of almost 300 onsite) and 2 full-time workers to perform the service. Clearly there is room to both improve space utilization as well as cut costs in the servicing.
We did get a chance to meet the new CFO, Paul Middleton. Middleton seems focused on understanding the key drivers to the business, both costs and revenues. He has the ability to simplify the complex, which will be helpful to investors. He is still new to the company, so I didn't ask any detailed questions in our brief conversation. I will save that for another time.
Of Interest: The Boulevard of Broken Dreams: Plug Power