Plug Power Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the figures below are full-year unless noted.
Business context
Plug Power develops and sells hydrogen fuel-cell systems, hydrogen infrastructure and fuel, electrolyzers, liquefaction systems, and cryogenic equipment. Its strategy is to build an integrated hydrogen business, expand manufacturing and hydrogen production, and grow into stationary power, on-road vehicles, and international markets. The company reported one operating and reportable segment.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net revenue | $701.4 million | $502.3 million |
| Gross loss / margin | $(194.4) million / (27.7)% | $(171.3) million / (34.1)% |
| Operating loss | $(679.6) million | $(437.3) million |
| Net loss attributable to common stockholders | $(724.0) million; $(1.25) per share | $(460.0) million; $(0.82) per share |
| Net cash used in operating activities | $(828.6) million | $(358.2) million |
| Cash and cash equivalents at year-end | $690.6 million | $2.48 billion |
- Revenue increased 39.6%. Sales of fuel-cell systems, infrastructure, and equipment rose 42.3% to $558.9 million, with acquisitions contributing materially.
- Product and equipment gross margin declined to 16.3% from 21.8%, attributed mainly to inflation, higher labor costs, and lower margins at acquired businesses. Service, PPA, and fuel-delivery activities continued to generate gross losses.
- R&D expense rose to $99.6 million from $64.8 million. SG&A increased to $363.9 million from $179.9 million, including a $91.7 million increase in stock-based compensation.
- Year-end liquidity included $690.6 million cash and cash equivalents, $1.33 billion available-for-sale securities, $134.8 million equity securities, and $858.7 million restricted cash. Working capital was $2.7 billion. Restricted cash primarily supports leasing and financing arrangements and is not freely available.
- Reported outstanding indebtedness was approximately $532.2 million, including $193.9 million of convertible notes, $9.1 million of long-term debt, and $329.2 million of finance obligations. Operating and finance lease liabilities totaled a further $366.5 million.
Material changes versus FY2021
- Revenue grew, but net loss attributable to common stockholders widened by $264.0 million and operating cash use more than doubled.
- Cash and cash equivalents fell by approximately $1.79 billion. The company also used $679.4 million in investing activities, including $436.6 million for property, plant, and equipment.
- Gross margin improved overall, from (34.1)% to (27.7)%, partly as the service-contract loss provision fell to $26.8 million from $72.0 million. However, the company still reported a substantial gross loss.
- Acquisitions expanded the business and contributed to higher equipment revenue and expenses. FY2022 acquisitions included Joule and two cryogenic-equipment businesses; the company also invested in joint ventures.
- Customer concentration eased: three customers represented 51.2% of FY2022 revenue versus 75.7% in FY2021. Amazon revenue was $97.5 million versus $205.1 million in FY2021; the filing gives Amazon’s FY2022 revenue share inconsistently as 13% and 14%.
Outlook, risks, and unusual items
- Management said available working capital and cash were expected to fund operations for at least one year after the financial statements were issued. This is not a profitability forecast; the company reported persistent losses and operating cash outflows.
- The company expected to begin producing liquid green hydrogen in 2023 and was developing multiple production plants. Project timing, costs, permitting, supply of electrolyzers, and access to competitively priced hydrogen remain significant execution risks.
- Management said inflationary costs were expected to remain elevated through 2023. Supply constraints, freight costs, labor availability, and higher energy and hydrogen costs could pressure margins.
- The Inflation Reduction Act created potential clean-energy and hydrogen incentives, but the company said detailed guidance was pending and benefits were not assured.
- In August 2022, Plug issued Amazon a warrant for up to 16 million shares in connection with Amazon’s agreement to purchase hydrogen fuel through 2029. Warrant provisions reduced FY2022 revenue by $12.7 million across revenue categories.
- The company recorded an $81.1 million accrual for expected losses on extended service contracts. Management’s estimate depends on achieving future service-cost reductions; a 10% change in estimated service costs would change the accrual by approximately $15.2 million higher or $14.4 million lower.
- Management concluded disclosure controls were ineffective, and identified continuing material weaknesses in internal control over financial reporting relating to technical accounting resources, control design and execution, and monitoring. Deloitte issued an adverse opinion on internal control, while issuing an unqualified opinion on the financial statements. Management’s remediation plans include more accounting and internal-audit resources, improved controls, and a new ERP system.
- Legal matters include securities and derivative litigation related in part to prior accounting and disclosure issues, plus unresolved litigation involving a 2018 forklift accident and hydrogen storage tanks. The company stated it had not accrued for legal matters; it settled claims by individual plaintiffs in the accident case in 2022, while other related litigation continued.
Most important facts for investors to verify
- Whether operating cash burn can be reduced and whether unrestricted liquidity will support the company’s investment program without additional financing or dilution.
- Whether reported orders of approximately $1.2 billion and estimated future revenue obligations of $1.18 billion convert to timely deliveries, installations, collections, and profitable revenue.
- Whether hydrogen plants and manufacturing expansions reach planned operating dates and costs, and whether hydrogen supply is adequate and affordable.
- Whether gross margins improve across service, PPA, and fuel-delivery activities, and whether the $81.1 million service-contract loss accrual proves adequate.
- Progress in remediating material weaknesses and implementing the ERP system; the independent auditor’s adverse internal-control opinion makes this a key reporting risk.
- Customer concentration, Amazon and Walmart warrant-related revenue reductions, potential share issuance, and the company’s other dilution exposure.
- Developments in the unresolved litigation and the eventual interpretation and availability of Inflation Reduction Act incentives.