Plug Power Inc. — Q2 2014 Form 10-Q
Reporting period: Three and six months ended June 30, 2014; unaudited. Plug Power develops and sells fuel-cell systems and related services, primarily for material-handling equipment. The quarter included ReliOn operations from its April 2 acquisition.
Key financial results
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 |
|---|---|---|
| Revenue | $17.32 million, up 131% year over year | $22.90 million, up 64% year over year |
| Gross profit (loss), before operating expenses | $0.20 million; 1.1% margin | $(2.11) million; (9.2)% margin |
| Operating loss | $(6.64) million, approximately flat year over year | $(14.02) million, versus $(12.99) million |
| Net income (loss) attributable to the company | $3.88 million, versus a $9.32 million loss | $(71.98) million, versus a $17.90 million loss |
| Net income (loss) per common share | $0.02 | $(0.49) |
| Cash used in operating activities | Not separately reported | $19.93 million, versus $10.93 million |
Q2 product revenue rose to $12.58 million from $5.58 million, with 687 GenDrive units shipped versus 246. Service revenue rose to $4.41 million from $1.55 million. Six-month product and service revenue were $15.74 million and $6.48 million, respectively. Gross margin improved substantially year over year but remained weak; service costs exceeded service revenue in both periods.
Balance sheet, liquidity and financing
- Cash and cash equivalents were $168.61 million at June 30, up from $5.03 million at December 31, 2013. Working capital was $190.43 million, versus $11.11 million.
- Total liabilities were $47.85 million. Capital-lease obligations totaled about $0.95 million and the finance obligation was $2.46 million. The $16.13 million common-stock warrant liability is a separately remeasured derivative liability.
- Financing activities provided $183.60 million in the first half, principally from $165.7 million net proceeds from 2014 public offerings and $18.3 million from warrant exercises. The offerings materially increased shares outstanding; 167.4 million shares were issued at quarter-end, and 167.3 million were outstanding on August 7.
- The company reported an accumulated deficit of approximately $921.5 million and continued operating losses and negative operating cash flow.
Changes, unusual items and outlook
- ReliOn was acquired for $4.0 million in stock plus assumed specified liabilities. The preliminary purchase-price allocation produced a $1.01 million bargain-purchase gain, included in Q2 income.
- Warrant fair-value movements materially affected reported earnings: Q2 included a $9.58 million gain, while the first half included a $58.86 million loss. These noncash changes depend on stock price and other Black-Scholes assumptions; the warrants are valued using significant unobservable inputs.
- Despite Q2 net income, the company remained loss-making from operations. Management said current cash, expected sales and potential warrant exercises should fund operations for at least 12 months, based on assumptions about sales, costs and cash burn. No specific revenue or profitability guidance was provided.
- Management identified ongoing risks including additional financing needs, losses and uncertain path to profitability, orders not converting or shipping, customer concentration, product reliability and acceptance, manufacturing scale and cost, hydrogen availability and infrastructure, and competition. Five customers represented 77.2% of receivables at quarter-end; two customers generated 35.9% of first-half revenue.
- Section 382 ownership changes limit tax attributes: the filing says most affected net operating losses and all $15.6 million of affected research-credit carryforwards are expected to expire unused. The company maintained a full valuation allowance on remaining deferred tax assets.
- Management reported effective disclosure controls at a reasonable-assurance level and no material change in internal control over financial reporting. No legal proceedings or subsequent events requiring disclosure were reported.
Investor facts to verify
- Whether revenue and unit shipment growth can translate into sustained positive gross margins and lower operating cash burn.
- How much reported earnings are driven by noncash warrant revaluation and acquisition accounting rather than operations.
- Cash runway under actual sales, working-capital and cash-burn trends, and whether further capital raising is needed.
- Customer concentration, order conversion, product reliability, warranty costs, and ReliOn integration results.
- Potential dilution from outstanding warrants, options, preferred stock and future equity financing.