Bloom Energy Corporation — Q2 2023 Form 10-Q
Business context and reporting period. Bloom Energy designs and sells solid-oxide fuel-cell power systems, installation and maintenance services, and electricity. This unaudited filing covers the three and six months ended June 30, 2023; comparisons are with the same 2022 periods. Amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $301.1 | $243.2 | $576.3 | $444.3 |
| Gross profit (loss) | $56.4 | $(2.0) | $110.6 | $26.0 |
| Gross margin | 19% | (1)% | 19% | 6% |
| Operating loss | $(54.5) | $(102.2) | $(118.1) | $(167.8) |
| Net loss | $(69.1) | $(121.2) | $(144.0) | $(203.9) |
| Net loss per share | $(0.32) | $(0.67) | $(0.66) | $(1.11) |
- Revenue rose 23.8% in Q2 and 29.7% for the first half. Product revenue was the largest contributor, increasing 23.7% and 33.0%, respectively. Product acceptances increased 28.7% in Q2 and 32.2% year to date.
- Product gross margin improved to 32% in Q2 and 33% for the first half. Service remained loss-making, with gross loss widening to $15.0 million in Q2 and $25.5 million year to date, primarily due to field replacement units and performance guarantees. Installation also generated gross losses.
- Operating expenses increased 10.6% in Q2 and 18.0% year to date, reflecting investments in workforce, research and development, business development, and facilities. Interest expense was $14.0 million in Q2 and $25.7 million for the first half.
- Net cash used in operating activities was $361.2 million for the first half, versus $98.5 million in 2022; management attributed the increase chiefly to working-capital use, including higher receivables and inventory. Capital expenditures were $46.1 million.
- At June 30, cash and cash equivalents were $767.1 million; restricted cash was $155.5 million. Total debt principal was $982.6 million: $862.5 million recourse and $120.1 million non-recourse. The balance sheet reported $839.2 million of long-term recourse debt and $310.5 million of current Series B redeemable convertible preferred stock. The company was in compliance with debt covenants.
Material changes and financing
- In May, Bloom issued $632.5 million principal amount of 3% convertible senior notes due 2028, generating reported net proceeds of $612.9 million in the notes disclosure. It used proceeds to redeem $57.6 million principal amount of 10.25% secured notes at 104%, recording a $2.9 million extinguishment loss, and paid $54.5 million for capped calls intended to reduce potential conversion dilution. The MD&A describes net cash proceeds as $616.7 million; investors should reconcile this figure with the note disclosure.
- In March, SK ecoplant invested $311.0 million for Series B redeemable convertible preferred stock. SK ecoplant may elect redemption subject to specified timing and terms; Bloom has a conditional, undrawn loan commitment of up to $311.0 million from SK ecoplant.
- Inventory increased to $468.3 million from $268.4 million at year-end as Bloom built stock ahead of anticipated second-half shipments. Total assets increased to $2.72 billion from $1.95 billion; total liabilities increased to $2.37 billion from $1.57 billion.
Outlook, commentary, and risks
- Management expects cash, cash equivalents, and anticipated operating cash flows to meet operational and capital needs for at least the next 12 months. No specific revenue or earnings guidance is provided in the filing. Management expected inventory to decline in the second half as systems ship and described plans for continued manufacturing-capacity investment.
- Management said revenue, margins, and cash flow depend substantially on prior-year bookings and warned that delays in anticipated 2023 bookings could materially affect 2024 results. Supply-chain lead times, inflation, geopolitical developments, labor costs, customer financing availability, permitting, utility interconnection delays, and natural-gas availability and pricing may affect execution and demand.
- Hydrogen and other zero-carbon fuels remain limited in availability and, for most customers, uneconomic; shifting regulations and customer sustainability priorities may extend sales cycles. Bloom also cited changes to South Korea’s fuel-cell procurement process and U.S. fuel-cell tax-credit eligibility timing.
- Potential performance-guarantee payments were capped at approximately $548.4 million in aggregate; remaining potential exposure was approximately $482.5 million at June 30. Bloom paid $19.9 million during the first half.
- A proposed $3 million settlement of an IPO-related securities class action, expected to be funded by insurers, awaited court approval. A separate patent and contract dispute with a former supplier remained unresolved; the company said the outcome could not be predicted. Bloom also disclosed a potential repayment of up to $2.5 million under a Delaware manufacturing grant if milestones were not met by September 30, 2023.
Important facts for investors to verify
- Whether anticipated second-half shipments convert the elevated inventory and working-capital investment into revenue and cash, and whether operating cash use moderates.
- Whether product-margin improvement can be sustained while addressing continuing service and installation gross losses and performance-guarantee costs.
- The terms and potential dilution or cash-settlement implications of the convertible notes, capped calls, and SK ecoplant preferred stock, including the redemption contingency.
- Whether management’s 12-month liquidity assessment remains supported by operating performance, customer financing, and access to additional capital.
- Developments in the securities settlement, supplier dispute, grant milestones, fuel availability, policy incentives, and permitting or interconnection conditions.