Bloom Energy Corporation — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 6, 2021. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context and reporting period
Bloom designs, manufactures, sells and installs solid-oxide fuel cell systems for on-site power generation. Revenue comes from product sales, installation, maintenance services and electricity. The company reports as one operating segment and continues to incur operating losses and negative operating cash flows.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $228.5 | $187.9 | $422.5 | $344.6 |
| Gross profit | $37.3 | $26.2 | $92.0 | $46.2 |
| Gross margin | 16% | 14% | 22% | 13% |
| Operating expenses | $80.1 | $55.7 | $149.1 | $122.1 |
| Operating loss | $(42.7) | $(29.5) | $(57.1) | $(75.9) |
| Net loss | $(58.4) | $(48.0) | $(88.2) | $(129.6) |
| Net loss per share, diluted | $(0.31) | $(0.34) | $(0.46) | $(0.95) |
| Cash used in operating activities | Not separately provided | Not separately provided | $(35.3) | $(40.2) |
Q2 revenue rose 21.6%, led by product revenue growth of 26.4% and service growth of 36.2%; installation revenue declined 3.2%. For the first half, revenue grew 22.6%. Product acceptances increased 41.5% in Q2 and 40.7% in the first half, measured in 100-kilowatt systems. Product and service gross margins improved year over year, while installation remained loss-making: Q2 installation gross loss was $7.6 million and first-half loss was $9.6 million.
Despite higher gross profit, Q2 operating loss widened as operating expenses rose 43.6%, including higher spending on sales and marketing, research and development, and general and administrative costs. First-half net loss improved, helped by lower interest expense and the absence of the prior-year $14.1 million debt-extinguishment loss; operating loss also narrowed.
Financial position, debt and liquidity
- At June 30, cash and cash equivalents were $204.0 million; restricted cash was $196.6 million. Combined cash, cash equivalents and restricted cash were $400.5 million, down from $416.7 million at year-end 2020. Restricted funds are not all freely available for general purposes.
- Current assets were $565.9 million and current liabilities $409.0 million. Total assets were $1.464 billion; total liabilities were $1.434 billion. Stockholders’ equity was a deficit of $21.6 million.
- Total debt carrying value was $506.5 million: $290.7 million recourse and $215.8 million non-recourse. Current debt was $119.7 million, principally a $110.3 million non-recourse term loan due December 2021. The company stated that some non-recourse debt is expected to be refinanced by the relevant PPA Entity. Recourse debt scheduled repayments commence in June 2022.
- Six-month investing cash outflow was $34.5 million, principally for tenant improvements at a new Fremont engineering facility. Financing cash inflow was $53.8 million, mainly reflecting proceeds from stock option exercises and employee stock purchases. The company reported compliance with debt covenants at June 30.
- Management said available cash and expected operating cash flows should cover operating and capital needs for the next 12 months, while also noting that additional equity or debt financing may be sought for expansion.
Material changes, outlook and risks
- Costs and investment: Per-kilowatt product costs fell year over year through cost-reduction efforts, and service gross margin reached approximately break-even in Q2. Management increased spending on sales capacity, marketing, R&D and manufacturing expansion.
- Supply chain: Management reported longer component lead times, logistics and container delays, and raw-material price increases. It expected lead-time and pricing pressures to continue into Q3, with semiconductor and specialty-metal shortages potentially persisting through the second half of 2021. These could delay production or installation and pressure revenue, cash flow and margins.
- Financing and installations: Financing for most planned 2021 installations had been obtained, but the remaining financing was still being pursued. Failure to secure it could materially affect revenue, cash flow and liquidity. Installation timing is also exposed to permitting, site conditions, labor and utility interconnection.
- Capital plans and funding: The company is preparing Fremont facilities for manufacturing and anticipated demand, including new product expansion. It may need external financing; such financing may not be available on acceptable terms and equity issuance could dilute shareholders.
- Concentration and incentives: Three customers represented 31%, 26% and 12% of Q2 revenue. Asia Pacific represented 34% of Q2 revenue; South Korea represented 36% of first-half revenue. Demand and financing depend partly on tax credits, tax-equity availability, utility tariffs and other incentives. California fuel-cell net-metering tariffs and South Korea’s planned transition from its RPS framework to a Hydrogen Portfolio Standard were identified as uncertainties.
- Guarantees and contingencies: Remaining potential performance-guaranty exposure was approximately $86.2 million for direct-purchase projects and $104.8 million for portfolio-financed projects, subject to contractual caps. Several legal matters remain pending; the company said it could not estimate reasonably possible losses for certain cases. A lawsuit against the City of Santa Clara seeks building permits for two customer installations; delayed permits could lead customers to terminate contracts and could affect future bookings in the city.
- Other notable items: Bloom early-adopted ASU 2020-06 in January 2021, increasing reported non-current recourse debt by approximately $121.5 million and reducing additional paid-in capital by $126.8 million, with an opening accumulated-deficit adjustment. On July 1, 2021, it acquired SoftBank’s interest in Bloom Energy Japan. The filing gives no quantified financial guidance.
Important facts for investors to verify
- Whether the remaining financing for planned 2021 installations was secured and whether customer installations and acceptances proceeded on schedule.
- Whether supply shortages, freight costs and raw-material inflation persisted or affected production, installations and gross margins.
- How the December 2021 non-recourse loan maturity was refinanced or repaid, and whether scheduled debt service can be met without restricting growth investment.
- Whether revenue and receivables remain concentrated among a small number of customers, and the collection and availability of restricted cash.
- Progress on California interconnection tariffs, South Korea’s incentive transition and federal tax-credit availability, along with any material developments in litigation or performance-guaranty exposure.