Plug Power Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited. Plug develops and sells fuel-cell systems, hydrogen infrastructure and electrolyzers, and provides hydrogen fuel and related services.
Financial performance and liquidity
- Revenue: Q3 revenue was $188.6 million, up 31% from $143.9 million. Nine-month revenue was $480.7 million, up 41% from $340.4 million.
- Gross loss and margin: Q3 gross loss was $46.1 million (24.4% negative margin), versus $31.1 million (21.6% negative margin) a year earlier. Nine-month gross loss was $113.9 million (23.7% negative margin), versus $83.5 million (24.5% negative margin).
- Operating and net loss: Q3 operating loss was $159.7 million, versus $98.7 million; net loss was $170.8 million, or $0.30 per share, versus $106.7 million, or $0.19 per share. Nine-month operating loss was $445.8 million and net loss was $500.5 million, or $0.87 per share, compared with $236.6 million and $267.1 million, or $0.48 per share, respectively.
- Cash flow: Nine-month cash used in operating activities was $522.0 million, up from $348.5 million. Capital expenditures for property, plant and equipment were $317.6 million. Cash, cash equivalents and restricted cash totaled $2.56 billion at September 30.
- Liquidity: Cash and cash equivalents were $1.75 billion; restricted cash was $807.3 million. Working capital was $3.1 billion. Management stated that working capital and cash were expected to fund operations for at least one year after issuance of the financial statements.
- Debt and obligations: The balance sheet reported $193.6 million of convertible notes, $66.3 million of long-term debt, and $303.6 million of finance obligations. Operating and finance lease liabilities totaled approximately $332.2 million. The company reported compliance with its term-loan covenants.
- Other metrics: Total assets were $5.86 billion and stockholders’ equity was $4.22 billion. Nine-month stock-based compensation was $135.0 million.
Material changes versus prior periods
- Revenue growth included contributions from acquisitions: Applied Cryo, Frames and Joule generated approximately $38.0 million in Q3 and $124.9 million in the first nine months of 2022. Management attributed growth in equipment sales primarily to acquired businesses, while GenDrive unit deployments declined year over year in the nine-month period.
- Equipment gross margin declined to 19.4% in Q3 from 23.1%, and to 19.0% for nine months from 24.4%, reflecting lower margins at acquired businesses and, for the year-to-date period, higher freight, materials and labor costs.
- Hydrogen fuel and power purchase agreement activities remained substantially loss-making. Management cited higher hydrogen and freight costs, operational inefficiencies and warrant-related reductions to revenue. Q3 fuel-delivery cost of revenue was $53.1 million against $12.4 million of revenue.
- Operating expenses rose: nine-month research and development expense increased to $72.1 million from $37.6 million, and selling, general and administrative expense to $262.4 million from $106.7 million. Management cited growth investment, headcount, stock compensation and branding expenses.
- Cash used in operations increased, while cash and cash equivalents declined from $2.48 billion at year-end 2021. Inventory increased to $516.3 million from $269.2 million.
Outlook, risks and unusual items
- No specific revenue, margin or profitability guidance is provided in the supplied filing text. Management expects inflationary cost pressures to remain elevated through at least the remainder of 2022 and possibly into 2023, and expects higher hydrogen molecule costs at least through 2022.
- Management cited supply-chain constraints, freight and commodity inflation, labor shortages, rising interest rates and geopolitical uncertainty as risks to costs, margins and execution. It warned that customers may delay or reduce spending amid economic weakness.
- Internal control over financial reporting remained ineffective at September 30, 2022. Previously identified material weaknesses—including controls over operating expense presentation, service-contract loss accruals, inventory, inventory-cost capitalization and fuel billing IT controls—had not been remediated.
- The securities class action was dismissed in full on September 29, 2022, with leave for the lead plaintiff to amend. Related derivative matters were stayed pending resolution of the securities action. Plug reported no legal accruals. It settled claims by individual plaintiffs arising from a 2018 forklift incident for less than its commercial liability insurance limits; litigation by Procter & Gamble remained ongoing.
- An August 2022 Amazon agreement provides for hydrogen purchases through 2029 and a warrant for up to 16 million shares, with most shares vesting based on payments. The warrant may create future dilution and reduces revenue as its value is amortized.
- Investment fair values declined amid interest-rate movements: available-for-sale securities had $26.2 million of gross unrealized losses at quarter-end, which the company attributed to interest-rate fluctuations; no credit-loss allowance was recorded.
Key facts for investors to verify
- Whether revenue growth translates into improving gross margins, particularly in fuel delivery, PPAs and acquired equipment businesses.
- Cash burn, capital spending, inventory growth and the timing and use of restricted cash as hydrogen-plant and manufacturing investments proceed.
- Progress in remediating material weaknesses and the effectiveness of controls in subsequent filings.
- Execution and economics of the Amazon hydrogen agreement, including warrant vesting, revenue deductions and potential dilution.
- Developments in litigation, acquisition earn-outs and the company’s ability to manage inflation, supply constraints and customer concentration.