Plug Power Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020; unaudited. Plug Power supplies hydrogen fuel-cell systems, hydrogen infrastructure, fuel, and related services, primarily for industrial mobility and stationary power.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $107.0 million | $59.5 million | $215.9 million | $138.6 million |
| Gross profit (loss), GAAP | $(1.3) million | $8.3 million | $(0.7) million | $15.2 million |
| Operating loss | $(27.5) million | $(10.1) million | $(79.8) million | $(42.5) million |
| Net loss attributable to Plug Power | $(39.4) million | $(18.1) million | $(85.5) million | $(67.2) million |
| Loss per share, basic and diluted | $(0.11) | $(0.08) | $(0.26) | $(0.29) |
- Q3 GAAP gross margin was approximately negative 1.2%, versus 14.0% a year earlier; nine-month margin was approximately negative 0.3%, versus 11.0%. Management’s segment margin presentation excludes a separate $4.3 million service-contract loss provision, which explains its different reported total gross-profit figures.
- At September 30, cash and cash equivalents were $448.1 million, restricted cash $283.2 million, working capital $514.2 million, and total assets $1.50 billion. Working capital was $162.5 million at December 31, 2019.
- Nine-month cash used in operations was $156.9 million, compared with $51.8 million in 2019; investing used $71.7 million, compared with $9.0 million. Financing provided $590.6 million, compared with $149.1 million. Cash, cash equivalents, and restricted cash totaled $731.4 million at period-end.
- Total liabilities were $883.2 million. Balance-sheet long-term debt plus current maturities was $195.2 million; convertible notes, net, were $105.1 million; finance obligations were $400.8 million. These categories have different terms and include lease-related obligations.
Changes versus prior period
- Revenue rose 80% year over year in Q3 and 56% for the nine-month period, led by fuel-cell systems and infrastructure. Q3 systems-and-infrastructure revenue increased to $83.5 million from $38.9 million; recognized GenDrive units increased to 3,709 from 1,513.
- Despite higher revenue, GAAP gross results weakened, with losses in services, PPAs, and delivered fuel, alongside a $4.3 million provision for service loss contracts. The company attributed PPA and service cost pressure in part to increased usage and COVID-related customer-site service costs; delivered-fuel margins also faced higher fuel costs.
- Operating expenses increased: nine-month R&D was $32.1 million versus $24.3 million, and selling, general and administrative expense was $46.9 million versus $33.4 million. Interest and other expense rose to $42.0 million from $24.2 million.
- Net loss widened year over year, although the 2020 nine-month result included a $13.2 million gain on extinguishment of debt and a $24.2 million income-tax benefit. The tax benefit included effects of convertible-note accounting and the Giner ELX acquisition; the company continued to fully reserve its remaining net deferred tax assets.
Financing, outlook, and risks
- August’s registered offering of 35.3 million shares generated approximately $344.4 million net. The company also issued $212.5 million principal of 3.75% convertible notes due 2025 and repurchased $66.3 million principal of 5.5% notes. It borrowed another $50 million under its Generate facility in Q3. That facility had $185 million outstanding at 9.5%, secured by substantially all company and guarantor assets, with maturity extended to October 2025. The company reported compliance with its covenants.
- Management said available working capital and expected operating cash, project financing, borrowings, and equity and debt proceeds should fund operations for at least one year after issuance of the financial statements. This expectation depends on operating assumptions and access to financing; management cautioned that funding may not be available on acceptable terms. The company reported ongoing operating cash outflows, net losses, and a $1.4 billion accumulated deficit.
- No quantified financial guidance was provided in the supplied filing text. Strategic outlook includes a goal of sourcing more than 50% of hydrogen used by the company from green hydrogen by 2024. June acquisitions of United Hydrogen and Giner ELX expanded hydrogen production, liquefaction, and electrolyzer capabilities.
- COVID-19 effects remained uncertain. The company cited potential supply-chain disruption, customer shutdowns, and added service costs; some customers increased equipment use while others reduced hydrogen purchases. Risks also include continued losses and financing needs, dilution, customer order and payment dependence, margin execution, and product, supply, and acquisition risks.
- Customer concentration is significant: one customer represented 84.5% of receivables at quarter-end, and two customers accounted for 71.8% of nine-month revenue. Product-liability and property-damage litigation arising from a 2018 forklift incident in Louisiana continued; the company said it could not estimate possible loss but did not expect a material impact.
- Subsequent events disclosed include conversion of $28.0 million principal of remaining 5.5% notes into 12.2 million shares in October, partial settlement of the common-stock forward resulting in receipt of 3.5 million shares in October, and further Amazon warrant vesting on November 2, 2020.
Important facts for investors to verify
- Whether revenue growth translates into sustainably positive GAAP gross margins, especially across PPAs, service contracts, and hydrogen delivery.
- Cash-burn trajectory and financing needs, including the availability and restrictions on cash collateralized for lease and financing arrangements.
- Debt, convertible-note settlement and dilution exposure, including the impact of post-quarter conversions and the common-stock forward.
- Customer concentration, receivable collectability, and the effect of Amazon and Walmart warrant charges on reported revenue and service-contract costs.
- Progress and economics of the acquisitions and the 2024 green-hydrogen target, as well as developments in COVID-related operations and Louisiana litigation.