Plug Power Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited consolidated results. Plug Power supplies hydrogen fuel-cell systems and related infrastructure, maintenance, power purchase agreements (PPAs), and hydrogen fuel, primarily for material-handling and stationary-power applications.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $40.8 million | $21.6 million; up 89% |
| Gross loss / margin | $4.5 million loss / (11.0)% | $3.8 million loss / (17.5)% |
| Operating loss | $25.9 million | $20.5 million |
| Net loss attributable to company | $37.5 million | $31.0 million |
| Net loss per share, basic and diluted | $0.12 | $0.14 |
| Operating cash flow | $60.0 million used | $36.3 million used |
| Investing cash flow | $6.4 million used | $2.3 million used |
| Financing cash flow | $4.1 million provided | $37.7 million provided |
Sales of fuel-cell systems and infrastructure rose to $20.4 million from $2.5 million; 825 units and four hydrogen installations were recognized as revenue, compared with 94 units and no installations in Q1 2019. This line’s gross margin improved to 32.6% from 8.8%. Services and PPAs remained loss-making, with gross margins of (25.5)% and (119.3)%, respectively; fuel-delivery margin was (23.2)%. Total gross margin remained negative despite the higher sales volume.
At March 31, 2020, cash and cash equivalents were $74.3 million, versus $139.5 million at year-end 2019; restricted cash was $232.9 million, versus $230.0 million. Working capital was $125.4 million, down from $162.5 million. Restricted cash and collateral support leasing arrangements and are not generally available for other uses. Cash, cash equivalents and restricted cash together declined $62.3 million during the quarter.
Total liabilities were $638.7 million and stockholders’ equity was $109.1 million. Balance-sheet current assets were $277.1 million and current liabilities $151.6 million. Debt, including current and long-term debt and convertible notes net of discounts and issuance costs, totaled approximately $219.8 million. Finance obligations were $324.2 million. The company reported a $1.38 billion accumulated deficit.
Changes and management commentary
- Revenue growth was driven chiefly by system and infrastructure sales. Operating expenses increased to $21.4 million from $16.7 million, including higher R&D spending for fuel-efficiency, product-performance, and new-product programs.
- Management attributed weaker services and PPA margins in part to increased service costs as some major customer sites used equipment more intensively during COVID-19. Certain customers suspended operations and bought less hydrogen, while essential customers including Walmart increased usage.
- COVID-19 risks included potential supplier disruption, especially for components sourced from China, changes in customer demand, and further operational disruption. Plug Power said it was considered an essential business and had introduced workplace precautions; it had not observed material supply impacts as of the filing date.
- Management said available working capital, expected operating cash generation, financing sources, and equity or debt offerings were expected to fund operations for at least one year after issuance of the financial statements, but cautioned that future financing was not assured. The company continued to report operating losses and negative operating cash flow.
- On May 6, 2020, after quarter-end, Generate Capital funded an additional $50 million term loan, reduced the interest rate on the loans from 12% to 9.5%, and extended maturity to October 31, 2025. A further $50 million facility was available at the lender’s discretion. The facility is secured by substantially all company and guarantor assets; the company reported covenant compliance at March 31.
- On April 13, 2020, the company established an at-the-market share-sale program for up to $75 million; no shares had been sold under it as of the filing. On April 6, it acquired an $8 million convertible note from hydrogen supplier United Hydrogen, funded with $1 million cash and 1.8 million Plug Power shares.
- Management’s stated strategic target was for more than 50% of hydrogen used to be green by 2024. The filing did not provide specific revenue, earnings, or margin guidance.
Risks, contingencies, and unusual items
- Customer and receivable concentration is material: two customers represented 65.9% of Q1 revenue, and three customers represented 85.2% of accounts receivable at quarter-end.
- Sale-leaseback and customer-financing structures require substantial collateral: approximately $129.7 million of cash was restricted and $101.6 million of security deposits backed letters of credit. Remaining lease payments and finance obligations create significant continuing commitments.
- Convertible notes, warrants, options, and possible equity offerings may create dilution. The filing listed 110.6 million outstanding Amazon and Walmart warrant shares, of which 26.2 million were vested, in addition to potential shares from notes, preferred stock, and options.
- Product-liability litigation relates to a 2018 forklift accident in Louisiana, including claims by individuals and Procter & Gamble. The company intended to defend the cases; their outcome and potential damages were not determinable. Management did not expect a material financial impact.
- Revenue is reduced by non-cash charges for Amazon and Walmart warrants; these charges totaled $2.2 million in Q1 2020, compared with $1.2 million in Q1 2019.
Investor verification priorities
- Assess whether revenue growth can translate into positive gross margins, particularly in services, PPAs, and fuel delivery.
- Track operating cash burn, unrestricted liquidity, collateral requirements, and the availability and terms of future financing.
- Review the amended Generate loan’s funding, amortization, security, covenants, and any lender-discretionary borrowing.
- Monitor customer concentration, order conversion, hydrogen supply and cost, COVID-19 effects, and the outcome of the Louisiana litigation.
- Evaluate potential dilution from the ATM program, convertible notes, warrants, options, and share-funded supplier investment.
- Reconcile the MD&A’s stated Q1 investing cash use of $5.1 million with the cash-flow statement’s $6.4 million; the filing text does not explain the difference.