Plug Power Inc. — Q1 2013 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2013, compared with Q1 2012. Plug Power designs and sells fuel-cell systems, with its primary focus on GenDrive products for forklift and material-handling applications.
Financial performance and position
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Total revenue | $6.45 million | $7.75 million; down 16.9% |
| Product and service revenue | $6.04 million | $7.24 million; down 16.5% |
| R&D contract revenue | $0.40 million | $0.52 million; down 22.3% |
| Operating loss | $6.38 million | $7.81 million |
| Net loss | $8.58 million | $6.58 million |
| Loss per share, basic and diluted | $0.18 | $0.28 |
| Cash used in operating activities | $5.93 million | $3.48 million |
- Costs of product and service revenue and R&D contract revenue totaled $8.62 million, exceeding revenue by $2.17 million; combined gross margin was negative.
- R&D expense fell 38.9% to $0.75 million and SG&A fell 26.8% to $2.88 million, primarily due to lower personnel costs. Management attributed the lower product revenue partly to shipments of 238 systems versus 299 a year earlier.
- Net loss worsened despite a lower operating loss, principally because the warrant liability’s fair-value change was a $2.13 million expense in Q1 2013, versus a $1.24 million gain in Q1 2012.
- Cash and cash equivalents were $4.50 million at quarter-end, down from $9.38 million at December 31, 2012; working capital was $7.88 million, compared with $6.90 million. Restricted cash was $0.75 million.
- Total liabilities were $29.43 million. No line-of-credit borrowing remained at March 31; capital-lease obligations totaled about $1.80 million and the sale-leaseback finance obligation was about $2.54 million.
- Shareholders’ equity was $7.71 million, down from $15.03 million at year-end. The company reported an accumulated deficit of $795.22 million. Weighted-average shares increased to 48.57 million from 23.44 million; 64.04 million shares were outstanding on May 2, 2013.
Material changes, outlook, and risks
- The Silicon Valley Bank credit facility, which provided up to $15 million subject to borrowing-base limits, expired March 29, 2013. The $3.38 million outstanding at year-end was repaid in January.
- A February public offering and warrant exercise generated proceeds; the company also completed a March sale-leaseback. Because of continuing involvement, the transaction was accounted for as financing, not a sale, and included a $0.75 million cash-collateralized letter of credit.
- After quarter-end, the company entered into an Air Liquide strategic transaction described as providing approximately $6.5 million of funding and other value, including preferred-stock investment, sale of a 25% HyPulsion joint-venture interest for $3.3 million, and an engineering-services agreement. Plug Power’s HyPulsion ownership fell from 45% to 20%. The preferred stock carries an 8% annual dividend, senior liquidation preference, conversion and redemption provisions, and board-designation rights.
- Management expected 2013 operating cash burn of approximately $10–$15 million and said available funds, including post-quarter transactions and expected sales, were projected to fund operations into October 2013. This is a management projection, not a guarantee; the filing says there were no commitments for additional financing.
- The company continued to incur operating losses and negative operating cash flow, and stated that continued operations depend on future funding, growth in orders and shipments, and the ability to meet service obligations profitably. It warned that inadequate financing could require reducing or ceasing operations or seeking bankruptcy protection.
- Management expected the 2012 restructuring to reduce annual expenses by $3–$4 million. Risks also include potential dilution or senior claims from financing, Nasdaq listing concerns, customer concentration, product reliability and warranty costs, and whether orders convert to shipments and revenue. Five customers represented 88.6% of receivables; two customers generated 58.3% of Q1 revenue.
- The warranty reserve was $1.87 million at quarter-end, following $0.97 million of warranty costs incurred during the quarter. The filing cited previously identified GenDrive component-quality issues and ongoing retrofits.
Important facts for investors to verify
- Whether the Air Liquide transactions closed on the stated terms and how the proceeds and preferred-stock obligations affect liquidity.
- Actual cash burn, available cash, financing access, and the timing and terms of any replacement credit facility or other capital raise.
- Whether GenDrive orders convert into shipments and revenue, and whether unit economics, gross margins, reliability, and warranty costs improve.
- The status of Nasdaq listing compliance, customer concentration, and the company’s ability to continue as a going concern.