Bloom Energy Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Comparisons are with the three months ended March 31, 2022 unless otherwise stated. Bloom sells fuel-cell-based power systems and related installation, service and electricity offerings.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $275.2 million | $201.0 million | +36.9% |
| Gross profit / margin | $54.3 million / 20% | $27.9 million / 14% | Margin +6 percentage points |
| Operating loss | $63.7 million | $65.7 million | Loss narrowed $2.0 million |
| Net loss | $74.9 million | $82.7 million | Loss narrowed $7.8 million |
| Net loss per share, basic and diluted | $0.35 | $0.44 | Improved $0.09 |
| Operating cash flow | $(314.7) million | $(92.4) million | Cash use increased $222.3 million |
| Capital expenditures | $26.6 million | $18.5 million | Cash use increased $8.1 million |
Product revenue grew 45.1% to $193.7 million, installation revenue 51.4% to $20.5 million, service revenue 15.4% to $40.7 million, and electricity revenue 8.3% to $20.3 million. Product acceptances increased 36.5% to 512 systems (51 net megawatts accepted). Product gross margin improved to 33% from 21%; however, installation and service remained loss-making, with margins of (22)% and (26)%, respectively. Total operating expenses rose 26.0% to $117.9 million, including higher R&D and workforce-related spending.
Liquidity, balance sheet and financing
- At March 31, cash and cash equivalents were $320.4 million; restricted cash was $163.0 million. Combined cash, cash equivalents and restricted cash were $483.4 million, down $34.9 million from year-end.
- Operating cash use of $314.7 million reflected a $272.4 million working-capital increase, including higher receivables and inventory and the timing of vendor payments. Inventory rose to $397.7 million from $268.4 million at December 31, 2022.
- Total debt carrying value was $402.4 million: $282.4 million recourse and $120.0 million non-recourse. The filing reports $409.2 million in aggregate unpaid principal. Debt principal repayments scheduled for the remainder of 2023 are $20.1 million; $258.3 million is scheduled for 2025, principally reflecting the convertible notes.
- In March, SK ecoplant invested $311.0 million for Series B redeemable convertible preferred stock. The $311.0 million redemption-value liability is classified as current. SK ecoplant may elect redemption subject to the agreement’s timing provisions; the preferred stock may also convert to Class A common stock. Bloom has a conditional loan commitment from SK ecoplant of up to $311.0 million at 4.6% interest, with a five-year maturity; no amount was drawn at quarter-end.
- Management said existing cash and expected operating cash flows should cover anticipated needs for at least the next 12 months, while noting that additional financing may be needed if cash sources prove insufficient or untimely. The company was in compliance with financial covenants at quarter-end.
Changes, outlook and material matters
- Management attributed revenue growth principally to higher product acceptances and demand. Product costs per kilowatt accepted fell 10.7%, but installation costs per kilowatt rose 42.8%, primarily due to site mix. Performance-guarantee payments were $15.8 million, compared with $0.3 million a year earlier.
- Bloom built inventory ahead of anticipated higher second-half 2023 shipments and expects inventory to continue increasing in Q2, followed by an anticipated decrease in the second half as systems ship. It also expects further capital spending to prepare the Fremont manufacturing facility for production. These are management expectations, not quantified revenue or earnings guidance.
- Management cited continuing supply-chain, freight, raw-material and inflation pressures; higher interest rates; foreign-exchange volatility; geopolitical uncertainty; and possible customer financing constraints. Installation delays from permitting, utilities and customer-site access also occurred, though management reported only a couple of significant delays.
- Two customers accounted for approximately 66% of Q1 revenue, and two customers represented approximately 88% of quarter-end accounts receivable. Asia Pacific accounted for 5% of Q1 revenue versus 65% in the prior-year quarter.
- Potential performance-guarantee payments under agreements subject to renewal were capped at approximately $540.2 million; remaining potential liability was approximately $478.1 million. Bloom reported no liabilities at quarter-end for failure to repair or replace systems under performance warranties.
- Legal matters include an agreement in principle to settle an IPO-related class action for $3 million, funded by insurers, subject to definitive documentation and court approval. After quarter-end, Bloom and the City of Santa Clara reached a settlement allowing two installations to proceed and requiring zoning-code changes. A supplier-related patent and contract dispute remains unresolved; the company said it could not predict the outcome. A Delaware manufacturing grant has a $9.5 million recorded liability, and up to a further $2.5 million could be repayable if milestones are not met.
- Management concluded disclosure controls and procedures were effective as of March 31, 2023. The filing reported no material changes to risk factors other than adding risks related to bank failures, uninsured deposits and customer access to financing.
Important facts for investors to verify
- Whether operating cash use and working-capital needs moderate as inventory is converted into shipments and receivables are collected.
- Whether expected second-half shipments materialize, and whether product-margin gains persist while installation and service losses improve.
- The Series B preferred stock’s redemption or conversion outcome, including the potential use and terms of the conditional SK ecoplant loan.
- Customer concentration, customer financing availability, supply-chain and installation constraints, and the scale of performance-guarantee exposure.
- Progress on Fremont capacity spending, legal and grant contingencies, and any financing needs beyond management’s stated 12-month liquidity expectation.