Bloom Energy Corporation — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; comparisons are with Q1 2018 unless noted. Bloom designs, manufactures, sells and installs on-site solid-oxide fuel cell systems. Financial amounts below are in U.S. dollars; millions are indicated as “$m.”
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / prior balance |
|---|---|---|
| Revenue | $200.7m | $169.4m; up 18.5% |
| Gross profit and margin | $15.8m; 7.8% | $43.7m; 25.8% |
| Operating loss | $(72.6)m | $5.7m |
| Net loss | $(88.3)m | $(22.3)m |
| Net loss attributable to common stockholders / diluted loss per share | $(84.4)m / $(0.76) | $(17.7)m / $(1.70) |
| Cash used in operating activities | $(4.2)m | $(34.5)m |
| Capital expenditures | $8.5m | $0.2m |
| Cash and cash equivalents | $320.4m | $220.7m at Dec. 31, 2018 |
| Total debt, net carrying value | $741.1m | $741.3m at Dec. 31, 2018 |
- Revenue mix: product $141.7m, installation $22.3m, service $23.3m and electricity $13.4m. Product acceptances rose 41.6% to 235 systems, measured in 100-kilowatt equivalents.
- Reported Q1 2018 revenue and gross profit included one-time retroactive investment tax credit benefits of $45.5m and $36.1m, respectively. Excluding that revenue benefit, management said revenue increased 62.0% and gross profit, excluding the benefit and stock-based compensation, increased $20.7m, or 218.3%.
- Stock-based compensation was $63.9m versus $8.0m, including approximately $31.0m tied to an IPO-related employee RSU grant. Management attributed most of the increase in operating expenses to IPO-related compensation; operating expenses totaled $88.4m versus $38.0m.
- Product cost per accepted kilowatt fell 16.8% to $3,206, while installation cost per kilowatt rose 28.5% to $676. Total installed system cost per kilowatt increased to $5,658 from $5,074, reflecting site complexity and installation costs.
- Operating cash use improved year over year, but Q1’s $95.1m of cash provided by investing activities mainly reflected $104.5m of proceeds from maturing securities, not operating cash generation. Cash, cash equivalents and restricted cash ended at $369.9m; restricted cash was $49.5m. Short-term investments were nil, versus $104.4m at year-end 2018.
- Debt at quarter-end comprised $401.3m recourse and $339.8m non-recourse debt on a net carrying basis. Unpaid principal was $780.7m; $391.4m was scheduled for repayment in 2020. Bloom reported compliance with financial covenants.
- Current assets were $639.8m and current liabilities $276.2m. The company reported a $2.7bn accumulated deficit.
Changes, outlook and material matters
- Revenue growth reflected higher acceptances and installation activity. Service revenue also increased with maintenance renewals; electricity revenue declined slightly. Installation gross profit turned negative, while product gross profit and total gross margin were pressured by costs, stock compensation and the prior-year ITC comparison.
- Management stated that cash and cash equivalents and short-term investments should be sufficient for operating, capital and other cash needs for at least 12 months from the report date. It also noted that the company has incurred operating losses and negative operating cash flows since inception, expects losses to continue for the foreseeable future, and may need additional financing if liquidity needs exceed available sources. No specific financial guidance was provided in the filing text.
- Third-party PPAs are a significant sales channel, but deployments depend on financing availability. The filing said one additional Third-Party PPA financing arrangement needed to be finalized to support planned Q2 2019 installations.
- Customer and receivable concentration is material: three customers represented approximately 72% of Q1 revenue; two customers represented 70.1% of accounts receivable at March 31. The filing also identifies dependence on incentives and tax-equity financing, lengthy sales and installation cycles, supplier constraints, installation variability, natural-gas and utility economics, and regulatory changes as risks.
- Bloom disclosed securities class-action complaints related to its July 2018 IPO. It recorded no loss contingency for a separate former-executive arbitration claim, which it said it considered without merit. The EPA had sought approximately $1.0m in fines relating to prior handling of certain maintenance waste; Bloom was contesting the matter.
- A Delaware manufacturing-facility grant creates potential repayment exposure. Bloom reported 334 Delaware employees and $99.3m in cumulative compensation at March 31, against grant milestones of 900 employees and $324m compensation by September 30, 2023; $10.5m was recorded as a liability for potential recapture.
- The filing describes a dual-class share structure, with Class B shares carrying ten votes per share versus one vote for Class A, and potential dilution from convertible notes, options and restricted stock units.
Important facts for investors to verify
- Whether acceptance growth converts into sustainable gross-margin improvement, particularly as installation costs and service obligations evolve.
- Whether reported cash runway holds after considering debt service, capital spending, financing needs and cash that is restricted or held in PPA entities.
- Repayment, refinancing or conversion risks associated with substantial debt, including the 2020 maturities and $296.2m principal balance of 6% convertible notes.
- Availability and terms of third-party PPA financing, and the concentration of revenue and receivables among a small number of customers.
- Progress against Delaware grant milestones, and developments in the EPA matter, IPO-related litigation and other contingencies.