Plug Power Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited results; dollar amounts below are USD millions unless stated otherwise. Plug Power develops hydrogen fuel-cell systems, infrastructure, fueling, maintenance and power-purchase solutions. Its 2020 comparative interim financial statements reflect the restatement described in the 2020 Form 10-K; investors should use those restated comparatives.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $124.6 | $68.0 | $196.5 | $108.8 |
| Gross profit (loss) | $(40.3) | $(0.0) | $(52.5) | $(9.7) |
| Gross margin | (32.4)% | (0.0)% | (26.7)% | (8.9)% |
| Operating loss | $(89.6) | $(26.5) | $(137.9) | $(52.1) |
| Net loss attributable to common stockholders | $(99.6) | $(9.4) | $(160.4) | $(46.9) |
| Loss per share, basic and diluted | $(0.18) | $(0.03) | $(0.30) | $(0.15) |
- Six-month operating cash flow was $(246.6), investing cash flow $(1,405.2), and financing cash flow $3,607.3. Investing outflows included $1,244.6 net purchases of available-for-sale securities and $120.0 of equity securities; financing inflows were primarily equity proceeds.
- At June 30, cash and cash equivalents were $3,160.2; restricted cash was $429.4; available-for-sale securities were $1,242.7; and equity securities were $120.3. Working capital was $4,715.3.
- Liabilities included $160.5 of long-term debt, $192.0 of convertible notes, $195.8 of finance obligations, and $157.2 of operating and finance lease liabilities. The secured term loan bears 9.5% and matures in 2025; the company reported covenant compliance or waivers.
- Stockholders’ equity was $4,830.9, versus $1,466.9 at year-end 2020, reflecting substantial equity issuance. The company issued shares in a public offering and to SK Holdings, raising approximately $1.8 billion and $1.6 billion, respectively.
Material changes and operating drivers
- Q2 revenue increased 83% year over year, led by fuel-cell systems and infrastructure, whose revenue more than doubled to $99.3 million. Six-month revenue increased 81%; the filing attributes growth largely to higher unit deployments and more hydrogen installations.
- Growth did not translate into improved overall profitability: gross loss widened materially. Product and infrastructure gross margin fell to 19.5% in Q2 from 29.0%, which management attributed to product and customer mix. Service, PPA and fuel-delivery lines remained loss-making, with losses worsening year over year.
- Fuel-delivery costs included approximately $16.0 million of six-month costs associated with ending a fuel-provider relationship, including tank removal, transition fuel and settlement costs; approximately $14.6 million was incurred in Q2. Vendor transition and hydrogen-plant disruptions also raised fuel costs.
- Service contract loss provisions were $8.2 million for the first half, versus $0.8 million a year earlier; the loss-contract accrual was $28.4 million at June 30. Estimates depend in part on expected future service-cost savings.
- Research and development expense rose to $21.0 million for the first half from $9.6 million; selling, general and administrative expense rose to $64.2 million from $32.8 million, including higher staffing and stock compensation, branding, and restatement-related costs.
Outlook, risks and unusual items
- Management stated that working capital and cash were expected to fund operations for at least one year after the financial statements were issued. It plans to invest in manufacturing capacity, strategic partnerships and acquisitions, and capital projects. The filing provides no specific revenue, margin or earnings guidance.
- Management reported continuing net losses and negative operating cash flow and noted that profitability may not be achieved. It cited risks involving execution at scale, orders converting to revenue, supply and fuel costs, product reliability, customer concentration, financing, and potential dilution.
- Three customers accounted for 77.7% of first-half revenue; one customer represented 78.5% of accounts receivable at June 30. Management also reported service and PPA margin pressure from increased customer utilization and COVID-related freight, supplier and force-majeure issues.
- Disclosure controls were assessed as ineffective because the previously identified material weakness in internal control over financial reporting remained unremediated at June 30. The weakness involved staffing and risk assessment, with deficiencies affecting expense presentation, leases, estimates and inventory adjustments.
- The company disclosed product-liability litigation related to a 2018 forklift accident and securities and derivative lawsuits related to alleged misstatements and control issues. It recorded no legal accruals, stating none were required based on its assessment.
- The 3.75% convertible notes had a $192.0 million carrying amount but an estimated fair value of approximately $1.32 billion at June 30. The notes became convertible in Q3 2021 after conversion conditions were met; conversion could result in share issuance or cash settlement. The filing also describes outstanding customer warrants and their potential dilution.
- In June 2021, Plug Power France formed HyVia, a 50/50 joint venture with Renault for fuel-cell commercial vehicles and hydrogen infrastructure in Europe. On August 2, 2021, the company’s authorized common shares increased from 750 million to 1.5 billion.
Important facts for investors to verify
- Whether higher system and infrastructure sales can improve gross margins, and whether service, PPA and fuel-delivery losses and the $28.4 million loss-contract accrual decline.
- How much of the fuel-provider transition costs were nonrecurring, and whether supply, fuel-price and service-cost disruptions persist.
- Cash burn, investment spending and the availability of cash after considering restricted balances, lease security and other obligations.
- Potential dilution or cash requirements from convertible-note conversion, customer warrants, equity compensation and future capital needs.
- Progress remediating the material weakness, effects of the prior-period restatement, and developments in the disclosed lawsuits.
- Customer concentration, receivable collection and whether announced orders and partnerships convert into deliveries and revenue.