Bloom Energy Corporation — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; unaudited. Bloom designs, manufactures, sells and installs solid-oxide fuel-cell systems for on-site power generation, with associated maintenance and electricity sales. Financial amounts below are in U.S. dollars; “$m” means millions.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $207.2m | $200.3m | $629.7m | $544.9m |
| Gross profit / margin | $36.9m / 18% | $56.0m / 28% | $128.9m / 20% | $102.2m / 19% |
| Operating expenses | $80.8m | $56.4m | $229.9m | $178.4m |
| Operating loss | $(43.9)m | $(0.4)m | $(101.0)m | $(76.3)m |
| Net loss | $(56.7)m | $(17.9)m | $(144.9)m | $(147.5)m |
| Net loss attributable to common stockholders | $(52.4)m | $(12.0)m | $(131.1)m | $(130.4)m |
| Loss per share, basic and diluted | $(0.30) | $(0.09) | $(0.76) | $(1.01) |
- Q3 revenue increased 3.5%; nine-month revenue increased 15.6%. Product revenue rose 19.2% and service revenue rose 43.7% year to date; installation revenue fell 26.5%.
- Q3 gross profit declined $19.1m year over year, with product gross margin falling to 27% from 45%. Management cited a prior-year $14.2m contract-related revenue recognition without corresponding costs, higher freight and supply-chain costs. Nine-month gross profit rose $26.7m, and total gross margin improved to 20% from 19%.
- Service gross profit improved substantially: from a $7.1m loss to a $0.3m loss in Q3, and from a $15.3m loss to approximately break-even for the nine-month period. Management attributed improvement to longer power-module life, cost reductions and fleet optimization. Installation remained loss-making.
- Operating expenses increased 43.3% in Q3 and 28.8% year to date, reflecting investment in R&D, sales capacity, marketing and infrastructure. The Q3 operating loss widened markedly.
Cash flow, liquidity and debt
- For the first nine months, operating cash used was $107.9m, versus $80.0m in 2020; investing cash used was $41.5m versus $33.1m; financing cash provided was $53.1m versus $240.0m. Management attributed higher operating cash use primarily to a $68.9m increase in working capital, including inventory build and timing of collections.
- At September 30, cash and cash equivalents were $121.9m; restricted cash was $198.0m. Combined cash, cash equivalents and restricted cash were $319.9m. Restricted cash is not generally available for unrestricted corporate use.
- Total debt carrying value was $504.2m: $291.3m recourse and $212.9m non-recourse to Bloom (recourse debt principal repayments were scheduled to begin in June 2022). Current debt carrying value was $13.8m. The filing states the company was in compliance with financial covenants.
- Stockholders’ deficit was $46.9m at quarter end, compared with $78.8m of equity at December 31, 2020. Inventory rose to $182.6m from $142.1m.
- Management said existing cash and expected operating cash flows should cover operational and capital needs for the next 12 months, while warning that additional equity or debt financing may be needed. Subsequent to quarter end, Bloom agreed to sell SK ecoplant $255m of preferred stock, subject to closing conditions. The agreement also gives SK ecoplant an option to buy at least 11m Class A shares under specified pricing terms. These transactions could strengthen liquidity but involve closing risk and potential dilution.
- In November 2021, a PPA subsidiary refinanced a $136m term loan due December 2021 with a $136m non-recourse loan due June 2031 at 3.04%.
Business developments, outlook and risks
- Product acceptances increased 12.4% in Q3 and 30.6% year to date, measured in 100-kilowatt systems. Management cited growth in the United States and South Korea, and utility-sector activity. It reported almost all financing needed for remaining 2021 installations secured as of September 30, but was still working to secure a minimal amount.
- No numerical revenue or earnings guidance is provided in the supplied filing text. Management expected component shortages, especially semiconductors and specialty metals, to persist at least through the first half of 2022, and supply-chain disruptions and higher freight costs to continue into Q4 2021. These pressures could delay production and installations and reduce cash flow and gross margin.
- COVID-19-related installation delays and supplier constraints continued, although management said completed installations were minimally affected in the periods and it experienced no COVID-related maintenance delays. One planned installation was deferred to Q4.
- Revenue is concentrated: one customer represented 35% of Q3 revenue; two customers represented 37% and 12% of nine-month revenue. Asia Pacific contributed 36% of Q3 and 38% of nine-month revenue. A customer or regional downturn, or changes to Korean incentive arrangements, could materially affect results.
- On October 23, 2021, Bloom and SK ecoplant expanded their strategic relationship, including commercial cooperation on hydrogen and market expansion, and revised distributor and joint-venture arrangements. The preferred-stock investment remained conditional at the report date.
- Contingencies include performance guarantees, with stated remaining potential caps of approximately $85.2m for direct-purchase projects and $104.6m for portfolio-financed projects. The filing also describes ongoing securities and employment-related litigation; reasonably possible losses were not estimable. Bloom’s suit concerning Santa Clara building permits was amended in October 2021; the company warned that delayed permits could cause customers to terminate contracts and impair future bookings in the city.
- Other key exposures include installation and permitting delays, customer financing availability, supplier concentration, cost inflation, warranty and service obligations, dependence on incentives and tax-equity capital, indebtedness, and the possibility that natural-gas use or incentive and interconnection rules constrain demand.
Most important facts for investors to verify
- Whether Q4 installations were completed as planned and whether customer financing and acceptance timing supported revenue recognition and cash collections.
- Whether supply shortages, shipping costs and materials inflation continued to pressure product costs and gross margin, and whether service profitability remained near break-even.
- Whether the $255m SK ecoplant preferred-stock investment closed, its final terms and proceeds, and the implications of SK ecoplant’s potential common-stock purchase option.
- How much reported cash is unrestricted and available after accounting for restricted cash, project-level obligations and upcoming debt service.
- Progress on Santa Clara permits, the status and potential exposure of legal proceedings, and any changes to performance-guarantee or warranty obligations.