Bloom Energy Corporation (NYSE: BE) — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The financial statements are unaudited. Bloom designs, manufactures, sells and services solid-oxide fuel cell systems for on-site power generation.
Financial performance
| Metric | Q3 2020 | Q3 2019, restated | Nine months 2020 | Nine months 2019, restated |
|---|---|---|---|---|
| Revenue | $200.3m | $224.3m | $544.9m | $571.6m |
| Gross profit / margin | $56.0m / 28% | $42.7m / 19% | $102.2m / 19% | $72.6m / 13% |
| Operating loss | $(0.4)m | $(34.9)m | $(76.3)m | $(184.9)m |
| Net loss | $(17.9)m | $(56.8)m | $(147.5)m | $(252.5)m |
| Net loss attributable to common stockholders | $(12.0)m | $(51.8)m | $(130.4)m | $(238.6)m |
| Basic and diluted loss per share | $(0.09) | $(0.44) | $(1.01) | $(2.09) |
| Cash from operating activities | — | $(80.0)m | $141.5m |
Q3 revenue fell 10.7% year over year; nine-month revenue fell 4.7%. Product revenue declined, partly offset by higher installation and service revenue. Q3 product acceptances rose 4.0% to 314 (in 100-kW system equivalents); nine-month acceptances increased 8.4% to 876.
Margins improved, but comparisons reflect lower stock-based compensation and prior-year PPA II upgrade charges. Q3 2020 also included a one-time $14.2m recognition of previously deferred revenue after a contract scope change; this was not tied to acceptances or services in the quarter.
Liquidity, debt and cash flow
- At September 30, 2020, cash and cash equivalents were $325.2m; restricted cash was $179.1m. Total assets were $1.47bn.
- Total debt carrying value was $570.3m: $343.1m recourse and $227.2m non-recourse. Current debt was $129.7m. The company reported compliance with financial covenants.
- Nine-month operating cash use was $80.0m, with working-capital use of $42.4m; investing cash use was $33.1m, primarily property and equipment purchases. Financing provided $240.0m, including $300m of debt issuance proceeds, partly offset by debt repayments and issuance costs.
- In August, Bloom issued $230m of 2.5% Green Convertible Senior Notes due 2025, receiving $220.1m net proceeds. Their accounting effective interest rate was 21.2%, reflecting the debt discount and issuance costs.
- After quarter-end, holders converted the remaining $96.2m principal of 10% convertible notes into shares. Bloom also gave notice to redeem its 10% Notes; the filing expected an approximately $84.3m payment in November 2020. Management said these actions were expected to reduce annual debt service from more than $44m to less than $13m.
Material changes, outlook and risks
- Restatement: 2019 comparative periods in this filing are restated. Bloom concluded that certain Managed Services and similar transactions should have been accounted for as financing transactions, not upfront sales. It also corrected stock-based compensation capitalization and embedded derivative accounting. These changes shifted revenue recognition over time and altered assets, liabilities, earnings and cash-flow classifications.
- Controls: Disclosure controls were deemed ineffective at September 30, 2020 due to a material weakness in staffing and expertise for accounting for complex or non-routine transactions. Remediation efforts included increased use of internal and external technical accounting resources.
- Management outlook: Management expected existing cash and operating cash flows to meet operational and capital needs for the next 12 months and said it did not expect to need capital markets for operating cash, unless COVID-19 effects proved more extensive than expected. This is a forward-looking assessment, not a guarantee.
- COVID-19: Installation delays, customer facility access limits, weather and supplier disruptions affected deployments and acceptances, cash flow and revenue. Management reported that production had not yet been constrained, but warned that renewed outbreaks could disrupt manufacturing, supply and installations. Customer financing was taking longer to arrange, and some financiers’ ability to monetize tax credits was more difficult.
- Concentration and market exposure: Q3 revenue included three customers at approximately 25%, 24% and 21% of total revenue; nine-month revenue included two customers at approximately 29% each. South Korea accounted for 29% of nine-month revenue. Customer concentration, financing availability and changes to incentives or energy regulations are material risks.
- Other notable risks and contingencies: The company disclosed securities and other litigation, but said outcomes were uncertain; some potential losses could not be estimated. It also described possible Delaware grant recapture, performance-guarantee obligations, and regulatory uncertainty over emissions and interconnection rules. A New York program change made future economics for fuel-cell projects more challenging, though contracted projects were grandfathered.
Key investor verification points
- Review the restatement disclosures and confirm how the Managed Services accounting change affects revenue trends, margins, balance-sheet assets and liabilities, and cash-flow comparisons.
- Assess whether the $14.2m one-time deferred-revenue recognition materially influenced Q3 gross profit and how results look excluding it.
- Track cash generation, unrestricted versus restricted cash, debt maturities and the completion and cash cost of the post-quarter note conversions and redemption.
- Monitor remediation of the material weakness and whether controls become effective; the filing identifies risk of further misstatements.
- Verify installation and financing progress, customer concentration, South Korea exposure, and the effects of COVID-19 and incentive or regulatory changes on demand and project economics.