Plug Power Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited results; comparisons are with Q1 2022 unless stated otherwise. Plug develops and sells fuel-cell, hydrogen production, storage and delivery products and services.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $210.3 million | $140.8 million; up 49.3% |
| Gross loss and margin | $69.4 million loss; (33.0%) | $35.3 million loss; (25.1%) |
| Operating loss | $209.8 million | $139.2 million |
| Net loss / loss per share | $206.6 million / $0.35 | $156.5 million / $0.27 |
| Operating cash flow | $(276.9) million | $(209.9) million |
| Capital spending on property and equipment | $168.6 million | $78.4 million |
- Revenue growth was led by equipment, hydrogen infrastructure, electrolyzers and cryogenic equipment. Electrolyzer sales were $40.0 million versus $4.1 million; hydrogen infrastructure sales were $48.9 million versus $27.1 million. Equipment, infrastructure and other sales rose 67% to $182.1 million.
- Reported revenue includes a $14.2 million reduction for common-stock warrants, versus $1.9 million in Q1 2022, mainly associated with Walmart and Amazon arrangements. These warrant charges also contributed to sharply negative PPA and fuel-delivery economics.
- Equipment sales generated a 13.1% gross margin, down from 18.4%. Services, PPAs and fuel delivery each produced gross losses; the PPA and fuel-delivery gross margins were (489.8%) and (437.4%), respectively. Management cited new-product ramp costs, warrant provisions, fuel costs and operating inefficiencies.
- Cash and cash equivalents were $474.9 million at March 31, down from $690.6 million at year-end. Restricted cash was $898.4 million; available-for-sale securities were $1.028 billion and equity securities $139.9 million. Management reported $2.3 billion of working capital.
- Operating cash use increased year over year, primarily due to inventory and other working-capital needs. Inventory rose to $775.6 million from $645.6 million at year-end. Investing activities provided $95.8 million, including $315.8 million of securities maturities; financing activities provided $7.2 million.
- At quarter-end, the balance sheet included $194.3 million of convertible notes (net), $9.0 million carrying value of acquired debt, $342.8 million of finance obligations, and $375.8 million of operating and finance lease liabilities. Finance obligations and leases are significant contractual commitments; restricted cash and letters of credit support certain sale-leaseback arrangements.
Material changes and management commentary
- Revenue increased, but losses widened: gross loss nearly doubled and operating cash use rose by $67.0 million year over year. Operating expenses also increased, including R&D to $26.5 million and SG&A to $104.0 million.
- Warrant provisions, service-contract loss accruals and new-product ramp-up weighed on results. The Q1 provision for service loss contracts was $6.9 million versus $2.0 million a year earlier; the total service-contract loss accrual was $81.3 million.
- Management said it expects cash and working capital to fund operations for at least one year after issuance of the statements, while noting plans to spend on manufacturing capacity, hydrogen plants, partnerships, acquisitions and capital projects. No specific revenue, margin or profitability guidance is provided in the filing text.
- Management identified supply-chain, component availability, inflation and labor-cost pressures. It noted that inventory build-up could become a risk if demand weakens. The company also entered a strategic supply and development partnership with Johnson Matthey.
- A ransomware incident in or around March 2023 encrypted some systems and involved exfiltration of limited data. Plug said affected systems were restored, operations remained fully operational, and it did not believe the event had a material business impact; it incurred response and remediation costs.
- Disclosure controls and procedures were deemed ineffective at March 31, 2023 because previously identified material weaknesses in internal control over financial reporting had not been remediated.
- Legal matters include a securities class action filed April 12, 2023, several stayed derivative actions, and a trade-secret and contract lawsuit filed May 2, 2023 against Plug and Joule Processing. The company said it intends to defend the latter. A separate P&G property-damage/business-interruption matter was settled on terms described as favorable, with settlement funded by insurance.
Key facts for investors to verify
- Whether higher equipment and electrolyzer sales convert into improved gross margins and lower cash burn, particularly in PPAs and hydrogen fuel delivery.
- Inventory composition, turnover and obsolescence exposure, alongside planned capital expenditure and hydrogen-plant progress.
- Availability of unrestricted liquidity after accounting for restricted cash, lease collateral, letters of credit and other contractual obligations.
- Progress remediating internal-control material weaknesses and any further developments from the securities, derivative and trade-secret litigation.
- Potential revenue and share-count effects of customer warrants and other potentially dilutive securities; the filing lists 85.9 million common-stock warrants outstanding at March 31, 2023.