Plug Power Inc. — Q2 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and six months ended June 30, 2022. Plug Power develops and sells fuel-cell and hydrogen solutions, including fuel-cell systems, hydrogen infrastructure, electrolyzers, services, power purchase agreements (PPAs), and fuel. The company reported one operating segment. Results are presented against the comparable 2021 periods.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $151.3 million | $124.6 million | $292.1 million | $196.5 million |
| Gross loss (margin) | $32.5 million (21.5%) | $40.3 million (32.4%) | $67.8 million (23.2%) | $52.5 million (26.7%) |
| Operating loss | $146.9 million | $89.6 million | $286.1 million | $137.9 million |
| Net loss | $173.3 million | $99.6 million | $329.8 million | $160.4 million |
| Loss per share, basic and diluted | $0.30 | $0.18 | $0.57 | $0.30 |
| Cash used in operating activities | Not separately stated for the quarter | Not separately stated for the quarter | $405.1 million | $246.6 million |
- Revenue and profitability: Q2 revenue increased 21% year over year, but the company remained loss-making. Gross margin improved year over year in Q2, while the six-month gross margin deteriorated. In Q2, PPAs and fuel delivered to customers remained particularly loss-making, with gross margins of negative 212.4% and negative 187.5%, respectively.
- Cash flow and liquidity: At June 30, cash and cash equivalents were $2.256 billion; restricted cash was $705.7 million. Available-for-sale securities were $715.9 million and equity securities $134.3 million. Working capital was $3.5 billion. Operating cash outflow was $405.1 million for the first half, versus $246.6 million a year earlier. Capital spending on property, plant and equipment was $157.8 million in the first half. Investing activities provided $265.4 million, primarily reflecting investment-security transactions.
- Debt and obligations: Balance-sheet carrying amounts included $193.3 million of convertible notes, $92.7 million of long-term debt including its current portion, $266.4 million of finance obligations, and $269.8 million of lease liabilities. The $83.3 million Generate Capital term-loan balance was due to be fully repaid by October 2025; Plug reported compliance with its covenants. Restricted cash and letters of credit support certain sale/leaseback arrangements.
- Other metrics: Total assets were $5.734 billion and stockholders’ equity was $4.339 billion at June 30. Stock-based compensation was $88.2 million for the first half, versus $20.8 million in the prior-year period. The company recorded $18.6 million of six-month losses from changes in fair value of equity securities and $6.0 million of losses on equity-method investments.
Material changes versus the prior period
- First-half revenue rose 49%, with acquisitions contributing materially. Applied Cryo, Frames, and Joule contributed a combined $46.8 million in Q2 and $86.9 million in the first half. Acquired engineered and cryogenic equipment contributed revenue not present in the comparable 2021 period.
- Excluding the effect of acquired businesses, deployments were weaker: GenDrive units recognized as revenue fell to 1,258 in Q2 from 3,666 and to 2,487 for the first half from 4,974. Hydrogen infrastructure revenue was associated with 10 sites in Q2 versus 16 in Q2 2021.
- R&D expense increased to $23.6 million in Q2 and $44.0 million in the first half. SG&A rose to $96.0 million and $176.8 million, respectively, driven principally by headcount, compensation including stock-based awards, and branding costs.
- Equipment sales margins were pressured by freight, materials, labor, and lower margins at acquired businesses. Higher PPA costs and hydrogen costs also weighed on gross profit. Service-contract gross losses improved year over year, in part because of releases of previously recorded loss accruals.
- Cash and cash equivalents declined from $2.481 billion at year-end 2021 to $2.256 billion at June 30, 2022; restricted cash increased from $650.9 million to $705.7 million. The accumulated deficit reached $2.727 billion.
Outlook, commentary, risks, and unusual items
- The filing provides no specific quantified revenue or earnings guidance. Management cites historical seasonality, with more revenue typically recognized in the second half, and says new PPA and fuel sites deployed late in Q2 had not yet contributed their full revenue impact.
- Management expects inflation and supply-chain cost pressures to remain elevated at least through the rest of 2022, and higher hydrogen molecule costs to continue at least through 2022. Freight, materials, labor availability, component supply, and China-related supply-chain conditions may affect costs and margins.
- Plug said its working capital and cash position should fund operations for at least one year after issuance of the financial statements. It plans to invest in manufacturing capacity, hydrogen plants, acquisitions, partnerships, and capital projects. The company also cautions that it continues to incur losses and may need additional capital in the future.
- At June 30, the company reported $644.965 million of estimated future revenue from unsatisfied or partially unsatisfied performance obligations; timing varies by product and contract, and backlog is not a guarantee of conversion to revenue.
- Acquisitions generated contingent consideration liabilities and provisional purchase accounting. The Joule earn-out may reach $130 million; measurement assumptions and purchase-price allocations remain subject to change. Management said acquired engineered-equipment sales are not expected to continue beyond current commitments.
- Internal controls: Disclosure controls were deemed ineffective, and previously identified material weaknesses in internal control over financial reporting had not been remediated as of June 30. Weaknesses include controls over operating-expense presentation, service loss accruals, inventory identification and capitalization, and fuel-billing IT controls. The filing also references prior financial-statement restatements.
- Legal matters: The securities class action and several derivative cases concern alleged misleading statements, accounting issues, controls, and insider trading; the derivative cases were stayed pending the class-action motion to dismiss. Plug settled claims by individual plaintiffs relating to a 2018 forklift incident on terms below insurance limits, but continues to defend a related Procter & Gamble lawsuit. The company reported no accruals for legal matters.
- Additional risks include customer concentration, product reliability and liability, acquisition integration, competition, incentives, and the ability to scale manufacturing profitably. Two customers represented 36.4% of receivables at quarter-end; two customers accounted for 38.0% of Q2 revenue.
Important facts for investors to verify
- Whether cash burn, operating losses, and negative margins—especially in PPAs, fuel, and services—improve as deployments and operating scale increase.
- Whether announced orders, backlog, and newly deployed customer sites convert to deliveries, revenue, and cash on the expected schedule.
- Progress and independent evidence of effective remediation of the disclosed material weaknesses in financial reporting controls.
- Acquisition integration, provisional valuations, earn-out exposure, and the sustainability of revenue from acquired businesses.
- Liquidity available after accounting for restricted cash, lease and finance obligations, capital investment plans, and continued operating cash outflows.
- Developments in the securities and derivative litigation and the remaining Procter & Gamble product-liability matter.