Plug Power Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing was signed March 1, 2022. Plug designs and sells fuel cells, electrolyzers, hydrogen equipment and related services, with material handling as its largest market, while developing an end-to-end green hydrogen business.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net revenue | $502.3 million | $(93.2) million |
| Gross loss / margin | $(171.3) million / (34.1)% | $(469.4) million / (503.5)% |
| Operating loss | $(437.3) million | $(584.2) million |
| Net loss attributable to common stockholders | $(460.0) million; $(0.82) per share | $(596.2) million; $(1.68) per share |
| Cash used in operating activities | $(358.2) million | $(155.5) million |
- Revenue increased substantially from 2020, but the comparison is distorted: 2020 included a $399.7 million revenue reduction upon acceleration of Amazon warrant vesting, contributing to negative reported revenue. FY2021 included $6.6 million of warrant-related revenue reductions.
- FY2021 sales of fuel-cell systems, infrastructure and equipment were $392.8 million, with a 21.8% gross margin. Services generated a $37.0 million gross loss; PPAs a $67.3 million gross loss; and delivered hydrogen an $80.3 million gross loss.
- The service-contract loss provision was $72.0 million in 2021 versus $35.5 million in 2020. The related accrual rose to $89.8 million from $24.0 million.
- Operating expenses were $266.0 million, including $64.8 million of R&D and $179.9 million of SG&A. Stock-based compensation was $76.5 million.
- Cash, cash equivalents and available-for-sale securities were approximately $3.7 billion; restricted cash was $650.9 million. Working capital was $4.0 billion. Management said available liquidity was expected to fund operations for at least one year after issuance of the financial statements.
- Reported indebtedness was approximately $574.4 million: $192.6 million of convertible notes, $128.0 million of long-term debt and $253.7 million of finance obligations. Operating and finance lease liabilities totaled a further $235.8 million. Restricted cash supports leasing and customer financing arrangements.
Changes and significant developments
- Cash used in operations increased to $358.2 million from $155.5 million, despite the smaller net loss; inventory and other working-capital needs contributed to cash use.
- Plug raised approximately $2.0 billion in a public equity offering and approximately $1.6 billion from an equity sale to an SK affiliate during 2021, increasing shares outstanding and providing substantial liquidity.
- Revenue-generating activity expanded: 12,806 GenDrive units and 49 hydrogen infrastructure sites were recognized in 2021, versus 9,418 units and 27 sites in 2020. Average units under maintenance contracts and PPAs also increased.
- Plug acquired Applied Cryo and Frames in late 2021, adding cryogenic storage and delivery equipment, engineering and systems-integration capabilities. The acquisitions contributed goodwill and intangible assets.
- Three customers accounted for 75.7% of FY2021 revenue; Amazon alone contributed 40.8%. One customer represented 46.6% of year-end accounts receivable.
Outlook, risks and unusual items
- Management planned green hydrogen plants in New York, Georgia, Texas and California, with New York and Georgia projects underway and production planned to begin in 2022. The Rochester gigafactory opened in 2021. These are plans, not guaranteed outcomes.
- Management expected inflationary costs to remain elevated through at least 2022. Freight, component availability, vendor transitions and labor costs pressured margins; COVID-related logistics and service costs also affected results.
- Profitability remains unachieved. Material risks include high service and fuel costs, execution and funding of hydrogen projects, customer concentration, dependence on suppliers and external financing for PPAs, and competition and regulatory uncertainty. Management estimated potential future losses of about $169.3 million on certain PPA arrangements, including $24.0 million of non-cash warrant charges; actual results may differ.
- The company reported material weaknesses in internal controls, including controls over operating expense presentation, service loss accruals, inventory capitalization and physical inventory, and IT controls for fuel billings. Management concluded controls were ineffective; KPMG issued an adverse opinion on internal control, while giving an unqualified opinion on the financial statements. Management expected remediation work to continue into 2022.
- The SEC staff had requested an amended 2020 Form 10-K with revised MD&A for restated periods; Plug said it expected to file the amendment as promptly as practicable. The filing also describes securities class-action and derivative litigation and a product-liability matter; the company had not recorded legal accruals.
- Other unusual items included approximately $17 million of costs following termination of a hydrogen fuel-provider relationship and a $16.2 million income-tax benefit primarily associated with deferred tax liabilities from the Applied Cryo acquisition. The company maintained a valuation allowance against most deferred tax assets.
Most important facts for investors to verify
- Whether revenue growth converts into positive gross margins and operating cash flow, particularly in service, PPA and hydrogen-delivery activities.
- Progress against service-cost reductions and whether the $89.8 million service loss accrual is adequate.
- Whether planned hydrogen plants and manufacturing capacity are completed on time and within budget, and whether external hydrogen supply remains dependable.
- Customer concentration, receivable collection and conversion of the approximately $682.4 million of stated future revenue obligations into delivered products and cash.
- Cash available after restricted balances, planned growth spending and financing obligations; debt and lease maturities and covenant compliance.
- Remediation and independent testing of internal-control weaknesses, and the status and effect of the promised 2020 Form 10-K amendment and litigation.