01—Abstract
Summary
Summary of the 10-K filed March 31, 2020. Cited figures are marked; the original filing is the authoritative source.
Bloom Energy's FY2019 10-K, filed March 31, 2020, is dominated by a restatement and a liquidity scramble.
Management restated FY2018 and revised FY2017 after finding that Managed Services Agreements had been booked as upfront sales when they should have been accounted for as financing transactions under lease accounting. The restatement cut cumulative revenue by $192.1 milliona through September 30, 2019, and the company disclosed a material weakness in internal control over financial reporting, so investors should treat historical revenue and margin trends with caution. Reported FY2019 results show revenue of $785.2 million (up 24.1%), product acceptances of 1,194 systems (up 47.6%), and a gross margin of 12%, but an operating loss of $232.8 million and a net loss attributable to common stockholders of $306.9 million.
Cash and equivalents fell to $202.8 millionb, and working capital was negative $101.3 million. Current debt of $337.6 million, which the company said would require $353.5 million in payments within 12 months, exceeded available liquidity at year-end. Management addressed the near-term maturity wall on March 31, 2020 by extending most of the 6% Convertible Notes to December 2021, raising the coupon to 10%, and cutting the conversion price to $8.00.
It also agreed to a $70 millionc senior secured note placement (subject to a rating) and a $30 million convertible note issuance to affiliates. These steps leave a $70 million repayment due September 1, 2020, and the company flagged COVID-19 as a source of uncertainty for installations, supply chain, and financing partners. Going-concern-style pressure is evident even though management concluded the next 12 months were covered.
02—Key points
Key Highlights
- Restatement: FY2018 restated and FY2017 revised for misstated Managed Services accounting; cumulative revenue overstatement of $192.1M through Sept. 30, 2019.
- FY2019 revenue of $785.2M (+24.1%), driven by product acceptances of 1,194 systems (+47.6%); ASC 606 adoption reduced 2019 revenue by $34.6M.
- Gross margin fell to 12% (from 17% in 2018) and the operating loss widened to $232.8M, including $70.5M of PPA II/IIIb decommissioning write-offs and $196.3M of stock-based compensation.
- Liquidity pressure: cash of $202.8M against $337.6M of current debt; management said it would need $353.5M of payments within 12 months, prompting March 2020 refinancing.
- Concentration: The Southern Company (34%) and SK Korea (23%) made up 57% of 2019 revenue; Southern was 51% of 2018 revenue.
- Material weakness in internal control over financial reporting for complex or non-routine transactions; both disclosure controls and ICFR were deemed not effective at 12/31/2019.
- Governance and dilution risk: dual-class structure gives CEO KR Sridhar control; CPPIB could hold ~32.5% of voting power on conversion of the 6% Notes; multiple securities class actions tied to the July 2018 IPO are pending.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Bloom Energy Corp lost $0.39.
- Revenue$785.2M100.0%
- Cost of revenue−$687.6M87.6%
- Gross profit$97.6M12.4%
- Operating costs−$330.4M42.1%
- Operating income−$232.8M29.6%
- Interest, other & tax−$71.6M9.1%
- Net income−$304.4M38.8%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 31, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $785.18M$632.65M | +24.1% |
| Cost of Revenue | $687.59M$526.90M | +30.5% |
| Gross Profit | $97.59M$105.75M | −7.7% |
| R&D Expenses | $104.17M$89.14M | +16.9% |
| Operating Expenses | $330.39M$270.76M | +22.0% |
| Operating Income | -$232.80M-$165.01M | −41.1% |
| Interest Expense | $87.48M$97.02M | −9.8% |
| Net Income | -$304.41M-$273.54M | −11.3% |
| EPS (Basic) | $-2.67$-5.14 | +48.1% |
| EPS (Diluted) | $-2.67— | — |
| Shares Outstanding (Basic) | 115.12M53.27M | +116.1% |
| Shares Outstanding (Diluted) | 115.12M53.27M | +116.1% |
05—Questions
Frequently Asked Questions
Why did Bloom restate its prior financial statements?
In February 2020 management determined that Managed Services Agreements and similar sale-leaseback arrangements had been recorded as upfront sales with operating leases, when under lease accounting they should be financing transactions. Revenue is now recognized over the contract term. The restatement also corrected capitalization of manufacturing stock-based compensation, an unrecorded embedded EPP derivative, and other immaterial items.
How much debt is due soon, and how is the company addressing it?
As of December 31, 2019, current debt was $337.6M, with $353.5M of cash payments due within 12 months. On March 31, 2020, the company extended most of the 6% Convertible Notes to December 1, 2021 (raising the interest rate to 10% and lowering the conversion price to $8.00), but must repay $70.0M by September 1, 2020. It also agreed to issue $70.0M of 10.25% senior secured notes, subject to funding conditions including a rating, and $30.0M of additional convertible notes to affiliates.
Is Bloom profitable, and when might it be?
No. Bloom reported a net loss attributable to common stockholders of $306.9M for 2019 and has an accumulated deficit of about $2.9B. Management stated it expects net losses for the foreseeable future and cannot assure profitability. Profitability depends on higher volumes, lower product costs, improved service economics, and continued access to financing partners.
What are the main risks tied to customer concentration and financing?
Two customers, The Southern Company and SK (Korea), accounted for roughly 57% of 2019 revenue. Bloom depends on third-party financiers and tax equity investors to fund customer purchases, and the company disclosed that one financier had already delayed a closing due to its own liquidity concerns. Loss of a major customer or financing partner could materially affect revenue and cash flow.
Does the dual-class structure affect shareholders?
Yes. Class B shares carry ten votes each. Chairman and CEO KR Sridhar and affiliated holders control a majority of voting power, which limits Class A holders' influence over board elections, mergers, and other major decisions. Bloom is also not expected to be eligible for certain major indices while the dual-class structure remains. Class B holders retain control until the earliest of July 27, 2023 or other specified triggers.
06—Continue