10-Q/APeriod: Q2 FY2020

Bloom Energy Corp Quarterly Report (Amendment) for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:BE

Summary

Bloom Energy Corporation's (BE) August 5, 2020, 10-Q filing highlights significant financial and operational risks that potential investors should carefully consider. The company faces substantial indebtedness, with approximately $645.7 million in total consolidated debt as of June 30, 2020. The covenants associated with this debt impose operating and financial restrictions, potentially limiting the company's flexibility in borrowing, paying dividends, and making investments. Furthermore, Bloom Energy's ability to utilize its net operating loss (NOL) carryforwards to offset future taxable income is subject to limitations, including potential expiration and Section 382 of the Internal Revenue Code, which could increase its future tax liabilities. The company also emphasizes the critical need to maintain customer and partner confidence in its liquidity and long-term business prospects, especially given its limited operating history at scale, lack of profitability, and the evolving distributed generation market. Investors should also be aware of the company's dependence on key personnel and the potential for conflicts of interest with its Project Power Purchase Agreement (PPA) entities. The firm's dual-class stock structure and the concentrated voting power of Class B shareholders and certain noteholders could limit the influence of Class A stockholders. Additionally, Bloom Energy plans to transition from its status as an Emerging Growth Company by the end of 2020, which will increase compliance costs and disclosure requirements, including the auditor attestation for Section 404 of the Sarbanes-Oxley Act.

Financial Highlights

47 data points
Beta

Revenue

$187.86M

14.0% Gross Margin

Net Income

-$42.51M

-22.6% Net Margin

EPS (Diluted)

$-0.34

Total Assets

$1.28B

Cash & Equivalents

$144.07M

Free Cash Flow

-$19.49M

Financial Statements
Beta
Revenue$187.86M
Cost of Revenue$161.61M
Gross Profit$26.25M
R&D Expenses$19.38M
Operating Expenses$55.75M
Operating Income-$29.50M
Interest Expense$15.20M
Net Income-$42.51M
EPS (Basic)$-0.34
EPS (Diluted)$-0.34
Shares Outstanding (Basic)125.93M
Shares Outstanding (Diluted)125.93M

Key Highlights

  • 1Substantial indebtedness of approximately $645.7 million as of June 30, 2020, with restrictive covenants impacting financial and operational flexibility.
  • 2Net Operating Loss (NOL) carryforwards face limitations due to potential expiration and Section 382 of the Internal Revenue Code, impacting future tax liabilities.
  • 3Critical need to maintain customer and partner confidence in liquidity and long-term business prospects due to limited operating history, lack of profitability, and market uncertainties.
  • 4Dependence on key employees and potential conflicts of interest with PPA entities pose operational and strategic risks.
  • 5Dual-class stock structure concentrates voting power, potentially limiting Class A shareholder influence and affecting the trading market.
  • 6Transition from Emerging Growth Company status by year-end 2020 will increase compliance costs and disclosure requirements (e.g., SOX 404 auditor attestation).
  • 7Potential for cash settlement of convertible debt obligations, which could strain liquidity if not adequately funded.

Frequently Asked Questions

As of June 30, 2020, Bloom Energy had approximately $645.7 million in total consolidated indebtedness. The agreements governing this debt include restrictive covenants that may limit the company's ability to borrow money, pay dividends, make investments, and engage in other financial and operational activities. This substantial debt load and its associated restrictions could hinder future growth, capital expenditures, and the ability to respond to market developments.

Bloom Energy has significant net operating loss (NOL) carryforwards, but their utilization is subject to limitations. These include potential expiration dates (starting in 2022 and 2028) and limitations under Section 382 of the Internal Revenue Code, which can arise from ownership changes. Furthermore, its deferred tax assets are fully reserved with a valuation allowance. If these NOLs expire unutilized, or if further limitations are imposed, the company may face higher future tax liabilities, impacting its ability to offset taxable income.

The company must maintain confidence in its liquidity and long-term business prospects. Factors that could negatively influence this confidence include its limited operating history at scale, its current lack of profitability, potential customer concerns about its ability to maintain Energy Servers, unfamiliarity with the distributed generation market, and competition from alternative energy sources. Negative perceptions, even if unfounded, could deter customers, financing sources, and suppliers.

Bloom Energy has a dual-class stock structure with Class A (one vote per share) and Class B (ten votes per share) common stock. As of June 30, 2020, holders of Class B stock, along with directors, executive officers, and significant stockholders, collectively held a substantial majority of the voting power. This concentrated control limits the ability of Class A stockholders to influence corporate matters, including director elections and major transactions, and may also affect the trading price and index inclusion of Class A shares.