Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 2.55M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 32K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 32K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 31K
10: R1 Cover Page HTML 83K
11: R2 Condensed Consolidated Balance Sheets HTML 176K
12: R3 Condensed Consolidated Balance Sheets HTML 52K
(Parenthetical)
13: R4 Condensed Consolidated Statements of Operations HTML 148K
14: R5 Condensed Consolidated Statements of Comprehensive HTML 66K
Loss
15: R6 Condensed Consolidated Statements of Changes in HTML 122K
Stockholders' Equity (Deficit)
16: R7 Condensed Consolidated Statements of Changes in HTML 35K
Stockholders' Equity (Deficit) (Parenthetical)
17: R8 Condensed Consolidated Statements of Cash Flows HTML 170K
18: R9 Nature of Business, Liquidity and Basis of HTML 47K
Presentation
19: R10 Summary of Significant Accounting Policies HTML 32K
20: R11 Revenue Recognition HTML 87K
21: R12 Financial Instruments HTML 54K
22: R13 Fair Value HTML 104K
23: R14 Balance Sheet Components HTML 96K
24: R15 Outstanding Loans and Security Agreements HTML 109K
25: R16 Derivative Financial Instruments HTML 48K
26: R17 Leases HTML 361K
27: R18 Stock-Based Compensation Expense and Employee HTML 83K
Benefit Plans
28: R19 Portfolio Financings HTML 64K
29: R20 Related Party Transactions HTML 41K
30: R21 Commitments and Contingencies HTML 47K
31: R22 Income Taxes HTML 32K
32: R23 Net Loss per Share Available to Common HTML 42K
Stockholders
33: R24 Subsequent Events HTML 29K
34: R25 Summary of Significant Accounting Policies HTML 42K
(Policies)
35: R26 Nature of Business, Liquidity and Basis of HTML 34K
Presentation (Tables)
36: R27 Revenue Recognition (Tables) HTML 84K
37: R28 Financial Instruments (Tables) HTML 65K
38: R29 Fair Value (Tables) HTML 104K
39: R30 Balance Sheet Components (Tables) HTML 101K
40: R31 Outstanding Loans and Security Agreements (Tables) HTML 102K
41: R32 Derivative Financial Instruments (Tables) HTML 47K
42: R33 Leases (Tables) HTML 139K
43: R34 Stock-Based Compensation Expense and Employee HTML 82K
Benefit Plans (Tables)
44: R35 Portfolio Financings (Tables) HTML 57K
45: R36 Related Party Transactions (Tables) HTML 39K
46: R37 Net Loss per Share Available to Common HTML 41K
Stockholders (Tables)
47: R38 Nature of Business, Liquidity and Basis of HTML 92K
Presentation (Details)
48: R39 Revenue Recognition - Contract Balances (Details) HTML 37K
49: R40 Revenue Recognition - Contract Assets (Details) HTML 35K
50: R41 Revenue Recognition - Contract Liabilities HTML 33K
(Details)
51: R42 Revenue Recognition - Revenue by Source (Details) HTML 54K
52: R43 Financial Instruments - Cash and Cash Equivalents HTML 43K
and Restricted Cash (Details)
53: R44 Financial Instruments - Restricted Cash (Details) HTML 52K
54: R45 Financial Instruments - Narrative (Details) HTML 31K
55: R46 Fair Value - Financial Assets and Liabilities HTML 60K
Measured at Fair Value (Details)
56: R47 Fair Value - Narrative (Details) HTML 40K
57: R48 Fair Value - Change in Level 3 Financial Assets HTML 33K
(Details)
58: R49 Fair Value - Estimated Fair Values and Carrying HTML 75K
Values for Customer Receivables and Debt
Instruments (Details)
59: R50 Balance Sheet Components - Inventories, Net HTML 39K
(Details)
60: R51 Balance Sheet Components - Prepaid Expense and HTML 48K
Other Current Assets (Details)
61: R52 Balance Sheet Components - Property, Plant and HTML 53K
Equipment (Details)
62: R53 Balance Sheet Components - Property Plant and HTML 51K
Equipment, Net Narrative (Details)
63: R54 Balance Sheet Components - Other Long-Term Assets HTML 46K
(Details)
64: R55 Balance Sheet Components - Accrued Other Current HTML 53K
Liabilities (Details)
65: R56 Outstanding Loans and Security Agreements - HTML 68K
Schedule of Debt (Details)
66: R57 Outstanding Loans and Security Agreements - HTML 43K
Recourse Debt Facilities Narrative (Details)
67: R58 Outstanding Loans and Security Agreements - HTML 59K
Non-recourse Debt Facilities (Details)
68: R59 Outstanding Loans and Security Agreements - HTML 49K
Schedule of Repayments (Details)
69: R60 Derivative Financial Instruments - Changes in Fair HTML 59K
Value of Derivative Contracts (Details)
70: R61 Leases - Narrative (Details) HTML 32K
71: R62 Leases - Operating and Financing Lease HTML 47K
Right-of-Use Assets and Lease Liabilities
(Details)
72: R63 Leases - Costs (Details) HTML 40K
73: R64 Leases - Weighted Average Remaining Lease Terms HTML 38K
and Discount Rates (Details)
74: R65 Leases - Future Minimum Lease Payments (Details) HTML 77K
75: R66 Leases - Sales-Type Leases (Details) HTML 42K
76: R67 Leases - Payment to be Received (Details) HTML 43K
77: R68 Stock-Based Compensation Expense and Employee HTML 39K
Benefit Plans - Stock-based Compensation Expense
(Details)
78: R69 Stock-Based Compensation Expense and Employee HTML 71K
Benefit Plans - Stock Option Activity (Details)
79: R70 Stock-Based Compensation Expense and Employee HTML 42K
Benefit Plans - Stock Options Narrative (Details)
80: R71 Stock-Based Compensation Expense and Employee HTML 51K
Benefit Plans - Stock Award Activity (Details)
81: R72 Stock-Based Compensation Expense and Employee HTML 35K
Benefit Plans - Stock Awards Narrative (Details)
82: R73 Stock-Based Compensation Expense and Employee HTML 37K
Benefit Plans - Number of Shares Available for
Grant (Details)
83: R74 Stock-Based Compensation Expense and Employee HTML 41K
Benefit Plans - Employee Stock Purchase Plan
(Details)
84: R75 Portfolio Financings - Narrative (Details) HTML 138K
85: R76 Portfolio Financings - Schedule of PPA Entities' HTML 104K
Assets and Liabilities (Details)
86: R77 Related Party Transactions - Schedule of Related HTML 37K
Party Transactions and Outstanding Related Party
(Details)
87: R78 Commitments and Contingencies (Details) HTML 69K
88: R79 Income Taxes (Details) HTML 38K
89: R80 Net Loss per Share Available to Common HTML 40K
Stockholders - Schedule of Antidilutive Securities
(Details)
90: R9999 Uncategorized Items - be-20220930.htm HTML 46K
93: XML IDEA XML File -- Filing Summary XML 176K
91: XML XBRL Instance -- be-20220930_htm XML 3.35M
92: EXCEL IDEA Workbook of Financial Reports XLSX 182K
6: EX-101.CAL XBRL Calculations -- be-20220930_cal XML 312K
7: EX-101.DEF XBRL Definitions -- be-20220930_def XML 808K
8: EX-101.LAB XBRL Labels -- be-20220930_lab XML 2.07M
9: EX-101.PRE XBRL Presentations -- be-20220930_pre XML 1.28M
5: EX-101.SCH XBRL Schema -- be-20220930 XSD 224K
94: JSON XBRL Instance as JSON Data -- MetaLinks 505± 783K
95: ZIP XBRL Zipped Folder -- 0001628280-22-028193-xbrl Zip 576K
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYesþ No ¨
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYesþ No ¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
iLarge accelerated filerþ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting
company i☐ Emerging growth company i☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No iþ
Unless
the context otherwise requires, the terms “Company”, “we,”“us,” “our,” and “Bloom Energy,” each refer to Bloom Energy Corporation and all of its subsidiaries.
Redeemable convertible preferred stock, Series A: ii10,000,000/
shares authorized and ii10,000,000/
shares and iino/ shares issued and outstanding
at September 30, 2022 and December 31, 2021, respectively.
i208,551
i208,551
Redeemable
noncontrolling interest
i—
i300
Stockholders’
equity (deficit):
Common stock: $iiii0.0001///
par value; Class A shares - ii600,000,000/ shares
authorized and ii179,165,539/ shares and ii160,627,544/
shares issued and outstanding and Class B shares - ii600,000,000/
shares authorized and ii15,802,146/ shares and ii15,832,863/
shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.
i19
i18
Additional
paid-in capital
i3,691,715
i3,219,081
Accumulated
other comprehensive loss
(i1,531)
(i350)
Accumulated
deficit
(i3,517,311)
(i3,263,075)
Total
equity (deficit) attributable to Class A and Class B common stockholders
i172,892
(i44,326)
Noncontrolling
interest
i29,481
i42,499
Total
stockholders' equity (deficit)
$
i202,373
$
(i1,827)
Total
liabilities, redeemable convertible preferred stock, redeemable noncontrolling interest and stockholders' equity (deficit)
$
i1,902,069
$
i1,725,571
1We
have variable interest entities related to PPAs, which represent a portion of the consolidated balances recorded within these financial statement line items in the condensedconsolidated balance sheets (see Note 11 - Portfolio Financings).
The accompanying notes are an integral part of these condensed consolidated financial statements.
2Excludes
$i17 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $i334 - distributions to redeemable noncontrolling interests
of $i20 + net income attributable to redeemable noncontrolling interest of $i17 = ending redeemable noncontrolling interest of $i331.
3Excludes
$i300 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $i300 - net loss attributable to redeemable noncontrolling
interest of $i300 = ending redeemable noncontrolling interest of iNil.
4Excludes
$i9 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $i377 - distributions to redeemable noncontrolling interest
of $i37 - net loss attributable to redeemable noncontrolling interest of $i9 = ending redeemable noncontrolling interest of $i331.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Operating
lease right-of-use assets and operating lease liabilities
i2,162
(i7,593)
Finance
lease liabilities
i499
i—
Accounts
payable
i38,642
i37,795
Accrued
warranty
i1,597
(i2,357)
Accrued
expenses and other current liabilities
i502
(i26,178)
Deferred
revenue and customer deposits
(i12,716)
(i53,181)
Other
long-term liabilities
(i9,980)
i1,289
Net
cash used in operating activities
(i168,453)
(i107,956)
Cash
flows from investing activities:
Purchase of property, plant and equipment
(i80,907)
(i44,625)
Net
cash acquired from step acquisition
i—
i3,114
Net
cash used in investing activities
(i80,907)
(i41,511)
Cash
flows from financing activities:
Repayment of debt of PPA IIIa
(i30,212)
i—
Repayment
of debt
(i17,262)
(i11,017)
Debt
make-whole payment related to PPA IIIa debt
(i2,413)
i—
Proceeds
from financing obligations
i—
i7,534
Repayment
of financing obligations
(i28,821)
(i10,174)
Contributions
from noncontrolling interests
i2,815
i—
Distributions
to redeemable noncontrolling interests
i—
(i37)
Distributions
and payments to noncontrolling interests
(i5,972)
(i5,285)
Proceeds
from issuance of common stock
i15,150
i72,109
Proceeds
from public share offering (Note 1)
i385,396
i—
Public
share offering costs (Note 1)
(i13,407)
i—
Other
(i63)
i—
Net
cash provided by financing activities
i305,211
i53,130
Effect
of exchange rate changes on cash, cash equivalent and restricted cash
(i1,643)
(i472)
Net
decrease in cash, cash equivalents and restricted cash
i54,208
(i96,809)
Cash,
cash equivalents and restricted cash:
Beginning of period
i615,114
i416,710
End
of period
$
i669,322
$
i319,901
Supplemental
disclosure of cash flow information:
Cash paid during the period for interest
$
i39,664
$
i42,598
Cash
paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
i11,759
i10,332
Operating
cash flows from finance leases
i788
i643
Cash
paid during the period for income taxes
i1,296
i372
Non-cash
investing and financing activities:
Transfer of customer financing receivable to property, plant and equipment, net
i42,758
i—
Increase
in recourse debt, non-current upon adoption of ASU 2020-06, net
i—
i121,491
Forward
to purchase Class A Common Stock (Note 5)
i4,183
i—
Liabilities
recorded for property, plant and equipment, net
i13,373
i6,188
Recognition
of operating lease right-of-use asset during the year-to-date period
i17,623
i43,660
Recognition
of finance lease right-of-use asset during the year-to-date period
i—
i1,961
The
accompanying notes are an integral part of these condensed consolidated financial statements.
8
Bloom Energy Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
The unaudited interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.
The
unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2021 Annual Report on Form 10-K.
1. iNature of Business, Liquidity and Basis of Presentation
Nature of Business
For information on the nature of our business, see Part II, Item 8, Note
1 - Nature of Business, Liquidity and Basis of Presentation, Nature of Business section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
We have not experienced any supply chain disruptions as a result of the invasion by the Russian Federation in Ukraine on February 24, 2022.
Liquidity
We have generally incurred operating losses and negative cash flows from operations since our inception. With the series of new debt offerings, debt extensions and conversions to equity that we completed during 2020 and 2021, we had $i287.5
million of total outstanding recourse debt as of September 30, 2022, $i274.7 million of which is classified as long-term debt. Our recourse debt scheduled repayments commenced in June 2022.
On August 10, 2022, pursuant to the Securities Purchase Agreement (“the SPA”) SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as
defined in the SPA) electing to purchase i13,491,701 shares (the “Second Tranche Shares”) at a purchase price of $i23.05 per share, calculated as a
i15% premium to the volume-weighted average closing price of the i20 consecutive trading day period immediately preceding the exercise of the option (see Note 5 - Fair Value).
The aggregate purchase price approximates cash proceeds to be received by us of $i311.0 million, net of related incremental direct costs of $i0.1 million.
The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the Hart Scott Rodino (“HSR”) Act of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice.
On August 19, 2022, we completed an underwritten public offering (“the Offering”), pursuant to which we issued and sold i13,000,000
shares of Class A Common Stock at price of $i26.00 per share. As a part of the Offering, the underwriters were provided a i30-day option to purchase an additional i1,950,000
shares of our Class A Common Stock at the same price, less underwriting discounts and commissions (“the Greenshoe”), which was exercised contemporaneously with the Offering. The aggregate net proceeds received by us from the Offering were $i371.5 million after deducting underwriting discounts and commissions of $i16.5
million and incremental costs directly attributable to the Offering of $i0.7 million.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our product, our ability to secure financing for
customer use of our Energy Servers, the timing of installations, and overall economic conditions including the impact of COVID-19 and inflationary pressure in the US on our ongoing and future operations. The rising interest rate environment in the US has and will continue to adversely impact the cost of new capital deployment.
In the opinion of management, the combination of our existing cash and cash equivalents and operating cash flows is expected to be sufficient to meet our operational and capital cash flow requirements and other cash flow needs for the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.
9
Inflation Reduction Act
On
August 7, 2022, the United States Senate passed the Inflation Reduction Act of 2022 (“the IRA”) under fiscal year 2022 budget reconciliation instructions. On August 16, 2022, the IRA was signed into law. This new bill is the U.S. federal government’s largest-ever investment to fight climate change. The IRA includes numerous investments in climate protection, including investments in clean energy production and tax credits aimed at reducing carbon emissions by roughly 40% by 2030. By implementing the IRA, the government aims to make an impact on energy markets so that cleaner options are more affordable to consumers.
i
The
IRA contains several credits and incentive provisions that may be relevant to us:
Credit
Credit summary
Section 45 – Production Tax credit (“PTC”)
Provides a 10-year tax credit for a variety of renewable energy technologies to incentivize electricity generation to be sold to a third party.
Section 48 – Investment Tax Credit (“ITC”)
Provides a tax credit based on capital investment in a variety of renewable and conventional energy technologies
to incentivize investment in new energy resources and more efficient use of fuel.
Section 45X – Advanced Manufacturing Production
Provides a PTC for the production of certain eligible components sold to an unrelated person (exceptions apply). The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals.
Section 48C – Qualified Advanced Energy Project (reenacted)
Provides an ITC through a competitive application process administered through the Department of Energy equal to 6% or 30% of the investment with respect to advanced energy projects.
Section 45Y – Clean Electricity
Production Credit
Provides a 10-year technology-neutral PTC, equal to the kWh of electricity produced by the taxpayer times an applicable amount (based of $0.003/kWh up to $0.015/kWh) for the production of clean electricity produced at a qualifying facility for which the GHG emission rate is not greater than zero and electricity is sold, consumed or stored.
Provides a technology-neutral ITC of between 6% (or 2%) to 30% (or 10%) for qualified capital investments in an electric generating facility or energy storage for which GHG rate is not greater than zero.
Section 45V – Clean Hydrogen
Provides a PTC of up to $3 per kg of clean hydrogen
over a 10-year credit period for the production of clean hydrogen at a qualified facility in the US.
Section 45Q – Carbon Capture Sequestration
Provides a credit ranging from $12-$17 or $60-$85 per metric ton based on the amount of carbon oxides captured from a qualified facility over a 12-year period.
We are currently assessing the impact of these provisions on our business beyond the third quarter of 2022.
Some of our existing contracts contemplated price adjustments due to changes to ITC rate at the inception of the contracts.
As a result, we recognized $i8.7 million product revenue and $i1.3 million
installation revenue for the three months ended September 30, 2022, due to a change in variable considerations for energy servers placed in service during the eligible periods from such existing contracts.
i
Basis of Presentation
We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”),
and as permitted by those rules, including all disclosures required by generally accepted accounting principles as applied in the United States (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform to the current period presentation.
i
Principles of Consolidation
For information on principles of consolidation, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Principles of Consolidation section in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2021.
10
i
Use of Estimates
For information on the use of accounting estimates, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Use of Estimates section in our Annual Report on Form 10-K for the fiscal year ended December
31, 2021.
Concentration of Risk
Geographic Risk - The majority of our revenue and long-lived assets are attributable to operations in the United States for all periods presented. In addition to shipments in the US, we also ship our Energy Servers to other countries, primarily to the Republic of Korea, Japan, and India (collectively, the “Asia Pacific region”). In the three and nine months ended September 30, 2022, total revenue in the Asia Pacific region was i58%
and i61%, respectively, of our total revenue. In the three and nine months ended September 30, 2021, total revenue in the Asia Pacific region was i36% and i38%,
respectively, of our total revenue.
Credit Risk - At September 30, 2022 and December 31, 2021, iione/
customer accounted for approximately i23% and i60% of accounts receivable, respectively. To date, we have not experienced any credit losses.
Customer Risk - During
the three months ended September 30, 2022, itwo customers represented approximately i54% and i26%
of our total revenue, respectively. During the nine months ended September 30, 2022, itwo customers represented approximately i48% and i16%
of our total revenue, respectively.
During the three months ended September 30, 2021, ione customer represented i35% of our total revenue. During
the nine months ended September 30, 2021, revenue from itwo customers represented i37% and i12%
of our total revenue, respectively.
2. iSummary of Significant Accounting Policies
Please refer to the accounting policies described in Part II, Item 8, Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended December
31, 2021.
i
Recent Accounting Pronouncements
There have been no significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.
Accounting Guidance Not Yet Adopted
Contract Assets and Contract
Liabilities Acquired in a Business Combination - In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts
with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in abusiness combination at fair value. ASU 2021-08 will be effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.Early adoption is permitted. The adoption impact of ASU 2021-08 will depend on the magnitude of any future acquisitions. The standard will not impact acquiredcontract
assets or liabilities from business combinations occurring prior to the adoption date.
The following table provides information about accounts receivables, contract assets, customer deposits and deferred revenue from contracts with customers (in thousands):
Contract
assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current in the condensed consolidated balance sheet when the Company expects to complete the related performance obligations and invoice the customers within one year of the balance sheet date, and as long-term when the Company expects to complete the related performance obligations and invoice the customers more than one year out from the balance sheet date. Contract
liabilities are classified as current in the condensed consolidated balance sheet when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year from the balance sheet date.
Transferred
to accounts receivable from contract assets recognized at the beginning of the period
(i21,677)
(i11,758)
(i21,304)
i—
Revenue
recognized and not billed as of the end of the period
i14,071
i20,865
i21,871
i24,418
Ending
balance
$
i25,768
$
i27,745
$
i25,768
$
i27,745
Deferred
Revenue
Deferred revenue activity, including deferred incentive revenue activity, during the three and nine months ended September 30, 2022 and 2021 consisted of the following (in thousands):
1
We have VIEs related to PPAs that represent a portion of the consolidated balances recorded within the “restricted cash” and other financial statement line items in the condensed consolidated balance sheets (see Note 11 - Portfolio Financings). In addition, the restricted cash held in the PPA II and PPA IIIb entities as of September 30, 2022, includes $i33.3 million and $i1.1
million of current restricted cash, respectively, and $i35.7 million and $i6.7 million of non-current restricted cash, respectively. The restricted cash held in the PPA II and PPA IIIb entities
as of December 31, 2021, includes $i41.7 million and $i1.2 million of current restricted cash, respectively, and $i57.7
million and $i6.7 million of non-current restricted cash, respectively. These entities are not considered VIEs.
/
Factoring Arrangements
We sell certain customer trade receivables on a non-recourse basis under factoring arrangements with our designated financial institution. These transactions are accounted for as sales and cash proceeds
are included in cash used in operating activities. We derecognized $i146.3 million and $i116.3
million of accounts receivable as of September 30, 2022 and December 31, 2021, respectively, under these factoring arrangements. The costs of factoring such accounts receivable on our condensed consolidated statements of operations for the three and nine months ended September 30, 2022, were $i2.5 million and $i3.7
million, respectively. The costs of factoring for the three and nine months ended September 30, 2021, were iino/t
material. The cost of factoring is recorded in general and administrative expenses.
14
5. iFair Value
Our accounting policy for the fair value measurement of cash equivalents and embedded Escalation Protection Plan (“EPP”)
derivatives is described in Part II, Item 8 Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
i
The tables below set forth, by level, our financial assets that are accounted for
at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):
Option
to acquire a variable number of shares of Class A Common Stock
$
i—
$
i13,200
$
i—
$
i13,200
Embedded
EPP derivatives
i—
i—
i6,461
i6,461
$
i—
$
i13,200
$
i6,461
$
i19,661
/
SK
ecoplant Notice to Exercise the Option to Acquire a Variable Number of Shares of Class A Common Stock
On August 10, 2022, pursuant to the SPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase i13,491,701 shares at a purchase price of $i23.05
per share. Upon receipt of SK’s notice the purchase price and the number of shares of Class A Common Stock that SK will purchase under the Option are fixed. The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the HSR Act of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice.
The Option was fair valued as of the notice date at $i4.2 million.
Upon the receipt of the notice from SK ecoplant the Option met the criteria of equity award and was classified as a forward contract as part of additional paid-in capital. The fair value of the Option was reflected in accrued expenses and other current liabilities in our condensed consolidated balance sheet as of December 31, 2021.
15
Embedded EPP Derivative Liability
For the three months ended September 30, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives
and recognized an unrealized gain of $i0.1 million and an unrealized loss of $i0.2 million, respectively, in gain (loss) on revaluation of embedded
derivatives on our condensed consolidated statements of operations.
For the nine months ended September 30, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized gain of $i0.6 million and an unrealized loss of $i1.6
million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statements of operations.
iThe changes in the Level 3 financial liabilities during the nine months ended September 30, 2022, were as follows (in thousands):
Financial
Assets and Liabilities and Other Items Not Measured at Fair Value on a Recurring Basis
Customer Receivables and Debt Instruments - The fair value for customer financing receivables is based on a discounted cash flow model, whereby the fair value approximates the present value of the receivables (Level 3). The senior secured notes, term loans and convertible notes are based on rates currently offered for instruments with similar maturities and terms (Level 3). iThe following table presents the estimated
fair values and carrying values of customer receivables and debt instruments (in thousands):
Depreciation expense related to property, plant and equipment for the three and nine months ended September 30, 2022 was $i15.5 million and $i46.2 million, respectively. Depreciation
expense related to property, plant and equipment for the three and nine months ended September 30, 2021 was $i13.3 million and $i40.1 million, respectively.
Property,
plant and equipment under operating leases by the PPA Entities was $i362.0 million and $i368.0
million and accumulated depreciation for these assets was $i153.8 million and $i139.4
million as of September 30, 2022 and December 31, 2021, respectively. Depreciation expense for these assets was $i5.8 million and $i17.3
million for the three and nine months ended September 30, 2022, respectively. Depreciation expense for these assets was $i5.9 million and $i17.6
million for the three and nine months ended September 30, 2021, respectively.
PPA IIIa Upgrade
In June 2022, we started a project to replace i9.8 megawatts of second-generation Energy Servers (the “old Energy Servers”) at PPA IIIa Investment Company and Operating Company (“PPA IIIa”) with current generation Energy Servers (the “new Energy Servers”) (the “PPA IIIa Upgrade”, the “PPA IIIa Repowering”). The replacement was ongoing as of September
30, 2022. See Note 11 - Portfolio Financing for additional information.
Change in Estimate
In June 2022, due to the replacement of old Energy Servers as part of the PPA IIIa Repowering, we revised the expected useful life of the old Energy Servers. As a result, the expected useful life of old Energy Servers decreased from i15 years to approximately i0.5
years. We recognized accelerated depreciation of $i0.2 million in electricity cost of revenue on the revised carrying amount of the old Energy Servers after impairment loss in our condensed consolidated statements of operations. There is no effect from this change in accounting estimate on future periods.
18
Other Long-Term Assets
i
Other
long-term assets consist of the following (in thousands):
Please refer to Part II, Item 8, Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 2021, for discussion of our i10.25%
Senior Secured Notes due March 2027 and i2.5% Green Convertible Senior Notes due August 2025.
Interest expense on the Green Notes for the three and nine months ended September 30, 2022, was $i1.9
million and $i5.8 million, respectively, including amortization of issuance costs of $i0.5 million and $i1.5
million, respectively. Interest expense on the Green Notes for the three and nine months ended September 30, 2021, was $i1.9 million and $i5.8 million,
respectively, including amortization of issuance costs of $i0.5 million and $i1.5 million, respectively.
20
Non-recourse
Debt Facilities
Please refer to Part II, Item 8, Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 2021 for discussion of our non-recourse debt.
Both note purchase and credit agreements require us to maintain a debt service reserve, the balances of which are presented below (in millions):
These
debt service balances are included as part of long-term restricted cash in the condensed consolidated balance sheets. Both notes and the loan are secured by assets of respective PPAs.
i7.5% Term Loan due September 2028 - On June 14, 2022, as part of the PPA IIIa Upgrade, we paid off the outstanding balance and related accrued interest of $i30.2 million
and $i0.4 million, respectively, and recognized a loss on extinguishment of debt of $i4.2 million. The debt service reserve
of $i3.6 million was reclassified from restricted cash to cash and cash equivalents at the time of extinguishment of debt.
Repayment Schedule and Interest Expense
i
The
following table presents details of our outstanding loan principal repayment schedule as of September 30, 2022 (in thousands):
Remainder of 2022
$
i6,755
2023
i28,503
2024
i31,872
2025
i265,494
2026
i39,078
Thereafter
i120,492
$
i492,194
/
Interest
expense of $i13.1 million and $i14.5 million for the three months ended September 30, 2022 and 2021, respectively,
was recorded in interest expense on the condensed consolidated statements of operations. Interest expense of $i41.0 million and $i43.8 million for the nine months ended September
30, 2022 and 2021, respectively, was recorded in interest expense on the condensed consolidated statements of operations.
21
8. iDerivative Financial
Instruments
Cash Flow Hedges
As of December 31, 2021, we had settled our interest rate swaps, which had been designated as cash flow hedges. There were no cash flow hedges as of September 30, 2022. iThe changes in fair value of the interest rate swaps designated as
cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings were as follows during the three and nine months ended September 30, 2022 and 2021 (in thousands):
For information on embedded EPP Derivatives in sales contracts, see Part II, Item 8, Note 8 - Derivative Financial Instruments in our Annual Report on form 10-K for the fiscal year ended December 31, 2021.
9. iiiiLeases///
Facilities,
Energy Servers, and Vehicles
For the three and nine months ended September 30, 2022, rent expense for all occupied facilities was $i5.0 million and $i14.2
million, respectively. For the three and nine months ended September 30, 2021, rent expense for all occupied facilities was $i4.4 million and $i11.4
million, respectively.
22
i
Operating and finance lease right-of-use assets and lease liabilities for facilities, Energy Servers, and vehicles as of September 30, 2022 and December 31, 2021 were as follows (in thousands):
1
These assets primarily include leases for facilities, Energy Servers, and vehicles.
2 Net of accumulated amortization.
3 These assets primarily include leases for vehicles.
4 Included in property, plant and equipment, net in the condensed consolidated balance sheet.
/i
The
components of our facilities, Energy Servers, and vehicles' lease costs for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):
Weighted
average remaining lease terms and discount rates for our facilities, Energy Servers and vehicles as of September 30, 2022 and December 31, 2021 were as follows:
Future
lease payments under lease agreements for our facilities, Energy Servers and vehicles as of September 30, 2022 were as follows (in thousands):
Operating Leases
Finance Leases
Remainder of 2022
$
i6,365
$
i281
2023
i24,688
i1,121
2024
i23,028
i948
2025
i23,504
i461
2026
i23,332
i222
Thereafter
i54,170
i73
Total
minimum lease payments
i155,087
i3,106
Less:
amounts representing interest or imputed interest
(i20,004)
(i219)
Present
value of lease liabilities
$
i135,083
$
i2,887
//
24
Managed
Services and Portfolio Financings Through PPA Entities
At September 30, 2022, future lease payments under the Managed Services Agreements financing obligations were as follows (in thousands):
Financing Obligations
Remainder of 2022
$
i10,889
2023
i44,124
2024
i42,051
2025
i41,025
2026
i36,426
Thereafter
i55,508
Total
minimum lease payments
i230,023
Less: imputed interest
(i128,150)
Present
value of net minimum lease payments
i101,873
Less: current financing obligations
(i16,682)
Long-term
financing obligations
$
i85,191
The long-term financing obligations, as reflected in our condensed consolidated balance sheets, were $i443.7
million and $i461.9 million as of September 30, 2022 and December 31, 2021, respectively. The difference between these obligations and the principal obligations in the table above will be offset against the carrying value of the related Energy Servers at the end of the lease and the remainder recognized as a gain at that point.
Portfolio Financings through PPA Entities
i
The
components of our aggregate net investment in sales-type leases under our Portfolio Financings through PPA entities consisted of the following (in thousands):
Estimated
residual value of leased assets (unguaranteed)
i—
i890
Net
investment in sales-type leases
i—
i45,268
Less:
current portion
i—
(i5,784)
Non-current
portion of net investment in sales-type leases
$
i—
$
i39,484
1
Net of current estimated credit losses of approximately $i0.1 million as of December 31, 2021.
/
As of September 30, 2022, there was ino
net investment in sales-type leases as a result of PPA IIIa Repowering. Please refer to Note 11 - Portfolio Financing for details.
25
i
As of September 30, 2022, future estimated operating minimum lease payments we expect to receive from Portfolio Financing
arrangements through PPA Entities were as follows (in thousands):
Operating Leases
Remainder of 2022
$
i9,582
2023
i37,608
2024
i40,067
2025
i42,589
2026
i43,761
Thereafter
i197,868
Total
minimum lease payments
$
i371,475
/
10.
iStock-Based Compensation Expense and Employee Benefit Plans
Stock-Based Compensation Expense
i
The
following table summarizes the components of stock-based compensation expense in the condensed consolidated statements of operations (in thousands):
Stock
Options - During the three and nine months ended September 30, 2022, we recognized $i1.2 million and $i6.7
million of stock-based compensation expense for stock options, respectively. During the three and nine months ended September 30, 2021, we recognized $i2.7 million and $i10.0
million of stock-based compensation expense for stock options, respectively. We did iiiino///t
grant options in the three and nine months ended September 30, 2022 and 2021.
As of September 30, 2022 and December 31, 2021, we had unrecognized compensation expense related to unvested stock options of $i0.8
million and $i6.2 million, respectively. This expense is expected to be recognized over the remaining weighted-average period of i0.5
years and i0.9 years, respectively. Cash received from stock options exercised totaled $i3.6
million and $i62.1 million for the nine months ended September 30, 2022 and 2021, respectively.
Stock Award Activity
i
A
summary of our stock awards activity and related information is as follows:
Stock
Awards - The estimated fair value of restricted stock units (“RSUs”) and performance stock units (“PSUs”) is based on the fair value of our Class A common stock on the date of grant. During the three and nine months ended September 30, 2022, we recognized $i18.4 million and $i64.4
million of stock-based compensation expense for stock awards, respectively. During the three and nine months ended September 30, 2021, we recognized $i15.8 million and $i40.6
million of stock-based compensation expense for stock awards, respectively.
As of September 30, 2022 and December 31, 2021, we had $i155.2 million and $i114.9
million of unrecognized stock-based compensation expense related to unvested stock awards, expected to be recognized over a weighted average period of i2.1 and i2.3
years, respectively.
The following table presents the stock activity for the nine months ended September 30, 2022, and the total number of shares available for grant under our stock plans as of September 30, 2022:
During the nine months ended September 30, 2022
and 2021, we recognized $i11.2 million and $i4.5
million of stock-based compensation expense for the 2018 Employee Stock Purchase Plan, respectively. We issued i759,744 and i1,945,305
shares in the nine months ended September 30, 2022 and 2021, respectively. During the nine months ended September 30, 2022 and 2021, we added an additional i12,055,792 shares and i1,902,572
shares, respectively. There were i13,840,716 shares and i2,544,668
shares available for issuance as of September 30, 2022 and 2021, respectively.
As of September 30, 2022 and December 31, 2021, we had $i10.4
million and $i9.8 million of unrecognized stock-based compensation expense, expected to be recognized over a weighted average period of i1.1
years and i0.5 years, respectively.
27
11. iPortfolio
Financings
Overview
We have developed various financing options that enable customers' use of the Energy Servers through third-party ownership financing arrangements. For additional information on these financing options, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
PPA IIIa Repowering of Energy Servers
PPA IIIa was established in 2012 and we, through a special purpose subsidiary (the “Project Company”), had previously entered into certain agreements for the purpose of developing, financing, owning, operating, maintaining and managing a portfolio of i9.8
megawatts of Energy Servers.
On March 31, 2022, we entered into a Membership Interest Purchase Agreement where we bought out the equity interest of the third-party investor, wherein the PPA IIIa became wholly owned by us (the “Buyout”).
Following the Buyout and prior to June 14, 2022, we repaid all outstanding debt of the Project Company of $i30.6 million, and recognized loss on extinguishment
of debt in an amount of $i4.2 million, which includes the write-off of the debt discount related to warrants of $i1.8 million
and a make-whole payment of $i2.4 million associated with the debt extinguishment. Refer to Note 7 - Outstanding Loans and Security Agreements, Non-recourse Debt Facilities section.
On June 14, 2022, we sold our i100%
interest in the Project Company to Generate C&I Warehouse, LLC (“Generate”) through a Membership Interest Purchase Agreement (“MIPA”). Simultaneously, we entered into an agreement with the Project Company to upgrade the old i9.8 megawatts of Energy Servers (the “old Energy Servers”) by replacing them with a newer generation of Energy Servers (“new Energy Servers”) and providing related installation services, which was financed by Generate (the “EPC Agreement”). The old Energy Servers will be removed prior to installing the new Energy Servers, whereby upon completion of installation
the old Energy Servers will be returned to Bloom. We also amended and restated our operations and maintenance agreement with the Project Company to cover all new Energy Servers and old Energy Servers prior to their upgrade (“the O&M Agreement”). The operations and maintenance fees under the O&M Agreement are paid on a fixed dollar per kilowatt basis.
Certain power purchase agreements within the PPA IIIa portfolio were classified as sales-type leases under ASC 840, while some were classified as operating leases. The Company elected the practical expedient package with the adoption of ASC 842, which allowed the Company to carry forward the lease classification upon adoption of ASC 842 on January
1, 2020. The leases were modified prior to the sale of the PPA IIIa to Generate. Such modified leases were reassessed and determined to not be leases under ASC 842 because customers have no control over the identified assets. Accordingly, on the date of modification, the customer financing receivables were derecognized and recognized as property, plant, and equipment (“PPA IIIa PP&E”).
Due to our repurchase option on the old Energy Servers, the Company concluded there was no transfer of control of the old Energy Servers upon sale of the membership interest to Generate. Accordingly, the Company continued to recognize the old Energy Servers, despite the legal ownership of such assets under the MIPA. Upon reclassification of the lease assets
to PP&E, the Company assessed the recorded assets for impairment. The carrying amount of the PPA IIIa PP&E was determined to be not recoverable as the net undiscounted cash flows are less than the carrying amounts for PPA IIIa PP&E. Therefore, we recognized the asset impairment charge as electricity cost, consistent with depreciation expense classification for property, plant and equipment under leases.
The PPA IIIa Upgrade was in progress as of September 30, 2022 and resulted in the following summarized impacts on our condensed consolidated balance sheet as of September 30, 2022: (i) cash and cash equivalents increased by $i17.7 million
mainly due to $i54.7 million cash receipts from the sale of new Energy Servers to the Project Company, offset by $i30.6 million for the repayment of outstanding debt, (ii) both
customer financing receivables, current and non-current, and property plant and equipment, net decreased by $i5.9 million, $i36.9 million
and $i2.2 million, respectively, due to the impairment of $i44.8 million and accelerated depreciation of $i0.2 million
of the existing old Energy Servers (we revised the expected useful life of the old Energy Servers from i15 years to approximately i0.5 years which resulted in recognized accelerated depreciation of $i0.2 million
in electricity cost of revenue (see Note 6)), (iii) contract assets increased by $i5.0 million, (iv) inventories and deferred cost of revenue decreased by $i24.1 million,
and (v) other liabilities increased by $i4.7 million. Impacts on our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 are summarized as follows: (i) net product and installation revenue recognized of $i12.7 million
and $i2.1 million and $i49.6 million and $i3.2 million,
respectively, as a
28
result of the sale of new Energy Servers; (ii) cost of electricity revenue of inil and $i45.0 million,
respectively, including the write-off of old Energy Servers of nil and $i44.8 million, respectively, accelerated depreciation of inil and $i0.2 million,
respectively, prior to the completion of installation; (iii) cost of product and installation revenue of $i5.7 million and $i1.7 million and $i21.6 million
and $i2.5 million, respectively, due to the sale of new Energy Servers; and (iv) nil and $i4.2 million, respectively, of loss on extinguishment of debt.
Impacts
on our condensed consolidated statements of cash flows for the nine months ended September 30, 2022 are summarized as follows: net cash provided by financing activities decreased by $i32.6 million due to the repayment of debt of $i30.2 million
and cash fee of $i2.4 million associated with debt extinguishment.
PPA Entities’ Aggregate Assets and Liabilities
Generally, the assets of an operating company owned by an investment company can be used to settle only the operating company obligations, and the operating company creditors do not have recourse to us. iThe
following are the aggregate carrying values of our VIEs' assets and liabilities in our condensed consolidated balance sheets, after eliminations of intercompany transactions and balances, including as of September 30, 2022 each of the PPA Entities in the PPA IV transaction and the PPA V transaction, and as of December 31, 2021 each of the PPA Entities in the PPA IIIa transaction, the PPA IV transaction and the PPA V transaction (in thousands):
We
consolidated each PPA Entity as VIEs in the PPA IV transaction and the PPA V transaction, as we remain the minority shareholder in each of these transactions but have determined that we are the primary beneficiary of these VIEs. These PPA Entities contain debt that is non-recourse to us and own Energy Server assets for which we do not have title.
29
12. iRelated
Party Transactions
There have been iino/
changes in related party relationships during the three and nine months ended September 30, 2022. For information on our related parties, see Part II, Item 8, Note 12 - Related Party Transactions in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
i
Our operations include the following related party transactions (in thousands):
Purchase
Commitments with Suppliers and Contract Manufacturers - As of September 30, 2022, we had a commitment with NetJets to purchase a fractional interest in one of its jets, which is to be used for corporate travel purposes, in the amount of approximately $i3.4 million. The jet is expected to be delivered by July of 2023. As of December 31, 2021, we had no material open purchase orders with
our component suppliers and third-party manufacturers that are not cancellable.
Portfolio Financings Performance Guarantees - We guarantee the performance of Energy Servers at certain levels of output and efficiency to customers over the contractual term. We paid $i1.3 million and $i0.2
million in performance guarantees for the nine months ended September 30, 2022 and 2021, respectively.
Letters of Credit - In 2019, pursuant to the PPA II upgrade of Energy Servers, we agreed to indemnify our financing partner for losses that may be incurred in the event of certain regulatory, legal or legislative development and established a cash-collateralized letter of credit facility for this purpose. There were no letters of credit or pledged funds associated with the PPA IIIa Upgrade. As of September 30, 2022, the balance of this cash-collateralized letter of credit was $i69.0
million, of which $i33.3 million and $i35.7 million is recognized as short-term and long-term restricted cash, respectively. As of December 31, 2021,
the balance of this cash-collateralized letter of credit was $i99.4 million, of which $i41.7 million and $i57.7
million is recognized as short-term and long-term restricted cash, respectively.
Pledged Funds - In 2019, pursuant to the PPA IIIb refinancing and energy servers upgrade program, we pledged $i20.0 million for a iseven-year period to
secure our operations and maintenance obligations with respect to the totality of our obligations to the financier. We categorized the $i20.0 million as restricted cash on our condensed consolidated balance sheet. It was agreed all or a portion of such funds would be released if we meet certain credit rating and/or market capitalization milestones prior to the end of the pledge period. If we do not meet the required criteria within the first ifive-year
period, the funds would still be released to us over the following itwo years as long as the energy servers continue to perform in compliance with our warranty obligations. As of September 30, 2022 and December 31, 2021, the balance of the long-term restricted cash was $i6.7
million and $i6.7 million.
Contingencies
Indemnification Agreements - We enter into standard indemnification agreements with our customers and certain other business partners in the ordinary course of business. Our exposure under these agreements is unknown because it involves future claims that may be made against us but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However,
we may record charges in the future as a result of these indemnification obligations.
Delaware Economic Development Authority - In March 2012, we entered into an agreement with the Delaware Economic Development Authority to provide a grant of $i16.5 million to us as an incentive to establish a new manufacturing facility in Delaware and to provide employment for full time workers at the facility over a certain period of time. As of September 30, 2022 the grant became current and we
have recorded $i9.5 million in accrued expenses and other current liabilities for future repayments of this grant. As of December 31, 2021, we have recorded $i9.5
million in other long-term liabilities for potential future repayments of this grant.
Investment Tax Credits- For information on ITCs, see Part II, Item 8, Note 13 - Commitments and Contingencies on our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Please also refer to Note 1 - Nature of Business, Liquidity and Basis of Presentation for discussion of investment tax credits implemented by the IRA.
Legal Matters - We are involved in various legal proceedings that arise in the ordinary course of business. We review all legal matters at least quarterly and assess whether an accrual for loss contingencies needs to be recorded.
We record an accrual for loss contingencies when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal matters are subject to uncertainties and are inherently unpredictable, so the actual liability in any such matters may be materially different from our estimates. If an unfavorable resolution were to occur, there exists the possibility of a material adverse impact on our consolidated financial condition, results of operations or cash flows for the period in which the resolution occurs or on future periods.
In March 2019, the Lincolnshire Police Pension Fund filed a class action complaint in the Superior Court of the State of California, County of Santa Clara, against us, certain members of our senior management, certain of our directors and the underwriters in our July 25, 2018 IPO alleging
violations under Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), for alleged misleading statements or omissions in our Registration Statement on Form S-1 filed with the SEC in connection with the IPO. iTwo related class action cases were subsequently filed in the Santa Clara County Superior Court against the same defendants containing the same allegations; Rodriquez vs Bloom Energy et al. was filed on April 22, 2019 and Evans vs Bloom Energy et al. was filed
on May 7, 2019. These cases have been consolidated. Plaintiffs' consolidated amended complaint was filed with the court on September 12, 2019. On October 4, 2019, defendants moved to stay the lawsuit pending the federal district court action discussed below. On December 7, 2019, the Superior Court issued an order staying the action through resolution of the parallel federal litigation mentioned below. We believe the complaint to be without merit and we intend to defend this action vigorously. We are unable to estimate any range of reasonably possible losses.
In May 2019, Elissa Roberts filed a class action complaint in the federal district court for the Northern District of California against us, certain members of our senior
management team, and certain of our directors alleging violations under Section 11 and 15 of the Securities Act for alleged misleading statements or omissions in our Registration Statement on Form S-1 filed with the SEC in connection with the IPO. On September 3, 2019, the court appointed a lead plaintiff and lead plaintiffs’ counsel. On November 4, 2019, plaintiffs filed an amended complaint adding the underwriters in the IPO and our auditor as defendants for the Section 11 claim, as well as adding claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ) against us, and certain members of our senior management team. The amended complaint alleged a class period for all claims from the time of our IPO until September 16, 2019. On April
21, 2020, plaintiffs filed a second amended complaint, which continued to make the same claims and added allegations pertaining to the restatement and, as to claims under the Exchange Act, extended the putative class period through February 12, 2020. On July 1, 2020, we and the other defendants filed a motion to dismiss the second amended complaint. On September 29, 2021, the court entered an order dismissing with leave to amend (1) five of seven statements or groups of statements alleged to violate Sections 11 and 15 of the Securities Act and (2) all allegations under the Exchange Act. All allegations against our auditors were also dismissed. Plaintiffs elected not to amend the complaint and instead on October 22, 2021 filed a motion for entry of final judgment in favor
of our auditors so that plaintiffs could appeal the dismissal of those claims. The court denied that motion on December 1, 2021 and in response plaintiffs have filed a motion asking the court to certify an interlocutory appeal as to the accounting claims. The court denied plaintiff’s motion on April 14, 2022. Separately, the claims for violation of Sections 11 and 15 of the Securities Act that were not dismissed by the court are in the discovery phase. A case schedule has been set, with a trial scheduled for December 2023. We believe the claims to be without merit and we intend to defend this action vigorously.
We are unable to predict the outcome of this litigation at this time and accordingly are not able to estimate any range of reasonably possible losses.
In September 2019,
we received a books and records demand from purported stockholder Dennis Jacob (“Jacob Demand”). The Jacob Demand cites allegations from the September 17, 2019 report prepared by admitted short seller Hindenburg Research. In November 2019, we received a substantially similar books and records demand from the same law firm on behalf of purported stockholder Michael Bolouri (“Bolouri Demand” and, together with the Jacob Demand, the “Demands”). On January 13, 2020, Messrs. Jacob and Bolouri filed a complaint in the Delaware Court of Chancery to enforce the Demands in the matter styled Jacob, et al. v. Bloom Energy Corp., C.A. No. 2020-0023-JRS. On March 9, 2020, Messrs. Jacob and Bolouri filed an amended complaint in the Delaware Court of Chancery to add
allegations regarding the restatement. The court held a one-day trial on December 7, 2020. On February 25, 2021, the Delaware Court of Chancery issued a decision rejecting the Bolouri Demand but granting in part the Jacob Demand allowing limited access to certain books and records pertaining to the allegations made in the Hindenburg Research Report. On March 29, 2021, the Court of Chancery entered a Final Order and Judgment regarding the required production of documents. On April 28, 2021, we produced documents to Mr. Jacob responsive to the Final Order and Judgment. We are unable to estimate any range of reasonably possible losses.
In June 2021, we filed a petition for writ of mandate and a complaint for declaratory and injunctive
relief in the Santa Clara Superior Court against the City of Santa Clara for failure to issue building permits for two of our customer installations and asking the court to require the City of Santa Clara to process and issue the building permits. In October 2021, we filed an amended petition and complaint that asserts additional constitutional and tort claims based on the City’s failure to timely issue the Energy Server permits. Discovery has commenced and we are aggressively pursuing all claims. On February 4, 2022, the City of Santa Clara filed a Demurrer seeking to dismiss all of the Company’s claims. The trial judge rejected the Demurrer on all claims except one, and allowed Bloom leave to amend that claim. The We filed the second amended petition was filed on July 1, 2022. The
City of Santa Clara demurred to one cause of action seeking damages for tortious conduct; the hearing is scheduled for October 27, 2022. The next Status Conference with the judge is scheduled for September December 115, 2022. If we are unable to secure building permits for these customer installations in a timely fashion, our customers will terminate their contracts with us and select another energy provider. In addition, if we are no longer able to install our Energy Servers in Santa Clara under building permits, we may not be able to secure future customer bookings for installation in the City of Santa Clara.
In February 2022, Plansee SE/Global Tungsten & Powders Corp. (“Plansee/GTP”), a former supplier, filed a request for expedited arbitration with the World Intellectual
Property Organization Arbitration and Mediation Center in Geneva Switzerland, for various claims allegedly in relation to an Intellectual Property and Confidential Disclosure Agreement between Plansee/GTP and Bloom Energy Corporation. Plansee/GTP’s statement of claims includes allegations of infringement of U.S. Patent Nos. 8,802,328, 8,753,785 and 9,434,003. On April 3, 2022, we filed a complaint against Plansee/GTP in the Eastern District of Texas to address the dispute between Plansee/GTP and Bloom Energy Corporation in a proper forum before a U.S. Federal District Court. Our complaint seeks the correction of inventorship of U.S. Patent Nos. 8,802,328, 8,753,785 and 9,434,003 (the “Patents-in-Suit”); declaratory judgment of invalidity, unenforceability, and non-infringement of the Patents-in-Suit; and declaratory judgment of no misappropriation. Further, our complaint seeks to recover damages hawse have suffered
in relation to Plansee/GTP’s business dealings that, as alleged, constitute acts of unfair competition, tortious interference contract, breach of contract, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and violations of the Clayton Antitrust Act. On June 9, 2022, Plansee/GTP filed a motion to dismiss the complaint filed in the Eastern District of Texas and compel arbitration (or alternatively to stay). We filed our opposition on June 30, 2022, Plansee/GTP’s filed its reply on July 14, 2022 and we filed our sur-reply on July 22, 2022. We await a ruling on the matter
and in the interim, discovery has commenced in Federal District Court. Given that the cases are still in their early stages, we are unable to predict the ultimate outcome of the arbitration and district court action at this time, and accordingly are not able to estimate a range of reasonably possible losses.
14. iIncome Taxes
For the three and nine months ended September
30, 2022, we recorded an income tax provisions of $i0.3 million and $i0.9 million, respectively, on pre-tax losses of $i60.1
million and $i263.4 million for effective tax rates of (i0.6)%
and (i0.3)%, respectively. For the three and nine months ended September 30, 2021, we recorded income tax provisions of $i0.2
million and $i0.6 million on pre-tax losses of $i56.5
million and $i144.3 million for effective tax rates of (i0.3)%
and (i0.4)%, respectively.
The effective tax rate for the three and nine months ended September 30, 2022 and 2021 is lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.
30
U.S.
tax law changes
On August 16, 2022, the United States government enacted the Inflation Reduction Act of 2022 (“IRA”). The IRA establishes a new corporate alternative minimum tax based on financial statement income adjusted for certain items. The new minimum tax is effective for tax years beginning after December 31, 2022. The enactment of the IRA did not have a material impact to the Company’s financial statements for the three and nine months ended September 30, 2022 and 2021, but we are currently assessing the impact of the production and tax credit-related IRA provisions on our business for future quarters.
15.
iNet Loss per Share Available to Common Stockholders
Please refer to the condensed consolidated statements of operations for computation of our net loss per share available to common stockholders, basic and diluted.
i
The
following common stock equivalents (in thousands) were excluded from the computation of our net loss per share available to common stockholders, diluted, for the three and nine months presented as their inclusion would have been antidilutive (in thousands):
As
of September 30, 2022, pursuant to the notice received from SK ecoplant of its intent to exercise its option to purchase additional shares of our Class A common stock (see Note 5), there were an additional i13,491,701 common stock equivalents that were excluded from the table above.
16.
iSubsequent Events
There have been no subsequent events that occurred during the period subsequent to the date of these condensed consolidated financial statements that would require adjustment to our disclosure in the condensed consolidated financial statements as presented.
31
ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by management. For example, forward-looking statements include, but are not limited to, our expectations regarding our products, services, business strategies, impact of COVID-19, our expanded strategic
partnership with SK ecoplant, operations, supply chain (including any direct or indirect effects from the Russia-Ukraine conflict or geopolitical developments in China), new markets, government incentive programs, impact of the IRA on our business, growth of the hydrogen market and the sufficiency of our cash and our liquidity. Forward-looking statements can also be identified by words such as “future,”“anticipates,”“believes,”“estimates,”“expects,”“intends,”“plans,”“predicts,”“targets,”“forecasts,”“will,”“would,”“could,”“can,”“may” and similar terms. These statements are based on the beliefs and assumptions of our management based on information currently available to management at the time they are made. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q
and in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 25, 2022. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Description of Bloom Energy
Our
mission is to make clean, reliable energy affordable for everyone in the world. We created the first large-scale, commercially viable solid oxide fuel-cell based power generation platform that empowers businesses, essential services, critical infrastructure and communities to responsibly take charge of their energy.
Our technology, invented in the United States, is one of the most advanced electricity and hydrogen producing technologies on the market today. Our fuel-flexible Bloom Energy Servers can use biogas, hydrogen, natural gas, or a blend of fuels to create resilient, sustainable and cost-predictable power at significantly higher efficiencies than traditional, combustion-based resources. In addition, our same solid oxide platform that powers our fuel cells can be used to create hydrogen, which is increasingly recognized as a critically important tool necessary for the full decarbonization of the energy economy. Our enterprise
customers include some of the largest multinational corporations in the world. We also have strong relationships with some of the largest utility companies in the United States and the Republic of Korea.
At Bloom Energy, we look forward to a net-zero future. Our technology is designed to help enable this future in order to deliver reliable, low-carbon, electricity in a world facing unacceptable levels of power disruptions. Our resilient platform has kept electricity available for our customers through hurricanes, earthquakes, typhoons, forest fires, extreme heat and grid failures. Unlike traditional combustion power generation, our platform is community-friendly and designed to significantly reduce emissions of criteria air pollutants. We have made tremendous progress making renewable fuel production a reality through our biogas, hydrogen and electrolyzer programs, and we believe that we are well-positioned as a core platform
and fixture in the new energy paradigm to help organizations and communities achieve their net-zero objectives.
We market and sell our Energy Servers directly and through indirect channels to our customers both in the United States and abroad. In order to appeal to the largest variety of customers, we have developed a number of financing options to enable customers' use of our Energy Servers on a pay-as-you-go model, made available through third-party ownership financing arrangements. For information about our different financing options, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Purchase and Financing Options in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Our typical target commercial
or industrial customer has historically been either an investment-grade entity or a customer with investment-grade attributes such as size, assets and revenue, liquidity, geographically diverse operations and general financial stability. We have also expanded our product and financing options to the below-investment-grade customer
32
and have also expanded internationally to target customers with deployments on a wholesale grid. Given that our customers are typically large institutions with multi-level decision making processes, we generally experience a lengthy sales process.
Strategic Investment
On October 23, 2021, we
entered into the SPA with SK ecoplant in connection with a strategic partnership. Pursuant to the SPA, on December 29, 2021, we sold to SK ecoplant 10 million shares of zero coupon, non-voting redeemable convertible Series A Preferred Stock in us, par value $0.0001 per share (“RCPS”), at a purchase price of $25.50 per share for an aggregate purchase price of $255 million (the “Initial Investment”). According to the SPA, on December 29, 2022, the first anniversary of the original issue date, all outstanding shares of Series A Preferred Stock will automatically be converted into shares of Class A Common Stock.
Please refer to Note 1 - Nature of Business, Liquidity and Basis of Presentationfor the Second Tranche Shares Option exercise notice
received from SK ecoplant on August 10, 2022.
Simultaneous with the execution of the SPA, we and SK ecoplant executed an amendment to the Joint Venture Agreement (“JVA”), an amendment and restatement to our Preferred Distribution Agreement (“PDA Restatement”) and a new Commercial Cooperation Agreement regarding initiatives pertaining to the hydrogen market and general market expansion for the Bloom Energy Server and Bloom Energy Electrolyzer.
Certain Factors Affecting our Performance
Global Macroeconomic Conditions
We generally are seeing worsening global macroeconomic conditions, including rising interest rates, recession fears, foreign exchange rate volatility and inflationary pressures, as well as increasing geopolitical instability. These
conditions impact our business in several ways. For example, the strengthening U.S. dollar has caused our Energy Servers to become relatively more expensive in several markets outside the United States, which, coupled with worsening global macroeconomic conditions, has the potential to adversely impact demand for our products. Our Energy Server Product runs on a variety of fuels, including natural gas. The rising cost of natural gas, limited availability of gas supply, as well as disruptions to the world gas markets increase the cost of our product to the end customer. To date, the potential impact of this on customer demand has been offset by the customer needs for resiliency and time to power that our Energy Server provides. In addition, these conditions also impact our manufacturing and supply chain, as discussed below.
Manufacturing and Labor Market Constraints
We
are experiencing impacts from the ongoing labor shortage and continue to face challenges in hiring for our manufacturing facilities, which is exacerbated by absences for any employees who are recovering from or have been exposed to COVID-19. While we continue to dedicate resources to supporting our capacity expansion efforts, we are experiencing difficulties with hiring and retention, particularly for our new manufacturing facility in Fremont, California. In addition, the current inflationary environment has led to rising wages and labor rates and increased competition for labor. To date, we have been able to mitigate any impact to production through a contingent workforce and other measures. In the event we are unable to mitigate the impacts of these challenges, it could delay the manufacturing and installation of our Energy Servers and we may be unable to meet customer demand, which would adversely impact our cash flows and results of operations, including revenue
and gross margin. We expect the hiring and retention challenges arising from the labor shortages to continue for the foreseeable future.
Supply Chain Constraints
We continue to see effects from the global supply chain disruptions and are experiencing supply chain challenges and logistics constraints. While we have not experienced any component shortages to date, we are facing pressures from longer lead times, shipping and freight delays, and increased costs of raw materials. These dynamics could worsen as a result of continued increase in geopolitical instability. In addition, the current inflationary environment and conflict in Ukraine has led to an increase in the price of components and raw materials. In the event we are unable to mitigate the impacts of delays and/or price increases in raw materials, components and freight, it could delay the manufacturing and installation of
our Energy Servers and increase the cost of our Energy Server, which would adversely impact our cash flows and results of operations, including revenue and gross margin. We expect these supply chain challenges and logistics constraints to continue for the foreseeable future.
For additional information on our manufacturing and supply chain matters, see Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
33
COVID-19
Pandemic
We continue to monitor and adjust as appropriate our operations in response to the COVID-19 pandemic. We maintain protocols to minimize the risk of COVID-19 transmission within our facilities, including enhanced cleaning and masking if required by the local authorities, as well as providing testing for all employees. We will continue to follow CDC and local guidelines when notified of possible exposures.For more information regarding the risks posed to our company by the COVID-19 pandemic, refer to Part I, Item 1A, Risk Factors – Risks Related to Our Products and Manufacturing –Our business has been and continues to be adversely affected by the COVID-19 pandemic in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021.
Our Energy Server Product runs on a variety of fuels, including natural gas. The rising cost of natural gas increases the cost of our product to the end customer. To date, the potential impact of this on customer demand has been offset by the customer needs for resiliency and time to power that our Energy Server provides.
Environmental, Social and Governance (“ESG”)
We released our 2021 Sustainability Report, Solutions for a Decarbonized Future, (the “Report”) during the first quarter of 2022 using accepted ESG frameworks and standards, including alignment with Sustainability Accounting Standards Board standards and the Task Force on Climate-related Financial Disclosures recommendations. In
addition, the Report also utilized certain Global Reporting Initiative standards and United Nations Sustainable Development Goals. We plan to issue the Report on an annual basis. Certain items within the Report will be updated to investors to the extent they are considered meaningful and reflective of our mission – “To make clean, reliable energy affordable for everyone in the world”.
We strive to empower businesses and communities to responsibly take charge of their energy. We aim to serve our customers with products that are resilient, providing uninterrupted power with predictable pricing from fixed power prices over the long-term, while addressing sustainability issues by considering and developing solutions relating to causes and consequences of climate change.
For further details of the
Report, please refer to the following website: 2021-bloom-energy-sustainability-report.pdf (bloomenergy.com). Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
Inflation Reduction Act of 2022 - New and Expanded Production and Tax Credits
for Manufacturers and Projects to Support Clean Energy
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”). The IRA contains provisions which we expect will have a significant impact on the development and financing of clean energy projects in the United States over the next ten years. The IRA includes a number of key changes relevant to clean energy in the United States, among them the extension of the Investment Tax Credit and Production Tax Credit and the addition of expanded tax credits for other technologies and for manufacturing of clean energy equipment as well as terms allowing parties to more easily monetize the tax credits. The IRA also includes some targeted incentives intended to encourage development in low-income communities and the use of domestically produced materials and compliance with certain prevailing
wage requirements. The IRA contains a two-tiered credit-amount structure for many applicable tax credits. Specifically, many of the credits have a lower base credit amount that can be increased up to five times if the taxpayer can satisfy applicable prevailing wage or apprenticeship requirements. In general, under the prevailing wage requirements, the IRA requires all laborers, mechanics and workers to be paid the prevailing wage during project construction (and, during the credit term, for repairs and alterations). Separately and subject to certain exceptions, to meet the apprenticeship requirements, qualified apprentices have to perform an applicable percentage of total labor hours for project construction. Further, the IRA establishes certain options to cure the failure to meet either the prevailing wage or apprenticeship requirements.
Please refer to Note 1 - Nature of Business, Liquidity and Basis
of Presentation for discussion of credits and incentive provisions implemented by the IRA relevant to us. We are currently assessing the impact of these provisions on our business.
Liquidity and Capital Resources
While we improved our liquidity in 2021, we increased our working capital spend in the first half of 2022. We have entered into new leases to maintain sufficient manufacturing facilities to meet anticipated demand in 2022 and beyond, including new product line expansion. In addition, we also increased our working capital spend and resources to enhance our marketing efforts and to expand into new geographies both domestically and internationally.
34
On
August 10, 2022, pursuant to the Securities Purchase Agreement (“the SPA”) SK ecoplant notified us of its intent to exercise its option the Option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 shares (the “Second Tranche Shares”) at a purchase price of $23.05 per share, calculated as a 15% premium to the volume-weighted average closing price of the 20 consecutive trading day period immediately preceding the exercise of the option. The aggregate purchase price approximates cash proceeds to be received by us of $311.0 million, net of related incremental direct costs of $0.1 million. The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the HSR Act of the sale of the Second Tranche
Shares as contemplated by the Second Tranche Exercise Notice.
On August 19, 2022, we completed an underwritten public offering, pursuant to which we issued and sold 13,000,000 shares of Class A Common Stock at a price of $26.00 per share (the “Offering”). As a part of the Offering, the underwriters were provided a 30-day option to purchase an additional 1,950,000 shares of our Class A Common Stock at the same price, less underwriting discounts and commissions, which was exercised contemporaneously with the Offering. The aggregate net proceeds received by us from the Offering were $371.5 million, after deducting underwriting discounts and commissions of $16.5 million and incremental costs directly attributable to the Offering of $0.7 million.
As of September
30, 2022, we had cash and cash equivalents of $492.1 million. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds. We maintain these balances with high credit quality counterparties, continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
As of September 30, 2022, we had $287.5 million of total outstanding recourse debt, $195.9 million of non-recourse debt and $8.9 million of other long-term liabilities. For a complete description of our outstanding debt, please see Note 7 - Outstanding Loans and Security Agreements in Part I, Item 1, Financial
Statements (unaudited).
The combination of our existing cash and cash equivalents is expected to be sufficient to meet our anticipated cash flow needs for at least the next 12 months. If these sources of cash are insufficient to satisfy our near-term or future cash needs, we may require additional capital from equity or debt financings to fund our operations, in particular, our manufacturing capacity, product development and market expansion requirements, to timely respond to competitive market pressures or strategic opportunities, or otherwise. We may, from time to time, engage in a variety of financing transactions for such purposes, including factoring our accounts receivable. We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financings may place limits on our financial and operating flexibility. If we raise additional funds through
further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our products, our ability to secure financing for customer use of our Energy Servers, the timing of installations, and overall economic conditions including the impact of COVID-19 on our ongoing and future operations. In order to support and achieve our
future growth plans, we may need or seek advantageously to obtain additional funding through an equity or debt financing. Failure to obtain this financing or financing in future quarters may affect our results of operations, including revenue and cash flows.
As of September 30, 2022, the current portion of our total debt is $28.7 million, of which $15.9 million is outstanding non-recourse debt.
A summary of our consolidated sources and uses of cash, cash equivalents and restricted cash was as follows (in thousands):
Net cash provided
by (used in) our PPA Entities, which are incorporated into the condensed consolidated statements of cash flows, was as follows (in thousands):
1
The PPA Entities' operating and financing cash flows are a subset of our consolidated cash flows and represent the stand-alone cash flows prepared in accordance with U.S. GAAP. Operating activities consist principally of cash used to run the operations of the PPA Entities, the purchase of Energy Servers from us and principal reductions in loan balances. Financing activities consist primarily of changes in debt carried by our PPAs, and payments from and distributions to noncontrolling partnership interests. We believe this presentation of net cash provided by (used in) PPA activities is useful to provide the reader with the impact to consolidated cash flows of the PPA Entities in which we have only a minority interest.
Operating Activities
Our operating activities have consisted of net loss adjusted for certain non-cash items plus changes in our operating assets and liabilities or
working capital. The increase in cash used in operating activities during the nine months ended September 30, 2022 as compared to the prior year period was primarily the result of an increase in our net loss and a decrease in our net working capital of $70.6 million in the nine months ended September 30, 2022 due to the timing of revenue transactions and corresponding collections, the increase in inventory levels to support future demand, and the timing of payments to vendors.
Investing Activities
Our investing activities have consisted of capital expenditures that include investment to increase our production capacity. We expect to continue such activities as our business grows. Cash used in investing activities of $80.9 million during the nine months ended September
30, 2022 was primarily the result of expenditures on tenant improvements for a newly leased engineering and manufacturing building in Fremont, California. We expect to continue to make capital expenditures over the next few quarters to prepare our new manufacturing facility in Fremont, California for production, which includes the purchase of new equipment and other tenant improvements. We intend to fund these capital expenditures from cash on hand as well as cash flow to be generated from operations. We may also evaluate and arrange equipment lease financing to fund these capital expenditures.
Financing Activities
Historically, our financing activities have consisted of borrowings and repayments of debt, proceeds and repayments of financing obligations, distributions paid to noncontrolling interests, and the proceeds from the issuance of our common stock. Net cash provided
by financing activities during the nine months ended September 30, 2022 was $305.2 million, an increase of $252.1 million compared to the prior year period, primarily due to the proceeds from public share offering of $372.0 million and the proceeds from issuance of common stock of $15.2 million, partially offset by the repayment debt related to PPA IIIa of $30.2 million and other debt of $17.3 million, and repayment of financing obligations of $28.8 million.
We believe we have the sufficient capital to operate our business over the next 12 months, including the completion of the build out of our manufacturing facilities. Our working capital was strengthened with the initial and subsequent investments by SK ecoplant and our public offering. In addition, we may still enter the equity or debt market as needed to support the expansion of our business. Please refer to Note 7 - Outstanding
Loans and Security Agreements in Part 1, Item 1, Financial Statements (unaudited); and Part I, Item 1A, Risk Factors - Risks Related to Our Liquidity - Our substantial indebtedness, and restrictions imposed by the agreements governing our and our PPA Entities' outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs, and We may not be able to generate sufficient cash to meet our debt service obligations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021for more information regarding the terms of and risks associated with our debt.
36
Purchase
and Financing Options
For information on purchase and financing options, see the Purchasing and Financing Options section in Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
International Channel Partners
There were no significant changes in our international channel partners during the three and nine months ended September 30, 2022. For information on international channel partners, see the International Channel Partners section in Part II, Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
37
Key Operating Metrics - Comparison of the Three and Nine Months Ended September 30, 2022 and 2021
For a description of the key operating metrics we use to evaluate business
activity, to measure performance, to develop financial forecasts and to make strategic decisions, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Operating Metrics in our Annual Report on Form 10-K for the year ended December 31, 2021.
Purchase Options
The portion of acceptances attributable to each purchase option in the three and nine months ended September 30, 2022 and 2021 was as follows:
Product
accepted during the period (in 100 kilowatt systems)
581
353
228
64.6
%
1,427
1,144
283
24.7
%
Product
accepted increased approximately 228 systems, or 64.6%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. Acceptance volume increased as demand increased for the Bloom Energy servers.
Product accepted increased approximately 283 systems, or 24.7%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Acceptance volume increased as demand increased for the Bloom Energy servers.
Megawatts accepted, net, increased approximately 208 megawatts, or 30.4%, for the nine months ended September 30, 2022 compared to the nine months ended September
30, 2021. The increase in acceptances achieved from September 30, 2021 to September 30, 2022 was added to our installed base and, therefore, increased our megawatts accepted, net, from 682 megawatts to 890 megawatts.
38
Costs Related to Our Products
Total product related costs for the three and nine months ended September 30, 2022 and 2021 was as follows:
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
Product
costs of product accepted in the period
$2,344/kW
$2,434/kW
$-90/kW
(3.7)
%
$2,438/kW
$2,362/kW
$76/kW
3.2
%
Period costs of manufacturing related expenses not included in product
costs (in thousands)
$
15,496
$
7,774
$7,722
99.3
%
$
38,672
$
19,653
$19,019
96.8
%
Installation
costs on product accepted in the period
$465/kW
$726/kW
$-261/kW
(36.0)
%
$398/kW
$584/kW
$-186/kW
(31.8)
%
Product costs of product accepted decreased approximately $90 per kilowatt,
or 3.7%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This decrease in cost is primarily driven by our ongoing cost reduction efforts to reduce material costs, labor and overhead through improved automation of our manufacturing facilities, our increased facility utilization and our ongoing material cost reduction programs with our vendors.
Product costs of product accepted increased approximately $76 per kilowatt, or 3.2%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase in cost is primarily driven by some of the cost pressures seen in the external inflationary environment with commodity pricing and logistics
increasing significantly from one year ago. Our ongoing cost reduction efforts to reduce material costs, labor and overhead through improved automation of our manufacturing facilities, our increased facility utilization and our ongoing material cost reduction programs with our vendors continued but were offset by the temporary increases in cost that we experienced.
Period costs of manufacturing related expenses increased approximately $7.7 million, or 99.3%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. Our period costs of manufacturing related expenses increased primarily as a result of costs incurred to support capacity expansion efforts which are expected to be brought online in future periods.
Period costs of manufacturing
related expenses increased approximately $19.0 million, or 96.8%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Our period costs of manufacturing related expenses increased primarily as a result of costs incurred to support capacity expansion efforts which are expected to be brought online in future periods.
Installation costs on product accepted decreased approximately $261 per kilowatt, or 36.0%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. This decrease in cost is primarily driven by the change in the mix of sites requiring Bloom installation and changes in installation process. Each customer site is different and
installation costs can vary due to a number of factors, including site complexity, size, location of gas, etc. As such, installation on a per kilowatt basis can vary significantly from period-to-period. In addition, some customers handle their own installation for which we have little to no installation cost.
Installation costs on product accepted decreased approximately $186 per kilowatt, or 31.8%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. This decrease in cost is primarily driven by the change in the mix of sites requiring Bloom installation. Each customer site is different and installation costs can vary due to a number of factors, including site complexity, size, location of gas, etc. As such, installation on a per kilowatt basis can vary significantly from period-to-period.
In addition, some customers handle their own installation for which we have little to no installation cost.
39
Results of Operations
A discussion regarding the comparison of our financial condition and results of operations for the three and nine months ended September 30, 2022 and 2021is presented below.
Revenue
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
(dollars
in thousands)
(dollars in thousands)
Product
$
213,243
$
128,550
$
84,693
65.9
%
$
520,415
$
413,347
$
107,068
25.9
%
Installation
22,682
22,172
510
2.3
%
48,964
53,710
(4,746)
(8.8)
%
Service
37,347
39,251
(1,904)
(4.9)
%
111,012
111,375
(363)
(0.3)
%
Electricity
19,002
17,255
1,747
10.1
%
56,158
51,273
4,885
9.5
%
Total
revenue
$
292,274
$
207,228
$
85,046
41.0
%
$
736,549
$
629,705
$
106,844
17.0
%
Total
Revenue
Total revenue increased by $85.0 million, or 41.0%, for the three months ended September 30, 2022 as compared to the prior year period. This increase was driven by a $84.7 million increase in product revenue, a $1.7 million increase in electricity revenue, a $0.5 million increase in installation revenue, offset by a $1.9 million decrease in service revenue.
Total revenue increased by $106.8 million, or 17.0%, for the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by a $107.1 million increase in product revenue and a $4.9 million increase in electricity revenue, offset by a $4.7 million decrease in installation revenue and a $0.4 million decrease in service revenue.
Product
Revenue
Product revenue increased by $84.7 million, or 65.9%, for the three months ended September 30, 2022 as compared to the prior year period. The product revenue increase was driven primarily by a 64.6% increase in product acceptances resulting from higher demand in existing markets and revenue recognized from the PPA 3a Upgrade of $12.7 million.
Product revenue increased by $107.1 million, or 25.9%, for the nine months ended September 30, 2022 as compared to the prior year period. The product revenue increase was driven primarily by a 24.7% increase in product acceptances resulting from higher demand in existing markets and revenue recognized from the PPA IIIa Upgrade of $49.6 million. We expect our product revenue to grow in the future as we expand our addressable markets.
Installation
Revenue
Installation revenue increased by $0.5 million, or 2.3%, for the three months ended September 30, 2022 as compared to the prior year period. This increase in installation revenue was driven by the revenue recognized from the PPA IIIa Upgrade of $2.1 million and the change in mix of product acceptances requiring installations by us, as more sites had installation costs in the three months ended September 30, 2022.
Installation revenue decreased by $4.7 million, or 8.8%, for the nine months ended September 30, 2022 as compared to the prior year period. This decrease in installation revenue was driven by the change in mix of product acceptances requiring installations by us, as fewer sites had installation
costs in the nine months ended September 30, 2022, offset by the revenue recognized from the PPA IIIa Upgrade of $3.2 million.
Service Revenue
Service revenue decreased by $1.9 million, or 4.9%, for the three months ended September 30, 2022 as compared to the prior year period. This decrease was primarily due to a one-off revenue increase of $2.7 million in the three months ended September 30, 2021 and the impact of product performance guarantees, partially offset by the 64.6% increase in acceptances plus the maintenance contract renewals associated with the increase in our fleet of Energy Servers.
40
Service
revenue decreased by $0.4 million, or 0.3%, for the nine months ended September 30, 2022 as compared to the prior year period. This decrease was primarily due to a one-off revenue increase of $2.7 million in the three months ended September 30, 2021 and the impact of product performance guarantees, partially offset by the 24.7% increase in acceptances plus the maintenance contract renewals associated with the increase in our fleet of Energy Servers. We expect our service revenue to grow in the future.
Electricity Revenue
Electricity revenue includes both revenue from contracts with customers and revenue
from contracts that contain leases.
Electricity revenue increased by $1.7 million, or 10.1%, for the three months ended September 30, 2022 as compared to the prior year period due to the increase in installed units as a result of the increase in Managed Services transactions recorded in the second half of fiscal year 2021.
Electricity revenue increased by $4.9 million, or 9.5%, for the nine months ended September 30, 2022 as compared to the prior year period due to the increase in installed units as a result of the increase in Managed Services transactions recorded in the second half of fiscal year 2021.
Cost of Revenue
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
(dollars
in thousands)
(dollars in thousands)
Product
$
158,176
$
93,704
$
64,472
68.8
%
$
393,337
$
289,889
$
103,448
35.7
%
Installation
28,333
25,616
2,717
10.6
%
57,836
66,756
(8,920)
(13.4)
%
Service
41,792
39,586
2,206
5.6
%
124,646
111,269
13,377
12.0
%
Electricity
13,029
11,439
1,590
13.9
%
83,819
32,913
50,906
154.7
%
Total
cost of revenue
$
241,330
$
170,345
$
70,985
41.7
%
$
659,638
$
500,827
$
158,811
31.7
%
Total
Cost of Revenue
Total cost of revenue increased by $71.0 million, or 41.7%, for the three months ended September 30, 2022 as compared to the prior year period primarily driven by a $64.5 million increase in cost of product revenue, a $2.7 million increase in costs of installation revenue, a $2.2 million increase in cost of service revenue, and a $1.6 million increase in cost of electricity revenue. The increase was primarily driven by the increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing
facilities.
Total cost of revenue increased by $158.8 million, or 31.7%, for the nine months ended September 30, 2022 as compared to the prior year period primarily driven by a $103.4 million increase in cost of product revenue, a $50.9 million increase in cost of electricity revenue, a $13.4 million increase in cost of service revenue, offset by a $8.9 million decrease in costs of installation revenue. The increase was primarily driven by the write-off of old Energy Servers of $44.8 million as a result of the PPA IIIa Upgrade, increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and
overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
41
Cost of Product Revenue
Cost of product revenue increased by $64.5 million, or 68.8%, for the three months ended September 30, 2022 as compared to the prior year period. The cost of product revenue increase was in line with the increase in product revenue and was driven primarily by a 64.6% increase in product acceptances, the sale of new Energy Servers of $5.7 million as a result of the PPA IIIa Upgrade, increased freight charges and other supply chain-related pricing pressures and costs incurred in support of upcoming capacity expansion efforts. This increase
was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Cost of product revenue increased by $103.4 million, or 35.7%, for the nine months ended September 30, 2022 as compared to the prior year period. The cost of product revenue increase was driven primarily by a 24.7% increase in product acceptances, the sale of new Energy Servers of $21.6 million as a result of the PPA IIIa Upgrade, increased freight charges and other supply chain-related pricing pressures and costs incurred in support of upcoming capacity expansion efforts. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in
labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Cost of Installation Revenue
Cost of installation revenue increased by $2.7 million, or 10.6%, for the three months ended September 30, 2022 as compared to the prior year period. This increase was driven by the change in mix of product acceptances requiring Bloom Energy installations, as more sites had installation costs in the three months ended September 30, 2022.
Cost of installation revenue decreased by $8.9 million, or 13.4%, for the nine months ended September 30, 2022 as compared to the prior year period. This decrease was driven by the change in mix of product acceptances
requiring Bloom Energy installations, as fewer sites had installation costs in the nine months ended September 30, 2022.
Cost of Service Revenue
Cost of service revenue increased by $2.2 million, or 5.6%, for the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily due to the deployment of field replacement units, partially offset by cost reductions and our actions to proactively manage fleet optimizations.
Cost of service revenue increased by $13.4 million, or 12.0%, for the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily due to the deployment of field replacement units, partially offset
by cost reductions and our actions to proactively manage fleet optimizations.
Cost of Electricity Revenue
Cost of electricity revenue includes both cost of revenue from contracts with customers and cost of revenue from contracts that contain leases.
Cost of electricity revenue increased by $1.6 million, or 13.9%, for the three months ended September 30, 2022 as compared to the prior year period, primarily due to the increase in installed units driven by Managed Services transactions recorded in the second half of fiscal year 2021.
Cost of electricity revenue increased
by $50.9 million, or 154.7%, for the nine months ended September 30, 2022 as compared to the prior year period, primarily due to the write-off of old Energy Servers of $44.8 million as a result of the PPA IIIa Upgrade and an increase in installed units driven by Managed Services transactions recorded in the second half of fiscal year 2021.
42
Gross Profit (Loss) and Gross Margin
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
2022
2021
(dollars in thousands)
Gross
profit (loss):
Product
$
55,067
$
34,846
$
20,221
$
127,078
$
123,458
$
3,620
Installation
(5,651)
(3,444)
(2,207)
(8,872)
(13,046)
4,174
Service
(4,445)
(335)
(4,110)
(13,634)
106
(13,740)
Electricity
5,973
5,816
157
(27,661)
18,360
(46,021)
Total
gross profit (loss)
$
50,944
$
36,883
$
14,061
$
76,911
$
128,878
$
(51,967)
Gross
margin:
Product
26
%
27
%
24
%
30
%
Installation
(25)
%
(16)
%
(18)
%
(24)
%
Service
(12)
%
(1)
%
(12)
%
—
%
Electricity
31
%
34
%
(49)
%
36
%
Total
gross margin
17
%
18
%
10
%
20
%
Total Gross Profit
Gross profit improved by $14.1 million in the three months ended September 30, 2022 as compared to the prior year period which was primarily driven by
the $20.2 million increase in product gross profit, driven by an 64.6% increase in acceptances and our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Gross profit decreased by $52.0 million in the nine months ended September 30, 2022 as compared to the prior year period which was primarily driven by the $46.0 million decrease in electricity gross profit primarily due to the write-off of old Energy Servers of $44.8 million as a result of the PPA IIIa Upgrade; the $13.7 million decrease in service gross profit due to a 24.7% increase in acceptances plus the maintenance contract renewals associated with the
increase in our fleet of Energy Servers. This decrease was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
43
Product Gross Profit
Product gross profit increased by $20.2 million in the three months ended September 30, 2022 as compared to the prior year period. The increase is primarily driven by an 64.6% increase in product acceptances, revenue recognized from the PPA IIIa Upgrade of $12.7 million and our ongoing cost
reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities, partially offset by increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods.
Product gross profit increased by $3.6 million in the nine months ended September 30, 2022 as compared to the prior year period. The increase is primarily driven by a 24.7% increase in product acceptances, revenue recognized from the PPA IIIa Upgrade of $49.6 million and our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs
through increased volume, improved processes and automation at our manufacturing facilities. This increase was partially offset by increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which will be brought online in future periods.
Installation Gross Loss
Installation gross loss worsened by $2.2 million in the three months ended September 30, 2022 as compared to the prior year period driven by the change in site mix and other site related factors such as site complexity, size, local ordinance requirements and location of the utility interconnect.
Installation gross loss improved by $4.2 million in the nine months ended September 30, 2022 as compared to the prior
year period driven by the change in site mix and other site related factors such as site complexity, size, local ordinance requirements and location of the utility interconnect.
Service Gross (Loss) Profit
Service gross loss worsened by $4.1 million in the three months ended September 30, 2022 as compared to the prior year period. This was primarily due to deployments of field replacement units and the impact of product performance guarantees offset by cost reductions and our actions to proactively manage fleet optimizations.
Service gross loss worsened by $13.7 million in the nine months ended September 30, 2022 as compared to the prior year period. This was primarily due to deployments of field replacement units and the impact of product
performance guarantees offset by cost reductions and our actions to proactively manage fleet optimizations.
Electricity Gross (Loss) Profit
Electricity gross profit increased by $0.2 million in the three months ended September 30, 2022 as compared to the prior year period mainly due to the increase in Managed Services transactions recorded in the second half of fiscal year 2021.
Electricity gross profit decreased by $46.0 million in the nine months ended September 30, 2022 as compared to the prior year period mainly due to the write-off of old Energy Servers from the PPA IIIa Upgrade of $44.8 million partially offset by the increase in Managed Services transactions recorded in the second half of fiscal year 2021.
Operating
Expenses
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
(dollars
in thousands)
(dollars in thousands)
Research and development
$
36,146
$
27,634
$
8,512
30.8
%
$
112,286
$
76,602
$
35,684
46.6
%
Sales
and marketing
23,275
20,124
3,151
15.7
%
65,084
62,803
2,281
3.6
%
General
and administrative
44,115
33,014
11,101
33.6
%
119,965
90,470
29,495
32.6
%
Total
operating expenses
$
103,536
$
80,772
$
22,764
28.2
%
$
297,335
$
229,875
$
67,460
29.3
%
44
Total
Operating Expenses
Total operating expenses increased by $22.8 million in the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily attributable to our continued investment in R&D capabilities to support our technology roadmap, our investment in business development, and an increase in General and Administrative outside services.
Total operating expenses increased by $67.5 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily attributable to our continued investment in R&D capabilities to support our technology roadmap, our investment in business development, and an increase in General and Administrative outside services.
Research
and Development
Research and development expenses increased by $8.5 million in the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $4.7 million to expand our employee base in order to support our technology roadmap and cost reduction initiatives, including our hydrogen, electrolyzer, marine and biogas solutions.
Research and development expenses increased by $35.7 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $13.3 million to expand our employee base in order to support our technology roadmap, including our hydrogen, electrolyzer, marine
and biogas solutions.
Sales and Marketing
Sales and marketing expenses increased by $3.2 million in the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $4.3 million to expand our U.S. and international sales force, increased investment in brand and product management, partially offset by a decrease in outside services.
Sales and marketing expenses increased by $2.3 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $8.8 million to expand our U.S. and international sales force, increased investment
in brand and product management, partially offset by a decrease in outside services.
General and Administrative
General and administrative expenses increased by $11.1 million in the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $4.0 million and outside services and an increase in factoring of receivables.
General and administrative expenses increased by $29.5 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $10.6 million, outside services and an
increase in factoring of receivables.
Stock-Based Compensation
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
(dollars
in thousands)
(dollars in thousands)
Cost of revenue
$
4,982
$
2,945
$
2,037
69.2
%
$
13,609
$
9,749
$
3,860
39.6
%
Research
and development
4,818
5,678
(860)
(15.1)
%
25,113
15,876
9,237
58.2
%
Sales
and marketing
3,948
4,391
(443)
(10.1)
%
13,528
12,486
1,042
8.3
%
General
and administrative
10,283
7,952
2,331
29.3
%
30,688
19,198
11,490
59.8
%
Total
stock-based compensation
$
24,031
$
20,966
$
3,065
14.6
%
$
82,938
$
57,309
$
25,629
44.7
%
Total
stock-based compensation for the three months ended September 30, 2022 compared to the prior year period increased by $3.1 million primarily driven by the efforts to expand our employee base across all of the Company’s functions.
45
Total stock-based compensation for the nine months ended September 30, 2022 compared to the prior year period increased by $25.6 million primarily driven by the efforts to expand our employee base across all of the Company’s
functions.
Other Income and Expense
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
2022
2021
(in thousands)
Interest
income
$
1,109
$
72
$
1,037
$
1,364
$
222
$
1,142
Interest expense
(13,099)
(14,514)
1,415
(41,000)
(43,798)
2,798
Other
income, net
4,472
2,011
2,461
254
1,948
(1,694)
Loss on extinguishment of debt
—
—
—
(4,233)
—
(4,233)
Gain
(loss) on revaluation of embedded derivatives
54
(184)
238
623
(1,644)
2,267
Total
$
(7,464)
$
(12,615)
$
5,151
$
(42,992)
$
(43,272)
$
280
Interest
Income
Interest income is derived from investment earnings on our cash balances primarily from money market funds. The increase in interest income was due to the increase in cash balances for money market funds for the three and nine months ended September 30, 2022 as compared to the prior year periods.
Interest Expense
Interest expense is from our debt held by third parties.
Interest expense for the three months ended September 30, 2022 as compared to the prior year period decreased by $1.4 million. This decrease was primarily due to lower interest expense as a result of our repayment of the 7.5% Term Loan due September 2028 and refinancing our notes at a lower interest rate.
Interest
expense for the nine months ended September 30, 2022 as compared to the prior year period decreased by $2.8 million. This decrease was primarily due to lower interest expense as a result of our repayment of the 7.5% Term Loan due September 2028 and refinancing our notes at a lower interest rate.
Other Income, net
Other income, net is primarily derived from gain from SK Option revaluation, investments in joint ventures, the impact of foreign currency translation, and adjustments to fair value for derivatives.
Other income, net for the three months ended September 30, 2022 as compared to the prior year period increased by $2.5 million primarily as a result of the gain on the revaluation of the Option to purchase Class A common stock upon
receipt of notice of exercise from SK ecoplant on August 10, 2022 of $7.9 million, partially offset by the loss on foreign currency translation of $3.6 million.
Other income, net for the nine months ended September 30, 2022 as compared to the prior year period decreased by $1.7 million primarily as a result of the loss on remeasurement of our equity investment in the Bloom Energy Japan joint venture, loss on foreign currency translation of $5.3 million, partially offset by the gain on the revaluation of the Option to purchase Class A common stock upon receipt of notice of exercise from SK ecoplant on August 10, 2022 of $9.0 million.
Loss on Extinguishment of Debt
Loss on extinguishment of
debt for the nine months ended September 30, 2022 was $4.2 million, which was recognized as a result of repayment of 7.5% Term Loan due September 2028 as part of the PPA IIIa Upgrade.
46
Gain (Loss) on Revaluation of Embedded Derivatives
Gain (loss) on revaluation of embedded derivatives is derived from the change in fair value of our sales contracts of embedded EPP derivatives valued using historical grid prices and available forecasts of future electricity prices to estimate future electricity prices.
Gain on revaluation of embedded
derivatives for the three months ended September 30, 2022 as compared to the prior year period increased by $0.2 million due to the change in fair value of our embedded EPP derivatives in our sales contracts
Gain on revaluation of embedded derivatives for the nine months ended September 30, 2022 as compared to the prior year period increased by $2.3 million due to the change in fair value of our embedded EPP derivatives in our sales contracts.
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
Three
Months Ended September 30,
Change
Nine Months Ended September 30,
Change
2022
2021
Amount
%
2022
2021
Amount
%
(dollars
in thousands)
Net loss attributable to noncontrolling interests
$
(3,315)
$
(4,309)
$
(994)
(23.1)
%
$
(9,768)
$
(13,733)
$
(3,965)
(28.9)
%
Net
(loss) income attributable to redeemable noncontrolling interest
$
—
$
17
$
17
(100.0)
%
$
(300)
$
(9)
$
291
3,233.3
%
Net
loss attributable to noncontrolling interests is the result of allocating profits and losses to noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method. HLBV is a balance sheet-oriented approach for applying the equity method of accounting when there is a complex structure, such as the flip structure of the PPA Entities.
Net loss attributable to noncontrolling interests for the three months ended September 30, 2022 as compared to the prior year period changed by $1.0 million due to decreased losses in our PPA Entities, which are allocated to our noncontrolling interests.
Net loss attributable to noncontrolling interests for the nine months ended September 30, 2022 as compared to the prior year period changed by $4.0 million due to decreased
losses in our PPA Entities, which are allocated to our noncontrolling interests.
Changes in net (loss) income attributable to redeemable noncontrolling interest for the three and nine months ended September 30, 2022 and 2021 were immaterial.
47
Off-Balance Sheet Arrangements
We include in our condensed consolidated financial statements all assets and liabilities and results of operations of our PPA Entities that we have entered into and over which we have substantial control. For additional information, see Part II, Item 8, Note 11 -Portfolio
Financingsin our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
We have not entered into any other transactions that have generated relationships with unconsolidated entities or financial partnerships or special purpose entities. Accordingly, as of September 30, 2022 and December 31, 2021 we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
as applied in the United States (“U.S. GAAP”) The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Our discussion and analysis of our financial results under Results of Operations above are based on our audited results of operations, which we have prepared in accordance with U.S. GAAP. In preparing these condensed consolidated financial statements, we make assumptions, judgments and estimates that can affect the reported amounts of assets, liabilities, revenues and expenses, and net income. On an ongoing basis, we base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are representative of estimation uncertainty, and
are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating the consolidated financial condition and results of operations.
The accounting policies that most frequently require us to make assumptions, judgments and estimates, and therefore are critical to understanding our results of operations, include:
•Discussion
of Earliest Year of Changes in Financial Condition and Results of Operations;
•Revenue Recognition;
•Leases: Incremental Borrowing Rate;
•Valuation of Escalator Protection Plan Agreements (“EPP”);
•Valuation of Certain Financial Instruments and Customer Financing Receivables;
•Valuation of Assets and Liabilities of the SK ecoplant Strategic Investment;
•Incremental Borrowing Rate (“IBR”) by Lease Class;
•Stock-Based Compensation;
•Income
Taxes;
•Principles of Consolidation; and
•Allocation of Profits and Losses of Consolidated Entities to Noncontrolling Interests and Redeemable Noncontrolling Interests.
Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 provides a more complete discussion of our critical accounting policies and estimates. During the nine months ended September 30, 2022, there were no significant changes to our critical accounting policies and estimates.
48
ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes to our quantitative and qualitative disclosures about market risk during the nine months ended September 30, 2022. Please refer to Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2021 for a more complete discussion of the market risks we consider.
ITEM 4 - CONTROLS AND PROCEDURES
During the three months ended September
30, 2022, there were no changes in our internal controls over financial reporting, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As of September 30, 2022 based on evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer and Chief Financial Officer (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) it was concluded that our disclosure controls and procedures were effective.
For further information on controls and procedures, see Part II, Item 9A, Controls and Procedures in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2021.
49
Part II
ITEM 1 - LEGAL PROCEEDINGS
We are, and from time to time we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. For a discussion of legal proceedings, see Part II, Item 8 Note 13 - Commitments and
Contingencies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part I, Item 1, Note 13 - Commitments and Contingencies. We are not presently a party to any other legal proceedings that in the opinion of our management and if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
ITEM 1A - RISK FACTORS
There were no material changes in risk factors as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†
Portions of this exhibit are redacted as permitted under Regulation S-K, Rule 601.
**
The
certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
51
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
