Bloom Energy reported second-quarter results on Monday that included continued growth in sales, a 250-megawatt deal with competitive energy services provider Duke Energy One, and a plan to run its fuel cells on hydrogen.
But the fuel-cell maker also reported continued — though narrowed — losses, as well as a forecast of slower-than-expected U.S. market growth in 2020. That combination sent the company's shares tumbling by more than 40 percent on Tuesday, falling to $4.75 in midday trading, the lowest point since Bloom's IPO last year.
Bloom reported a second-quarter loss of $62.2 million, or 55 cents per share, on revenue of $233.8 million. That’s an improvement from its first-quarter net loss of $84.4 million, or 76 cents a share, on sales of $200.7 million, but worse than the $45.7 million loss on revenue of $168.9 million that it reported for the second quarter of 2018.
Bloom’s Q2 2019 financial highlights include:
- A record 271 acceptances of its 100-kilowatt fuel cell units in the second quarter, compared to 235 acceptances in the first quarter of 2019, up 49.7 percent year-over-year.
- Gross profit of $41.7 million on a gross margin of 17.8 percent, compared to the previous quarter’s gross profit of $15.8 million and gross margin of 7.8 percent.
- Adjusted EBITDA of $21.9 million, excluding stock-based compensation, compared to the first quarter’s EBITDA of $2.1 million.
“We are pleased to have delivered a record Q2 for acceptances, which exceeded analyst expectations,” wrote Bloom CEO K.R. Sridhar in Monday’s shareholder letter.
Bloom’s customer base includes 25 of the Fortune 100 companies, including AT&T and Home Depot. New customers from the second quarter include life sciences giant Agilent Technologies and broadband communications and video services operator Altice USA.
In July, Bloom inked a $250 million deal with Duke Energy subsidiary Duke Energy One to deploy up to 37 megawatts of fuel cells over the next 18 months at more than 30 sites including hospitals, data centers and universities.
One year in as a publicly traded company
Bloom had been one of Silicon Valley’s last-standing energy “unicorns,” having raised $1.5 billion in investment with $950 million in debt prior to its IPO in July 2018. The IPO sold 18 million shares at a high-range price of $15 each, generating $270 million and valuing the firm at more than $2 billion.
Shares closed at $25 on its first day of trading, and rose to a high of $34 in late September 2018, after news of its $100 million financing deal with KeyBank. But its shares have fallen hard over the past year.
The company has also been under scrutiny for misrepresenting its financial status in public statements. In the midst of its IPO, CEO Sridhar told MarketWatch that Bloom would be "cash-flow positive and GAAP-profitable this year." Bloom press representatives soon walked that back to "Bloom Energy expects to be GAAP-profitable at the operating level, and thus cash-flow positive, this year, not net profitable."
In November 2018, Axios revealed that Bloom’s IPO filing and first quarterly earnings report had failed to mention an expected $100 million to $150 million cost to replace many of the fuel cells making up its 30-megawatt fleet for Delmarva Power in Delaware, its largest deployment. Bloom’s response stated that the incremental cost for replacing the systems would be covered by future savings.
Bloom is struggling to achieve something no publicly traded fuel cell maker, including Ballard, Plug Power, Hydrogenics and FuelCell Energy, has accomplished as of yet: earning an annual profit. Bloom’s recent S-1 made clear that it “will incur net losses on a GAAP basis for the foreseeable future.”
Lowered expectations driven by slow growth in U.S. markets
Bloom Chief Financial Officer Randy Furr warned analysts on Monday's conference call that the company expects headwinds in the rest of 2019, largely driven by uncertainty in key markets. Those include California, which faces major challenges from Pacific Gas & Electric's bankruptcy and ongoing threats of wildfires that have forced utilities to leave customers without power for days at a time, and New York, now in the midst of a struggle between gas utilities and state regulators that's left new customers without natural-gas hookups.
CEO Sridhar noted in Monday’s conference call that "there are no cancellations in orders" at present. While Bloom has a "healthy funnel in our sales pipeline," Sridhar said "the flow of deals in the funnel is...not at the pace it needs to be for us right now, because customers are postponing making decisions, especially in key markets like New York and California."
Beyond on-site power, Bloom has also been making inroads into the microgrid market as backup power for data centers and as part of commercial and industrial customers’ weather resilience needs. More than 100 Bloom systems within 100 miles of a July 7.5 magnitude earthquake in Northridge, Calif. continued to operate during and after the temblor, Sridhar said.
As for cleaning the carbon dioxide emissions of its mostly natural-gas-fired fuel cells, Bloom pointed to ongoing work in biogas — methane from landfills, food processing plants, dairy waste ponds and other sites — as well as a new push into hydrogen as a fuel. On the biogas front, in the first quarter, Bloom powered up a 50-kilowatt landfill biogas-fed fuel cell in a pilot project with Southern Company.
Earlier this summer, Bloom announced it’s capable of modifying its fuel cells to run on hydrogen gas generated from water electrolysis using off-peak renewable energy. Bloom's shareholder letter noted that more than 200 water electrolysis projects have come online since 2000.
While the market for such a product is now mostly limited to small-scale pilot projects and proposals, larger projects have been announced in the U.S. and Europe, as well as in Asia, “where hydrogen production and utilization are being most actively developed."