.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED March 31, 20232024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 1-34392
PLUG POWER INC.
(Exact name of registrant as specified in its charter)
| | |
| | |
Delaware | | 22-3672377 |
(State or Other Jurisdiction of | | (I.R.S. Employer |
Incorporation or Organization) | | Identification Number) |
968 ALBANY SHAKER ROAD, LATHAM, NEW YORK 12110
(Address of Principal Executive Offices, including Zip Code)
(518) 782-7700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | |||
| | |||
| | |||
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which Registered |
Common Stock, par value $.01 per share |
| PLUG | | The NASDAQ Capital Market |
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. Yes ☒ 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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, 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.
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | Emerging growth company ☐ |
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 ☒
The number of shares of common stock, par value of $0.01$.01 per share, outstanding as of May 4, 20237, 2024 was 600,536,746742,559,081 shares.
INDEX to FORM 10-Q
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Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited) | 3 |
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3 | |
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4 | |
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5 | |
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6 | |
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7 | |
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Notes to Interim Condensed Consolidated Financial Statements | 8 |
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | 35 |
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Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
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Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
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2
PART 1. FINANCIAL INFORMATION
Item 1 — Interim Financial Statements (Unaudited)
Plug Power Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | |
|
| March 31, |
| December 31, |
| March 31, |
| December 31, | ||||
| | 2023 | | 2022 |
| 2024 |
| 2023 | ||||
Assets | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 474,861 | | $ | 690,630 | | $ | 172,873 | | $ | 135,033 |
Restricted cash | | | 175,978 | | | 158,958 | | | 219,616 | | | 216,552 |
Available-for-sale securities, at fair value | | | 1,028,371 | | | 1,332,943 | ||||||
Equity securities | | | 139,911 | | | 134,836 | ||||||
Accounts receivable | |
| 127,720 | |
| 129,450 | ||||||
Inventory | |
| 775,649 | |
| 645,636 | ||||||
Accounts receivable, net of allowance of $7,351 at March 31, 2024 and $8,798 at December 31, 2023 | |
| 148,822 | |
| 243,811 | ||||||
Inventory, net | |
| 975,898 | |
| 961,253 | ||||||
Contract assets | | | 99,012 | | | 62,456 | | | 129,994 | | | 126,248 |
Prepaid expenses and other current assets | |
| 155,822 | |
| 150,389 | |
| 119,370 | |
| 104,068 |
Total current assets | |
| 2,977,324 | |
| 3,305,298 | |
| 1,766,573 | |
| 1,786,965 |
| | | | | | | | | | | | |
Restricted cash | |
| 722,467 | |
| 699,756 | |
| 775,595 | |
| 817,559 |
Property, plant, and equipment, net | | | 874,659 | |
| 719,793 | | | 1,453,991 | |
| 1,436,177 |
Right of use assets related to finance leases, net | | | 56,708 | | | 53,742 | | | 56,131 | | | 57,281 |
Right of use assets related to operating leases, net | | | 371,472 | | | 360,287 | | | 389,201 | | | 399,969 |
Equipment related to power purchase agreements and fuel delivered to customers, net | | | 98,301 | |
| 89,293 | | | 115,109 | |
| 111,261 |
Contract assets | | | 25,418 | | | 41,831 | | | 30,380 | | | 29,741 |
Goodwill | | | 249,871 | | | 248,607 | ||||||
Intangible assets, net | |
| 203,740 | |
| 207,725 | |
| 183,325 | |
| 188,886 |
Investments in non-consolidated entities and non-marketable equity securities | | | 67,350 | | | 31,250 | | | 66,691 | | | 63,783 |
Other assets | |
| 6,783 | |
| 6,694 | |
| 10,310 | |
| 11,116 |
Total assets | | $ | 5,654,093 | | $ | 5,764,276 | | $ | 4,847,306 | | $ | 4,902,738 |
| | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
Accounts payable | | $ | 188,149 | | $ | 191,895 | | $ | 285,546 | | $ | 257,828 |
Accrued expenses | |
| 167,754 | |
| 156,430 | |
| 154,814 | |
| 200,544 |
Deferred revenue and other contract liabilities | |
| 137,357 | |
| 131,813 | |
| 179,902 | |
| 204,139 |
Operating lease liabilities | | | 52,859 | | | 48,861 | | | 65,250 | | | 63,691 |
Finance lease liabilities | | | 8,622 | | | 8,149 | | | 9,602 | | | 9,441 |
Finance obligations | | | 63,370 | | | 58,925 | | | 85,175 | | | 84,031 |
Current portion of long-term debt | | | 5,228 | | | 5,142 | | | 2,786 | | | 2,716 |
Contingent consideration, loss accrual for service contracts, and other current liabilities | |
| 54,201 | |
| 34,060 | |
| 128,369 | |
| 142,410 |
Total current liabilities | |
| 677,540 | |
| 635,275 | |
| 911,444 | |
| 964,800 |
| | | | | | | | | | | | |
Deferred revenue and other contract liabilities | |
| 82,793 | |
| 98,085 | |
| 75,900 | |
| 84,163 |
Operating lease liabilities | | | 274,940 | | | 271,504 | | | 278,220 | | | 292,002 |
Finance lease liabilities | | | 39,404 | | | 37,988 | | | 33,673 | | | 36,133 |
Finance obligations | |
| 279,444 | |
| 270,315 | |
| 264,610 | |
| 284,363 |
Convertible senior notes, net | | | 194,250 | | | 193,919 | | | 209,802 | | | 195,264 |
Long-term debt | | | 3,799 | | | 3,925 | | | 1,013 | | | 1,209 |
Contingent consideration, loss accrual for service contracts, and other liabilities | |
| 180,273 | |
| 193,051 | |
| 143,522 | |
| 146,679 |
Total liabilities | |
| 1,732,443 | |
| 1,704,062 | |
| 1,918,184 | |
| 2,004,613 |
| | | | | | | | | | | | |
Stockholders’ equity: | | | | | | | | | | | | |
Common stock, $0.01 par value per share; 1,500,000,000 shares authorized; Issued (including shares in treasury): 611,951,626 at March 31, 2023 and 608,421,785 at December 31, 2022 | |
| 6,120 | |
| 6,084 | ||||||
Common stock, $.01 par value per share; 1,500,000,000 shares authorized; Issued (including shares in treasury): 705,604,549 at March 31, 2024 and 625,305,025 at December 31, 2023 | |
| 7,057 | |
| 6,254 | ||||||
Additional paid-in capital | |
| 7,360,887 | |
| 7,297,306 | |
| 7,823,209 | |
| 7,494,685 |
Accumulated other comprehensive loss | |
| (19,034) | |
| (26,004) | |
| (9,078) | |
| (6,802) |
Accumulated deficit | |
| (3,327,472) | |
| (3,120,911) | |
| (4,785,520) | |
| (4,489,744) |
Less common stock in treasury: 18,245,914 at March 31, 2023 and 18,076,127 at December 31, 2022 | | | (98,851) | | | (96,261) | ||||||
Less common stock in treasury: 19,242,215 at March 31, 2024 and 19,169,366 at December 31, 2023 | | | (106,546) | | | (106,268) | ||||||
Total stockholders’ equity | |
| 3,921,650 | |
| 4,060,214 | |
| 2,929,122 | |
| 2,898,125 |
Total liabilities and stockholders’ equity | | $ | 5,654,093 | | $ | 5,764,276 | | $ | 4,847,306 | | $ | 4,902,738 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
3
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2023 |
| 2022 | ||
Net revenue: | | | | | | |
Sales of equipment, related infrastructure and other | | $ | 182,094 | | $ | 108,847 |
Services performed on fuel cell systems and related infrastructure | | | 9,097 | | | 8,240 |
Power purchase agreements | |
| 7,937 | |
| 10,037 |
Fuel delivered to customers and related equipment | |
| 10,142 | |
| 13,429 |
Other | | | 1,016 | | | 251 |
Net revenue | | | 210,286 | | | 140,804 |
Cost of revenue: | | | | | | |
Sales of equipment, related infrastructure and other | |
| 158,320 | |
| 88,828 |
Services performed on fuel cell systems and related infrastructure | |
| 12,221 | |
| 13,875 |
Provision for loss contracts related to service | | | 6,889 | | | 2,048 |
Power purchase agreements | |
| 46,816 | |
| 31,753 |
Fuel delivered to customers and related equipment | |
| 54,501 | |
| 39,272 |
Other | |
| 935 | |
| 377 |
Total cost of revenue | |
| 279,682 | |
| 176,153 |
| | | | | | |
Gross loss | |
| (69,396) | |
| (35,349) |
| | | | | | |
Operating expenses: | | | | | | |
Research and development | | | 26,535 | | | 20,461 |
Selling, general and administrative | | | 104,016 | | | 80,890 |
Impairment of long-lived assets | | | 1,083 | | | — |
Change in fair value of contingent consideration | | | 8,769 | | | 2,461 |
Total operating expenses | | | 140,403 | | | 103,812 |
| | | | | | |
Operating loss | | | (209,799) | | | (139,161) |
| | | | | | |
Interest income | |
| 17,632 | |
| 2,054 |
Interest expense | | | (10,650) | | | (8,648) |
Other expense, net | |
| (4,771) | |
| (1,309) |
Realized loss on investments, net | | | (1) | | | (847) |
Change in fair value of equity securities | | | 5,075 | | | (5,159) |
Loss on equity method investments | | | (5,317) | | | (3,833) |
| | | | | | |
Loss before income taxes | | $ | (207,831) | | $ | (156,903) |
| | | | | | |
Income tax benefit | |
| (1,270) | |
| (414) |
| | | | | | |
Net loss | | $ | (206,561) | | $ | (156,489) |
| | | | | | |
Net loss per share: | | | | | | |
Basic and diluted | | $ | (0.35) | | $ | (0.27) |
| | | | | | |
Weighted average number of common stock outstanding | |
| 589,205,165 | |
| 577,866,983 |
| | | | | |
| Three months ended | ||||
| March 31 | ||||
| 2024 |
| 2023 | ||
Net revenue: | | | | | |
Sales of equipment, related infrastructure and other | $ | 68,295 | | $ | 182,094 |
Services performed on fuel cell systems and related infrastructure | | 13,023 | | | 9,097 |
Power purchase agreements | | 18,304 | |
| 7,937 |
Fuel delivered to customers and related equipment | | 18,286 | |
| 10,142 |
Other | | 2,356 | | | 1,016 |
Net revenue | | 120,264 | | | 210,286 |
Cost of revenue: | | | | | |
Sales of equipment, related infrastructure and other | | 135,125 | |
| 158,320 |
Services performed on fuel cell systems and related infrastructure | | 12,957 | |
| 12,221 |
Provision for loss contracts related to service | | 15,745 | | | 6,889 |
Power purchase agreements | | 55,228 | |
| 46,816 |
Fuel delivered to customers and related equipment | | 58,573 | |
| 54,501 |
Other | | 1,711 | |
| 935 |
Total cost of revenue | | 279,339 | |
| 279,682 |
| | | | | |
Gross loss | | (159,075) | |
| (69,396) |
| | | | | |
Operating expenses: | | | | | |
Research and development | | 25,280 | | | 26,535 |
Selling, general and administrative | | 77,959 | | | 104,016 |
Restructuring | | 6,011 | | | — |
Impairment | | 284 | | | 1,083 |
Change in fair value of contingent consideration | | (9,200) | | | 8,769 |
Total operating expenses | | 100,334 | | | 140,403 |
| | | | | |
Operating loss | | (259,409) | | | (209,799) |
| | | | | |
Interest income | | 9,277 | |
| 17,632 |
Interest expense | | (11,325) | | | (10,650) |
Other expense, net | | (6,996) | |
| (4,771) |
Realized loss on investments, net | | — | | | (1) |
Change in fair value of equity securities | | — | | | 5,075 |
Loss on equity method investments | | (13,113) | | | (5,317) |
Loss on extinguishment of convertible senior notes | | (14,047) | | | — |
| | | | | |
Loss before income taxes | $ | (295,613) | | $ | (207,831) |
| | | | | |
Income tax (expense)/benefit | | (163) | |
| 1,270 |
| | | | | |
Net loss | $ | (295,776) | | $ | (206,561) |
| | | | | |
Net loss per share: | | | | | |
Basic and diluted | $ | (0.46) | | $ | (0.35) |
| | | | | |
Weighted average number of common stock outstanding | | 641,256,134 | |
| 589,205,165 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
4
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
|
| 2023 |
| 2022 | ||
| | | | | | |
Net loss | | $ | (206,561) | | $ | (156,489) |
Other comprehensive (loss)/income | | | | | | |
Foreign currency translation (loss)/gain | |
| 1,659 | |
| (1,850) |
Change in net unrealized loss on available-for-sale securities | | | 5,311 | | | (15,080) |
Comprehensive loss attributable to the Company, net of tax | | $ | (199,591) | | $ | (173,419) |
| | | | | | |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
|
| 2024 |
| 2023 | ||
| | | | | | |
Net loss | | $ | (295,776) | | $ | (206,561) |
Other comprehensive (loss)/income: | | | | | | |
Foreign currency translation (loss)/gain | |
| (2,276) | |
| 1,659 |
Change in net unrealized gain on available-for-sale securities | | | — | | | 5,311 |
Comprehensive loss, net of tax | | $ | (298,052) | | $ | (199,591) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
5
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
| |
|
| |
| Accumulated |
| |
|
| |
|
| |
| | ||
| | | | | | | Additional | | Other | | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Comprehensive | | Treasury Stock | | Accumulated | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Shares |
| Amount |
| Deficit |
| Equity | ||||||
December 31, 2022 |
| 608,421,785 | | $ | 6,084 | | $ | 7,297,306 | | $ | (26,004) |
| 18,076,127 | | $ | (96,261) | | $ | (3,120,911) | | $ | 4,060,214 |
Net loss | | — | |
| — | |
| — | |
| — |
| — | |
| — | |
| (206,561) | |
| (206,561) |
Other comprehensive income | | — | |
| — | |
| — | |
| 6,970 |
| — | |
| — | |
| — | | | 6,970 |
Stock-based compensation | | 228,954 | |
| 2 | |
| 43,300 | |
| — |
| — | |
| — | |
| — | |
| 43,302 |
Stock option exercises and issuance of common stock | | 620,250 | |
| 6 | |
| 668 | |
| — |
| — | |
| — | |
| — | |
| 674 |
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock and restricted stock units | | — | | | — | | | — | | | — | | 169,787 | | | (2,590) | | | — | | | (2,590) |
Exercise of common stock warrants | | 2,680,637 | | | 28 | | | (28) | | | | | | | | | | | | | | — |
Provision for common stock warrants | | — | | | — | | | 19,641 | | | — | | — | | | — | | | — | |
| 19,641 |
March 31, 2023 |
| 611,951,626 | | $ | 6,120 | | $ | 7,360,887 | | $ | (19,034) |
| 18,245,914 | | $ | (98,851) | | $ | (3,327,472) | | $ | 3,921,650 |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
December 31, 2021 |
| 594,729,610 | | $ | 5,947 | | $ | 7,070,710 | | $ | (1,532) |
| 17,074,710 | | $ | (72,526) | | $ | (2,396,903) | | $ | 4,605,696 |
Net loss | | — | |
| — | |
| — | |
| — |
| — | |
| — | |
| (156,489) | |
| (156,489) |
Other comprehensive loss | | — | |
| — | |
| — | |
| (16,930) |
| — | |
| — | |
| — | | | (16,930) |
Stock-based compensation | | 226,221 | |
| 2 | |
| 43,384 | |
| — |
| — | |
| — | |
| — | |
| 43,386 |
Stock option exercises and issuance of common stock | | 253,525 | |
| 3 | |
| 288 | |
| — |
| — | |
| — | |
| — | |
| 291 |
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock and restricted stock units | | — | | | — | | | — | | | — | | 71,627 | | | (1,465) | | | — | | | (1,465) |
Provision for common stock warrants | | — | | | — | | | 1,743 | | | — | | — | | | — | | | — | |
| 1,743 |
March 31, 2022 |
| 595,209,356 | | $ | 5,952 | | $ | 7,116,125 | | $ | (18,462) |
| 17,146,337 | | $ | (73,991) | | $ | (2,553,392) | | $ | 4,476,232 |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
| |
|
| |
| Accumulated |
| |
|
| |
|
| |
| | ||
| | | | | | | Additional | | Other | | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Comprehensive | | Treasury Stock | | Accumulated | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Capital |
| Gain/(Loss) |
| Shares |
| Amount |
| Deficit |
| Equity | ||||||
December 31, 2023 |
| 625,305,025 | | $ | 6,254 | | $ | 7,494,685 | | $ | (6,802) |
| 19,169,366 | | $ | (106,268) | | $ | (4,489,744) | | $ | 2,898,125 |
Net loss | | — | |
| — | |
| — | |
| — |
| — | |
| — | |
| (295,776) | |
| (295,776) |
Other comprehensive loss | | — | |
| — | |
| — | |
| (2,276) |
| — | |
| — | |
| — | | | (2,276) |
Stock-based compensation | | 923,027 | |
| 9 | |
| 13,695 | |
| — |
| — | |
| — | |
| — | |
| 13,704 |
Public offerings, common stock, net of issuance costs | | 79,553,175 | | | 796 | | | 304,550 | | | — | | — | | | — | | | — | | | 305,346 |
Stock option exercises and issuance of common stock upon grant/vesting of restricted stock and restricted stock unit awards | | (176,678) | |
| (2) | |
| 43 | |
| — |
| — | |
| — | |
| — | |
| 41 |
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock and restricted stock unit awards | | — | | | — | | | — | | | — | | 72,849 | | | (278) | | | — | | | (278) |
Provision for common stock warrants | | — | | | — | | | 10,236 | | | — | | — | | | — | | | — | | | 10,236 |
March 31, 2024 |
| 705,604,549 | | $ | 7,057 | | $ | 7,823,209 | | $ | (9,078) |
| 19,242,215 | | $ | (106,546) | | $ | (4,785,520) | | $ | 2,929,122 |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
December 31, 2022 |
| 608,421,785 | | $ | 6,084 | | $ | 7,297,306 | | $ | (26,004) |
| 18,076,127 | | $ | (96,261) | | $ | (3,120,911) | | $ | 4,060,214 |
Net loss | | — | | | — | | | — | | | — | | — | | | — | | | (206,561) | | | (206,561) |
Other comprehensive income | | — | | | — | | | — | | | 6,970 | | — | | | — | | | — | | | 6,970 |
Stock-based compensation | | 228,954 | | | 2 | | | 43,300 | | | — | | — | | | — | | | — | | | 43,302 |
Stock option exercises and issuance of common stock upon grant/vesting of restricted stock and restricted stock unit awards | | 620,250 | | | 6 | | | 668 | | | — | | — | | | — | | | — | | | 674 |
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock and restricted stock unit awards | | — | | | — | | | — | | | — | | 169,787 | | | (2,590) | | | — | | | (2,590) |
Exercise of warrants | | 2,680,637 | | | 28 | | | (28) | | | — | | — | | | — | | | — | | | — |
Provision for common stock warrants | | — | | | — | | | 19,641 | | | — | | — | | | — | | | — | | | 19,641 |
March 31, 2023 | | 611,951,626 | | $ | 6,120 | | $ | 7,360,887 | | $ | (19,034) | | 18,245,914 | | $ | (98,851) | | $ | (3,327,472) | | $ | 3,921,650 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
6
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2023 |
| 2022 | ||
Operating activities | | | | | | |
Net loss | | $ | (206,561) | | $ | (156,489) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation of long-lived assets | |
| 9,789 | |
| 2,842 |
Amortization of intangible assets | |
| 4,959 | |
| 5,190 |
Stock-based compensation | |
| 43,302 | |
| 43,386 |
Amortization of debt issuance costs and discount on convertible senior notes | | | 621 | | | 661 |
Provision for common stock warrants | | | 14,175 | | | 1,852 |
Deferred income tax benefit | | | (947) | | | (414) |
Impairment of long-lived assets | | | 1,083 | | | — |
Loss/(benefit) on service contracts | | | 221 | | | (7,297) |
Fair value adjustment to contingent consideration | | | 8,769 | | | (2,461) |
Net realized loss on investments | | | 1 | | | 847 |
(Accretion)/amortization of premium on available-for-sale securities | | | (5,945) | | | 2,290 |
Lease origination costs | | | (2,660) | | | (1,613) |
Change in fair value for equity securities | | | (5,075) | | | 5,159 |
Loss on equity method investments | | | 5,317 | | | 3,833 |
Changes in operating assets and liabilities that provide (use) cash: | | | | | | |
Accounts receivable | |
| 1,730 | |
| 36,170 |
Inventory | |
| (129,572) | |
| (63,702) |
Contract assets | | | (14,677) | | | 44 |
Prepaid expenses and other assets | |
| (5,522) | |
| (27,107) |
Accounts payable, accrued expenses, and other liabilities | |
| 13,821 | |
| (25,096) |
Deferred revenue and other contract liabilities | |
| (9,748) | |
| (28,014) |
Net cash used in operating activities | |
| (276,919) | |
| (209,919) |
| | | | | | |
Investing activities | | | | | | |
Purchases of property, plant and equipment | |
| (168,565) | |
| (78,394) |
Purchases of equipment related to power purchase agreements and equipment related to fuel delivered to customers | | | (11,389) | | | (6,796) |
Purchase of available-for-sale securities | | | — | | | (114,173) |
Proceeds from sales of available-for-sale securities | | | — | | | 469,563 |
Proceeds from maturities of available-for-sale securities | | | 315,827 | | | 67,430 |
Purchase of equity securities | | | — | | | (4,990) |
Net cash paid for acquisitions | |
| — | |
| (26,473) |
Cash paid for non-consolidated entities and non-marketable equity securities | | | (40,077) | | | (32,253) |
Net cash provided by investing activities | |
| 95,796 | |
| 273,914 |
| | | | | | |
Financing activities | | | | | | |
Payments of contingent consideration | | | (2,000) | | | (2,667) |
Payments of tax withholding on behalf of employees for net stock settlement of stock-based compensation | | | (2,590) | | | (1,465) |
Proceeds from exercise of stock options | |
| 674 | |
| 291 |
Principal payments on long-term debt | | | (330) | | | (19,246) |
Proceeds from finance obligations | | | 27,927 | | | 17,273 |
Principal repayments of finance obligations and finance leases | | | (16,500) | | | (12,427) |
Net cash provided by (used in) financing activities | |
| 7,181 | |
| (18,241) |
Effect of exchange rate changes on cash | |
| (2,096) | |
| 634 |
(Decrease)/increase in cash and cash equivalents | |
| (215,769) | |
| 14,345 |
Increase in restricted cash | | | 39,731 | | | 32,043 |
Cash, cash equivalents, and restricted cash beginning of period | |
| 1,549,344 | |
| 3,132,194 |
Cash, cash equivalents, and restricted cash end of period | | $ | 1,373,306 | | $ | 3,178,582 |
| | | | | | |
Supplemental disclosure of cash flow information | | | | | | |
Cash paid for interest, net of capitalized interest of $2.0 million | | $ | 7,869 | | $ | 5,731 |
| | | | | | |
Summary of non-cash activity | | | | | | |
Recognition of right of use asset - finance leases | | $ | 4,018 | | $ | 8,070 |
Recognition of right of use asset - operating leases | | | 22,470 | | | 20,070 |
Net tangible assets acquired in a business combination | | | — | | | 56,929 |
Intangible assets acquired in a business combination | | | — | | | 60,522 |
Net transfers between inventory and long-lived assets | | | 441 | | | 489 |
Accrued purchase of fixed assets, cash to be paid in subsequent period | | | 65,701 | | | 6,707 |
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2024 | | 2023 | ||
Operating activities | | | | | | |
Net loss | | $ | (295,776) | | $ | (206,561) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation of long-lived assets | |
| 16,606 | |
| 9,789 |
Amortization of intangible assets | |
| 4,725 | |
| 4,959 |
Lower of cost or net realizable value inventory adjustment and provision for excess and obsolete inventory | | | 39,675 | | | 2,009 |
Stock-based compensation | |
| 13,704 | |
| 43,302 |
Loss on extinguishment of convertible senior notes | | | 14,047 | | | — |
(Recoveries)/provision for losses on accounts receivable | | | (1,447) | | | 237 |
Amortization of debt issuance costs and discount on convertible senior notes | | | 330 | | | 621 |
Provision for common stock warrants | | | 4,495 | | | 14,175 |
Deferred income tax expense/(benefit) | | | 163 | | | (947) |
Impairment | | | 284 | | | 1,083 |
Loss on service contracts | | | 3,809 | | | 221 |
Fair value adjustment to contingent consideration | | | (9,200) | | | 8,769 |
Net realized loss on investments | | | — | | | 1 |
Accretion of premium on available-for-sale securities | | | — | | | (5,945) |
Lease origination costs | | | (1,331) | | | (2,660) |
Change in fair value for equity securities | | | — | | | (5,075) |
Loss on equity method investments | | | 13,113 | | | 5,317 |
Changes in operating assets and liabilities that provide (use) cash: | | | | | | |
Accounts receivable | |
| 96,436 | |
| 1,493 |
Inventory | |
| (38,312) | |
| (131,581) |
Contract assets | | | 1,356 | | | (14,677) |
Prepaid expenses and other assets | |
| (14,496) | |
| (5,522) |
Accounts payable, accrued expenses, and other liabilities | |
| 25,755 | |
| 13,821 |
Payments of contingent consideration | | | (9,164) | | | — |
Deferred revenue and other contract liabilities | |
| (32,500) | |
| (9,748) |
Net cash used in operating activities | |
| (167,728) | |
| (276,919) |
| | | | | | |
Investing activities | | | | | | |
Purchases of property, plant and equipment | |
| (92,621) | |
| (168,565) |
Purchases of equipment related to power purchase agreements and equipment related to fuel delivered to customers | | | (6,072) | | | (11,389) |
Proceeds from maturities of available-for-sale securities | | | — | | | 315,827 |
Cash paid for non-consolidated entities and non-marketable equity securities | | | (21,891) | | | (40,077) |
Net cash (used in)/provided by investing activities | |
| (120,584) | |
| 95,796 |
| | | | | | |
Financing activities | | | | | | |
Payments of contingent consideration | | | (836) | | | (2,000) |
Proceeds from public and private offerings, net of transaction costs | | | 305,346 | | | — |
Payments of tax withholding on behalf of employees for net stock settlement of stock-based compensation | | | (278) | | | (2,590) |
Proceeds from exercise of stock options | |
| 41 | |
| 674 |
Principal payments on long-term debt | | | (300) | | | (330) |
Proceeds from finance obligations | | | — | | | 27,927 |
Principal repayments of finance obligations and finance leases | | | (20,908) | | | (16,500) |
Net cash provided by financing activities | |
| 283,065 | |
| 7,181 |
Effect of exchange rate changes on cash | |
| 4,187 | |
| (2,096) |
Increase/(decrease) in cash and cash equivalents | |
| 37,840 | |
| (215,769) |
(Decrease)/increase in restricted cash | | | (38,900) | | | 39,731 |
Cash, cash equivalents, and restricted cash beginning of period | |
| 1,169,144 | |
| 1,549,344 |
Cash, cash equivalents, and restricted cash end of period | | $ | 1,168,084 | | $ | 1,373,306 |
| | | | | | |
Supplemental disclosure of cash flow information | | | | | | |
Cash paid for interest, net of capitalized interest of $2.1 million and $2.0 million | | $ | 9,111 | | $ | 7,869 |
| | | | | | |
Summary of non-cash activity | | | | | | |
Recognition of right of use asset - finance leases | | $ | — | | $ | 4,018 |
Recognition of right of use asset - operating leases | | | 2,913 | | | 22,470 |
Accrued debt extinguishment costs, cash to be paid in subsequent period | | | 1,245 | | | — |
Net transfers between inventory and long-lived assets | | | 16,008 | | | 441 |
Accrued purchase of fixed assets, cash to be paid in subsequent period | | | 113,449 | | | 65,701 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
7
1. Nature of Operations
Plug Power Inc. (the “Company,” “Plug,”“Company”, “Plug”, “we” or “our”) is facilitating the paradigm shift to an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell solutions. While we continue to develop commercially viable hydrogen and fuel cell product solutions, we have expanded our offerings to support a variety of commercial operations that can be powered with greenclean hydrogen. We provide electrolyzers that allow customers — such as refineries, producers of chemicals, steel, fertilizer and commercial refueling stations — to generate hydrogen on-site. on-site. We are focusing our efforts on (a) industrial mobility applications, including electric forklifts and electric industrial vehicles, at multi-shiftmulti shift high volume manufacturing and high throughput distribution sites where we believe our products and services provide a unique combination of productivity, flexibility, and environmental benefits; (b) production of hydrogen; and (c) stationary power systems that will support critical operations, such as data centers, microgrids, and generation facilities, in either a backup power or continuous power role, and replace batteries, diesel generators or the grid for telecommunication logistics, transportation, and utility customers; and (c) production of hydrogen.customers. Plug expects to support these products and customers with an ecosystem of vertically integrated products that produce, transport, store and handle, dispense, and use hydrogen for mobility and power applications.
Liquidity and Capital Resources
The Company’s working capital was $855.1 million as of March 31, 2024, which included unrestricted cash and cash equivalents of $172.9 million and restricted cash of $1.0 billion. On January 17, 2024, the Company entered into the At Market Issuance Sales Agreement (the “Original ATM Agreement”) with B. Riley Securities, Inc. (“B. Riley”), pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company’s common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had $697.9 million remaining authorized for issuance under the Original ATM Agreement. On February 23, 2024, the Company and B. Riley entered into Amendment No. 1 to the Original ATM Agreement (the “Amendment” and, together with the Original ATM Agreement, the “ATM Agreement”) to increase the aggregate offering price of shares of the Company’s common stock available for future issuance under the Original ATM Agreement to $1.0 billion. Under the ATM Agreement, for a period of 18 months, the Company has the right at its sole discretion to direct B. Riley to act on a principal basis and purchase directly from the Company up to $11.0 million of shares of its common stock on any trading day (the “Maximum Commitment Advance Purchase Amount”) and up to $55.0 million of shares in any calendar week (the “Maximum Commitment Advance Purchase Amount Cap”). On and after June 1, 2024, so long as the Company’s market capitalization is no less than $1.0 billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company’s market capitalization is less than $1.0 billion on and after June 1, 2024, the Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. Through the date of filing of the Quarterly Report on Form 10-Q, the Company sold 135,354,467 shares of common stock at a weighted-average sales price of $3.38 per share for gross proceeds of $457.1 million with related issuance costs of $6.5 million. The Company believes that its working capital and cash position, together with its right to direct B. Riley to purchase shares directly from the Company under the ATM Agreement, will be sufficient to fund its on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying condensed consolidated financial statements.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. In addition, we include our share of the results of our joint ventureventures with Renault SAS (“Renault”) named HyVia SAS, a French société par actions simplifiée (“HyVia”), AccionaPlug S.L. (AccionaPlug)(“AccionaPlug”), and SK Plug Hyverse Co., Ltd. (“SK Plug Hyverse”), and our investment in Clean H2 Infra Fund, using the equity method based on our economic ownership interest and our ability to exercise significant influence over the operating and financial decisions of HyVia, AccionaPlug, and SK Plug Hyverse. Additionally, we consolidate the resultsHyverse and Clean H2 Infra Fund.
8
Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly, in accordance with U.S. generally accepted accounting principles (“GAAP”), the financial position, results of operations and cash flows for all periods presented, have been made. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.
Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 (the “2022“2023 Form 10-K”).
The information presented in the accompanying unaudited interim condensed consolidated balance sheets as of December 31, 20222023 has been derived from the Company’s December 31, 20222023 audited consolidated financial statements.
The unaudited interim condensed consolidated financial statements contained herein should be read in conjunction with our 20222023 Form 10-K.
8Reclassification
Certain prior year amounts in the unaudited interim condensed consolidated statements of Contentscash flows have been reclassified to conform to the current year presentation. These reclassifications had no effect on the reported results of operations.
Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
Other than the adoption of the accounting guidance mentioned in our 2022 Form 10-K, thereThere have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.
Recent Accounting Guidance Not Yet Effective
All issued but not yet effective accounting and reporting standards as of March 31, 20232024 are either not applicable to the Company or are not expected to have a material impact on the Company.
3. AcquisitionsExtended Maintenance Contracts
Alloy Custom Products, LLC and WesMor Cryogenics, LLC
On December 5, 2022, the Company acquired two subsidiariesa quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for sales of Cryogenic Industrial Solutions, LLC, Alloy Custom Products, LLC and WesMor Cryogenics, LLC (collectively, “CIS”). The CIS acquisition is expected to increase the Company’s production capabilities for stainless steel and aluminum cryogenic transport truck-mounted cryogenic pressure vessels, cryogenic transport trailers,equipment, related infrastructure and other mobile storage containers.
The fair value of consideration paid by the Company in connection with the CIS acquisition was as follows (in thousands):
| | | |
Cash |
| $ | 30,700 |
Due to Cryogenic Industrial Solutions, LLC | | | 500 |
Plug Power Inc. Common Stock | | | 6,107 |
Total consideration | | $ | 37,307 |
that have been sold. The following table summarizesshows the preliminary allocationroll forward of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):
| | | |
Cash |
| $ | 267 |
Accounts receivable | | | 5,038 |
Inventory | |
| 11,120 |
Prepaid expenses and other assets | | | 464 |
Property, plant and equipment | | | 3,887 |
Right of use asset | | | 1,538 |
Identifiable intangible assets | | | 13,430 |
Lease liability | | | (1,562) |
Accounts payable, accrued expenses and other liabilities | | | (3,826) |
Deferred revenue | | | (6,193) |
Total net assets acquired, excluding goodwill | | $ | 24,163 |
The preliminary allocation of the purchase price is considered provisional pending the finalization of the valuation for the assets acquired and liabilities assumed and related tax liabilities, if any,balances in relation to the CIS acquisition. Therefore, the fair values of the assets acquired and liabilities assumed are subject to change as we obtain additional information for valuation assumptions such as market demand for CIS product lines to support forecasted financial data, which will not exceed 12 months from the date of acquisition. There have been no measurement period adjustments recorded for the three months ended March 31, 2023.
9
The fair valuethe accrual for loss contracts, including changes due to the provision for loss accrual, releases to service cost of the tradename totaling $6.2 million was calculated using the relief from royalty approach which is a variant of the income approach,sales, increase to loss accrual related to warrants, and was assigned a useful life of fifteen years. The fair value of the customer relationships totaling $7.1 million was calculated using the multi-period excess earnings method (“MPEEM”) approach which is a variant of the income approach, and was assigned a useful life of fifteen years. The basic principle of the MPEEM approach is that a single asset, in isolation, is not capable of generating cash flow for an enterprise. Several assets are brought together and exploited to generate cash flow. The fair value of the non-compete agreements was $0.2 million with a useful life of five years. foreign currency translation adjustment (in thousands):
The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the CIS acquisition was calculated as follows (in thousands):
| | | |
Consideration paid |
| $ | 37,307 |
Less: net assets acquired | | | (24,163) |
Total goodwill recognized | | $ | 13,144 |
| | | | | |
| Three months ended | | Year ended | ||
| March 31, 2024 |
| December 31, 2023 | ||
Beginning balance | $ | 137,853 | | $ | 81,066 |
Provision for loss accrual | | 15,111 | | | 85,375 |
Releases to service cost of sales | | (11,936) | | | (29,713) |
Increase to loss accrual related to customer warrants | | 634 | | | 971 |
Foreign currency translation adjustment | | (93) | | | 154 |
Ending balance | $ | 141,569 | | $ | 137,853 |
The acquisition of CIS contributed $11.1Company increased its loss accrual to $141.6 million to total consolidated revenue for the three months ended March 31, 2023. The Company determined it immaterial2024 primarily due to report net loss for the CIS acquisition for the three months ended March 31, 2023.
Joule Processing LLC
On January 14, 2022,continued cost increases of GenDrive labor, parts and related overhead coupled with new GenDrive contracts entered into requiring provisions to be set up. As a result, the Company acquired Joule Processing LLC (“Joule”), an engineered modular equipment, process design and procurement company founded in 2009.
The fair value of consideration paid by the Company in connection with the Joule acquisition was as follows (in thousands):
| | | |
Cash |
| $ | 28,140 |
Contingent consideration | | | 41,732 |
Total consideration | | $ | 69,872 |
The contingent consideration represents theincreased its estimated fair value associated with earn-out payments of up to $130 million that the sellers are eligible to receive in cash or shares of the Company’s common stock (at the Company’s election). Of the total earnout consideration, $90 million is related to the achievement of certain financial performance and $40 million is related to the achievement of certain internal operational milestones.
The following table summarizes the final allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):
| | | |
Current assets |
| $ | 2,672 |
Property, plant and equipment | | | 493 |
Right of use asset | | | 182 |
Identifiable intangible assets | | | 60,522 |
Lease liability | | | (374) |
Current liabilities | | | (2,612) |
Contract liability | | | (3,818) |
Total net assets acquired, excluding goodwill | | $ | 57,065 |
The fair value of the developed technology totaling $59.2 million included in the identifiable intangible assets was calculated using the MPEEM approach. Therefore, to determine cash flow from the developed technology over its useful life of 15 years, one must deduct the related expenses incurred for the exploitation of other assets used for the generation of overall cash flow. The fair value of the tradename totaling $0.8 million was calculated using the relief from
10
royalty approach, which is a variant of the income approach, and was assigned a useful life of four years. The fair value of the non-compete agreements was $0.5 million with a useful life of six years.
In addition to identifiable intangible assets, the fair value of acquired work in process and finished goods inventory, included in inventory, was estimated based on the estimated selling price less costs to be incurred and a market participant profit rate.
In connection with the acquisition, the Company recorded on its consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable, and is recorded in the unaudited interim condensed consolidated balance sheet in contingent consideration, loss accrual for service contracts, and other current liabilities. The fair value of this contingent consideration was $59.9 million and $53.2 million as of March 31, 2023 and December 31, 2022, respectively, and as a result $6.7 million reduction was recorded in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2023.
Included in the purchase price consideration are contingent earn-out payments as described above. Due to the nature of the earn-outs, a scenario-based analysis using the probability of achieving the milestone expectations was used to determine the fair value of the contingent consideration. These fair value measurements were based on unobservable inputs and are considered to be level 3 financial instruments.
The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the Joule acquisition was calculated as follows (in thousands):
| | | |
Consideration paid |
| $ | 28,140 |
Contingent consideration | | | 41,732 |
Less: net assets acquired | | | (57,065) |
Total goodwill recognized | | $ | 12,807 |
The acquisition of Joule contributed $20.7 million and $1.4 million to total consolidated revenue for the three months ended March 31, 2023 and 2022, respectively. The Company determined it immaterial to report net loss for the Joule acquisition for the three months ended March 31, 2023.
The CIS and Joule acquisitions were not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.projected costs.
4. Extended Maintenance Contracts
On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems, related infrastructure and equipment that have been sold. The following table shows the roll forward of balances in the accrual for loss contracts, including changes due to the provision for loss accrual, loss accrual acquired from acquisition, releases to service cost of sales, releases due to the provision for warrants, and foreign currency translation adjustment (in thousands):
| | | | | | |
| | Three months | | Year | ||
| | ended | | ended | ||
|
| March 31, 2023 |
| December 31, 2022 | ||
Beginning balance | | $ | 81,066 | | $ | 89,773 |
Provision for loss accrual | | | 6,981 | | | 23,295 |
Releases to service cost of sales | | | (6,668) | | | (35,446) |
Increase/(decrease) to loss accrual related to customer warrants | | | (92) | | | 3,506 |
Foreign currency translation adjustment | | | 25 | | | (62) |
Ending balance | | $ | 81,312 | | $ | 81,066 |
11
5. Earnings Per Share
Basic earnings per common stock are computed by dividing net loss attributable to common stockholders by the weighted average number of common stock outstanding during the reporting period. In periods when we have net income, the shares of our common stock subject to the convertible notes outstanding during the period will be included in our diluted earnings per share under the if-converted method. Since the Company is in a net loss position, all common stock equivalents would be considered anti-dilutive and are therefore not included in the determination of diluted earnings per share. Accordingly, basic and diluted loss per share are the same.
The potentially dilutive securities are summarized as follows:
| | | | | | | | |
| | At March 31, | | At March 31, | ||||
|
| 2023 |
| 2022 |
| 2024 |
| 2023 |
Stock options outstanding (1) | | 27,479,533 |
| 24,185,000 | | 36,384,062 |
| 27,479,533 |
Restricted stock and restricted stock units outstanding (2) | | 5,888,013 |
| 5,439,207 | | 5,914,856 |
| 5,888,013 |
Common stock warrants (3) | | 85,879,175 | | 80,017,181 | | 78,561,263 | | 85,879,175 |
Convertible Senior Notes (4) | | 39,170,766 |
| 39,170,766 | | 44,661,605 |
| 39,170,766 |
Number of dilutive potential shares of common stock | | 158,417,487 |
| 148,812,154 | | 165,521,786 |
| 158,417,487 |
| (1) | During the three months ended March 31, |
| (2) | During the three months ended March 31, |
| (3) | In August 2022, the Company issued a warrant to acquire up to 16,000,000 shares of the Company’s common stock as part of a transaction agreement with Amazon.com, Inc. (“Amazon”), subject to certain vesting events, as described in Note |
In April 2017, the Company issued a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Amazon, subject to certain vesting events, as described in Note 12,11, “Warrant Transaction Agreements.”Agreements”. The warrant had been exercised with respect to 27,600,00034,917,912 and 24,704,45027,600,000 shares of the Company’s common stock as of March 31, 2024 and 2023, and 2022, respectively.
In July 2017, the Company issued a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Walmart, Inc. (“Walmart”), subject to certain vesting events, as described in Note 12,11, “Warrant Transaction Agreements.”Agreements”. The warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of March 31, 20232024 and 2022, respectively.2023.
10
| (4) |
Million
In March 2024, the Company exchanged $138.8 million in aggregate principal amount of the 3.75% Convertible Senior Notes for $140.4 million in aggregate principal amount of the 7.00% Convertible Senior Notes due 2026 (the “7.00% Convertible Senior Notes”) as described in Note 9, “Convertible Senior Notes”. There were no conversions of the 7.00% Convertible Senior Notes for the three months ended March 31, 2024 and 2023.
12
6. Inventory
Inventory as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
| | | | | | | |
|
| March 31, |
| December 31, |
| ||
| | 2023 | | 2022 | | ||
Raw materials and supplies - production locations | | $ | 550,315 | | $ | 450,432 | |
Raw materials and supplies - customer locations | | | 21,765 | | | 18,860 | |
Work-in-process | |
| 139,013 | |
| 112,231 | |
Finished goods | |
| 64,556 | |
| 64,113 | |
Inventory | | $ | 775,649 | | $ | 645,636 | |
As of March 31, 2023 and December 31, 2022, the reserve for excess and obsolete inventory was $5.4 million.
Inventory is primarily comprised of raw materials, work-in-process, and finished goods. The increase in inventory is primarily due to a combination of new product offerings, as well as increased revenue and orders.
7.5. Inventory
Inventory as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2024 | | 2023 | ||
Raw materials and supplies - production locations | | $ | 543,196 | | $ | 564,818 |
Raw materials and supplies - customer locations | | | 31,142 | | | 20,751 |
Work-in-process | |
| 156,146 | |
| 149,574 |
Finished goods | |
| 245,414 | |
| 226,110 |
Inventory | | $ | 975,898 | | $ | 961,253 |
Inventory is primarily comprised of raw materials, work-in-process, and finished goods. The Company had inventory reserves made up of excess and obsolete items and related lower of cost or net realizable value adjustments of $117.7 million and $85.2 million as of March 31, 2024 and December 31, 2023, respectively.
6. Property, Plant and Equipment
Property, plant and equipment at March 31, 20232024 and December 31, 20222023 consisted of the following (in thousands):
| | | | | | | ||||||
| | | | | | | | March 31, | | December 31, | ||
|
| March 31, 2023 |
| December 31, 2022 | | 2024 | | 2023 | ||||
Land | | $ | 1,772 | | $ | 1,772 | | $ | 5,951 | | $ | 6,049 |
Construction in progress | | | 697,456 | | | 575,141 | | | 852,555 | | | 1,109,896 |
Hydrogen production plants | | | 351,390 | | | 77,107 | ||||||
Building and leasehold improvements | | | 40,548 | | | 21,363 | | | 96,850 | | | 95,229 |
Software, machinery, and equipment | |
| 188,530 | |
| 169,633 | |
| 243,198 | |
| 229,352 |
Property, plant, and equipment | |
| 928,306 | |
| 767,909 | ||||||
Property, plant and equipment | |
| 1,549,944 | |
| 1,517,633 | ||||||
Less: accumulated depreciation | |
| (53,647) | |
| (48,116) | |
| (95,953) | |
| (81,456) |
Property, plant, and equipment, net | | $ | 874,659 | | $ | 719,793 | ||||||
Property, plant and equipment, net | | $ | 1,453,991 | | $ | 1,436,177 | ||||||
Construction in progress is primarily comprised of construction of fivethree hydrogen production plants, the Gigafactory in Rochester, NY, and our facility in the Slingerlands, NY.plants. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. Interest on outstanding debt is capitalized during periods of capital asset construction and amortized over the useful lives of the related assets. During the three months ended March 31, 20232024 and 2022,2023, the Company capitalized $2.0$2.1 million and $4.3$2.0 million of interest, respectively.
Depreciation expense related to property, plant and equipment was $5.5$11.6 million and $2.6$5.5 million for the three months ended March 31, 20232024 and 2022,2023, respectively.
8. Intangible Assets and Goodwill
The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of March 31, 2023 were as follows (in thousands):
| | | | | | | | | | | |
| | Weighted Average | | Gross Carrying | | Accumulated | | | | ||
|
| Amortization Period |
| Amount |
| Amortization |
| Total | |||
Acquired technology |
| 14 years |
| $ | 104,389 | | | (14,746) | | $ | 89,643 |
Dry stack electrolyzer technology | | 10 years | | | 29,000 | | | (3,142) | | | 25,858 |
Customer relationships, Non-compete agreements, Backlog & Trademark | | 12 years | |
| 103,325 | | | (15,086) | | | 88,239 |
| | | | $ | 236,714 | | $ | (32,974) | | $ | 203,740 |
11
13
7. Intangible Assets
The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of March 31, 2024 were as follows (in thousands):
| | | | | | | | | | | |
| | Weighted Average | | Gross Carrying | | Accumulated | | | | ||
| | Amortization Period | | Amount | | Amortization | | Total | |||
Acquired technology |
| 14 years |
| $ | 102,880 | | $ | (21,979) | | $ | 80,901 |
Dry stack electrolyzer technology | | 10 years | | | 29,000 | | | (6,042) | | | 22,958 |
Customer relationships, trade name and other | | 13 years | |
| 103,002 | | | (23,536) | | | 79,466 |
| | | | $ | 234,882 | | $ | (51,557) | | $ | 183,325 |
The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of December 31, 20222023 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Average | | Gross Carrying | | Accumulated | | | | | Weighted Average | | Gross Carrying | | Accumulated | | | | ||||
|
| Amortization Period |
| Amount |
| Amortization |
| Total | | Amortization Period | | Amount | | Amortization | | Total | ||||||
Acquired technology |
| 14 years | | $ | 104,221 | | $ | (12,754) | | $ | 91,467 |
| 14 years | | $ | 103,060 | | $ | (20,204) | | $ | 82,856 |
Dry stack electrolyzer technology | | 10 years | | | 29,000 | | | (2,417) | | | 26,583 | | 10 years | | 29,000 | | | (5,317) | | | 23,683 | |
Customer relationships, Non-compete agreements, Backlog & Trademark |
| 13 years | |
| 102,521 | | | (12,846) | | | 89,675 | |||||||||||
Customer relationships, trade name and other |
| 13 years | |
| 103,981 | | | (21,634) | |
| 82,347 | |||||||||||
| | | | $ | 235,742 | | $ | (28,017) | | $ | 207,725 | | | | $ | 236,041 | | $ | (47,155) | | $ | 188,886 |
The change in the gross carrying amount of the acquired technology and customer relationships, trade name and other from December 31, 20222023 to March 31, 20232024 was primarily due to changes in foreign currency translation.
Amortization expense for acquired identifiable intangible assets for the three months ended March 31, 2024 and 2023 and 2022 was $5.0$4.4 million and $5.2$5.0 million, respectively.
The estimated amortization expense for subsequent years is as follows (in thousands):
| | | |
Remainder of 2023 |
| $ | 14,347 |
2024 | | | 19,069 |
2025 | | | 18,294 |
2026 | | | 16,702 |
2027 | | | 16,694 |
2028 and thereafter | | | 118,634 |
Total | | $ | 203,740 |
Goodwill was $249.9 million and $248.6 million as of March 31, 2023 and December 31, 2022, which primarily increased due to foreign currency translation adjustments for goodwill associated with our international subsidiaries.
The change in the carrying amount of goodwill for the three months ended March 31, 2023 was as follows (in thousands):
| | | |
Beginning balance at December 31, 2022 |
| $ | 248,607 |
Foreign currency translation adjustment | |
| 1,264 |
Ending balance at March 31, 2023 | | $ | 249,871 |
| | | |
Remainder of 2024 |
| $ | 14,132 |
2025 | | | 18,070 |
2026 | | | 16,487 |
2027 | | | 16,480 |
2028 | | | 16,071 |
2029 and thereafter | | | 102,085 |
Total | | $ | 183,325 |
9.8. Long-Term Debt
In March 2019, the Company entered into a loan and security agreement, as amended, with Generate Lending, LLC, providing for a secured term loan facility in the amount of $100 million (the “Term Loan Facility”). In December 2022, the Company fully repaid the outstanding balance of the Term Loan Facility.
In June 2020, the Company acquired debt as part of its acquisition of United Hydrogen Group Inc. During the three months ended March 31, 2024, the Company repaid $0.3 million of principal related to this outstanding debt. The outstanding carrying value of the debt was $9.0$3.8 million as of March 31, 2023.2024. The remaining outstanding principal on the debt was $11.1$5.2 million and the unamortized debt discount was $2.1$1.4 million, bearing varying interest rates ranging from 2.2%7.3% to 8.3%7.6%. The debt is scheduled to mature in 2026. As of March 31, 2023,2024, the principal balance is due at each of the following dates as follows (in thousands):
| | | | | |
December 31, 2023 |
| $ | 5,660 | ||
December 31, 2024 | | | 3,357 | | 3,057 |
December 31, 2025 | | | 1,200 | | 1,200 |
December 31, 2026 | | | 900 | | 900 |
| | $ | 11,117 | ||
Total outstanding principal | $ | 5,157 | |||
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9. Convertible Senior Notes
7.00% Convertible Senior Notes
On March 20, 2024, the Company entered into separate, privately negotiated exchange agreements with certain holders of the Company’s outstanding 3.75% Convertible Senior Notes pursuant to which the Company exchanged $138.8 million in aggregate principal amount of the 3.75% Convertible Senior Notes, and accrued and unpaid interest of $1.6 million on such notes to, but excluding, March 20, 2024, for $140.4 million in aggregate principal amount of the Company’s new 7.00% Convertible Senior Notes due 2026, in each case, pursuant to the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”). Following the exchange, approximately $58.5 million in aggregate principal amount of the 3.75% Convertible Senior Notes remained outstanding with terms unchanged.
This transaction was accounted for as an extinguishment of debt. As a result, the Company recorded a loss on extinguishment of debt of $14.0 million in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024. Loss on extinguishment of debt arises from the difference between the net carrying amount of the Company’s debt and the fair value of the assets transferred to extinguish the debt.
The 7.00% Convertible Senior Notes are the Company’s senior, unsecured obligations and are governed by the terms of an Indenture (the “Indenture”), dated as of March 20, 2024, entered into between the Company and Wilmington Trust, National Association, as trustee. The 7.00% Convertible Senior Notes bear cash interest at the rate of 7.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2024, to holders of record at the close of business on the preceding May 15 and November 15, respectively. The 7.00% Convertible Senior Notes mature on June 1, 2026, unless earlier converted or redeemed or repurchased by the Company.
The conversion rate for the 7.00% Convertible Senior Notes is initially 235.4049 shares of the Company’s common stock per $1,000 principal amount of 7.00% Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $4.25 per share of common stock, which represents a premium of approximately 20% over the last reported sale price of Plug’s common stock on the Nasdaq Capital Market on March 12, 2024. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. Prior to the close of business on the business day immediately preceding December 1, 2025, the 7.00% Convertible Senior Notes will be convertible at the option of the holders of the 7.00% Convertible Senior Notes only upon the satisfaction of specified conditions and during certain periods. On or after December 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, the 7.00% Convertible Senior Notes will be convertible at the option of the holders of the 7.00% Convertible Senior Notes at any time regardless of these conditions. Conversions of the 7.00% Convertible Senior Notes will be settled in cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election.
Subject to certain exceptions and subject to certain conditions, holders of the 7.00% Convertible Senior Notes may require the Company to repurchase their 7.00% Convertible Senior Notes upon the occurrence of a “Fundamental Change” (as defined in the Indenture) prior to maturity for cash at a repurchase price equal to 100% of the principal amount of the 7.00% Convertible Senior Notes to be repurchased plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The 7.00% Convertible Senior Notes will be redeemable, in whole or in part, at the Company’s option at any time on or after June 5, 2025, at a cash redemption price equal to the principal amount of the 7.00% Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the then-applicable conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the three trading days immediately preceding the date the Company sends the related redemption notice, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company sends such redemption notice.
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10.In certain circumstances, conversions of 7.00% Convertible Senior Notes
3.75% in connection with “Make-Whole Fundamental Changes” (as defined in the Indenture) or conversions of 7.00% Convertible Senior Notes called for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 282.4859 shares of the Company’s common stock per $1,000 principal amount of 7.00% Convertible Senior Notes, subject to adjustment. In such circumstance, a maximum of 39,659,890 shares of common stock, subject to adjustment, may be issued upon conversion of the 7.00% Convertible Senior Notes. There were no conversions of the 7.00% Convertible Senior Notes during the three months ended March 31, 2024.
The 7.00% Convertible Senior Notes consisted of the following (in thousands):
| | |
| March 31, | |
| 2024 | |
Principal amounts: | | |
Principal | $ | 140,396 |
Unamortized debt premium, net of offering costs (1) | | 11,440 |
Net carrying amount | $ | 151,836 |
| (1) | Included in the unaudited interim condensed consolidated balance sheets within convertible senior notes, net and amortized over the remaining life of the notes using the effective interest rate method. |
The following table summarizes the total interest expense and effective interest rate related to the 7.00% Convertible Senior Notes for the three months ended March 31, 2024 (in thousands, except for the effective interest rate):
| | | |
| | March 31, | |
|
| 2024 | |
Interest expense | | $ | 296 |
Amortization of premium | | | (159) |
Total | | $ | 137 |
Effective interest rate | | | 3.0% |
The estimated fair value of the 7.00% Convertible Senior Notes at March 31, 2024 was approximately $153.2 million. The fair value estimation was primarily based on a quoted price in an active market.
3.75% Convertible Senior Notes
On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).Act. On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. DuringOn March 12, 2024, the three months ended March 31, 2023, thereCompany exchanged $138.8 million in aggregate principal amount of the 3.75% Convertible Senior Notes for $140.4 million in aggregate principal amount of the Company’s new 7.00% Convertible Senior Notes due 2026. Following the exchange, approximately $58.5 million in aggregate principal amount of the 3.75% Convertible Senior Notes remained outstanding with terms unchanged. There were no conversions of the 3.75% Convertible Senior Notes.Notes during the three months ended March 31, 2024 and 2023.
14
The 3.75% Convertible Senior Notes consisted of the following (in thousands):
| | | | | | | | | | | |
| | March 31, | | December 31, | March 31, | | December 31, | ||||
| | 2023 | | 2022 | 2024 | | 2023 | ||||
Principal amounts: | | | | | | | | | | | |
Principal | | $ | 197,278 | | $ | 197,278 | $ | 58,462 | | $ | 197,278 |
Unamortized debt issuance costs (1) | | | (3,028) | | | (3,359) | | (496) | | | (2,014) |
Net carrying amount | | $ | 194,250 | | $ | 193,919 | $ | 57,966 | | $ | 195,264 |
| Included in the unaudited interim condensed consolidated balance sheets within |
The following table summarizes the total interest expense and effective interest rate related to the 3.75% Convertible Senior Notes for the three months ended March 31, 2024 and 2023 (in thousands, except for the effective interest rate):
| | | | | | | | | | | | |
| | March 31, | | | March 31, | | March 31, | | | March 31, | ||
|
| 2023 |
| | 2022 |
| 2024 |
| | 2023 | ||
Interest expense | | $ | 1,849 | | $ | 1,849 | | $ | 1,690 | | $ | 1,849 |
Amortization of debt issuance costs | | | 331 | | | 316 | | | 316 | | | 331 |
Total | | | 2,180 | | | 2,165 | | $ | 2,006 | | $ | 2,180 |
Effective interest rate | | | 4.5% | | | 4.5% | | | 4.5% | | | 4.5% |
Based on the closing price of the Company’s common stock of $11.72 on March 31, 2023, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the note3.75% Convertible Senior Notes at March 31, 20232024 was approximately $433.6$60.4 million. The fair value estimation was primarily based on a quoted price in an active stock exchange trade on March 29, 2023 of the 3.75% Convertible Senior Notes.market.
Capped Call
In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions (the “3.75% Notes Capped Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call covers, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 3.75% Convertible Senior Notes and is generally expected to reduce potential dilution to the Company’s common stock upon any conversion of the 3.75% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 3.75% Notes Capped Call is initially $6.7560 per share, which represents a premium of approximately 60% over the last then-reported sale price of the Company’s common stock of $4.11 per share on the date of the transaction and is subject to certain adjustments under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.
The net cost incurred in connection with the 3.75% Notes Capped Call werewas recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets. The book value of the 3.75% Notes Capped Call is not remeasured.
15
5.5% Convertible Senior Notes and Common Stock Forward
In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior Notes due on March 15, 2023, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which have been fully repaid. In connection with the issuance of the 5.5% Convertible Senior Notes, the Company entered into a forward stock purchase transaction (the “Common Stock Forward”), pursuant to which the Company agreed to purchase 14,397,906 shares of its common stock for settlement on or about March 15, 2023. On May 18, 2020, the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. The number of shares of common stock that the Company will ultimately repurchase under the Common Stock Forward is subject to
15
customary anti-dilution adjustments. The Common Stock Forward is subject to early settlement or settlement with alternative consideration in the event of certain corporate transactions.
The net cost incurred in connection with the Common Stock Forward of $27.5 million was recorded as an increase in treasury stock in the unaudited interim condensed consolidated balance sheets. The related shares were accounted for as a repurchase of common stock. The book value of the Common Stock Forward is not remeasured.
There were no shares of common stock that settled in connection with the Common Stock Forward during the three months ended March 31, 202330, 2024 and 2023.
10. Stockholders’Equity
At Market Issuance Sales Agreement
On January 17, 2024, the Company entered into an At Market Issuance Sales Agreement with B. Riley, pursuant to which the Company may, from time to time, offer and sell through or duringto B. Riley, as sales agent or principal, shares of the Company’s common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had $697.9 million remaining authorized for issuance under the ATM Agreement. On February 23, 2024, the Company amended the ATM Agreement to increase the amount of shares of the Company’s common stock available for sale under the ATM Agreement to $1.0 billion. During the three months ended March 31, 2022.
11. Stockholders’Equity
Common Stock and Warrants
On August 24, 2022, a warrant to purchase up to 16,000,0002024, the Company sold 79,553,175 shares of common stock was issued in connectionat a weighted-average sales price of $3.89 per share for gross proceeds of $309.3 million with a transaction agreement with Amazon, as discussed in Note 12, “Warrant Transaction Agreements.” This warrant is measured at fair value at the timerelated issuance costs of grant or modification and is classified as an equity instrument on the unaudited interim condensed consolidated balance sheets.$3.9 million.
Accumulated Other Comprehensive IncomeLoss
Accumulated Other Comprehensive Income comprisesother comprehensive loss is comprised of unrealized gains and losses on available-for-sale securities and foreign currency translation gains and losses. There were no reclassifications from accumulated other comprehensive loss for the following (in thousands):three months ended March 31, 2024 and 2023, respectively.
| | | | | | | | | | | | |
|
| Gains and Losses on |
| Unrealized Gains and Losses on |
| Foreign |
| | | |||
| | Available-For-Sale | | Available-For-Sale | | Currency | | | | |||
| | Securities | | Securities | | Items | | Total | ||||
December 31, 2022 | | $ | (749) | | $ | (19,472) | | $ | (5,783) | | $ | (26,004) |
Net current-period other comprehensive loss | | | — | | | 5,311 | | | 1,659 | | | 6,970 |
March 31, 2023 | | $ | (749) | | $ | (14,161) | | $ | (4,124) | | $ | (19,034) |
| | | | | | | | | | | | |
December 31, 2021 | | $ | (150) | | $ | (67) | | $ | (1,315) | | $ | (1,532) |
Net current-period other comprehensive loss | | | — | | | (15,080) | | | (1,850) | | | (16,930) |
March 31, 2022 | | $ | (150) | | $ | (15,147) | | $ | (3,165) | | $ | (18,462) |
Net current-period other comprehensive loss for the three months ended March 31, 2024 increased due to foreign currency translation losses of $2.3 million. Net current-period other comprehensive income for the three months ended March 31, 2023 increased due to unrealized gains on available-for-sale securities of $5.3 million and foreign currency translation gains of $1.7 million.
12.11. Warrant Transaction Agreements
Amazon Transaction Agreement in 2022
On August 24, 2022, the Company and Amazon entered into a Transaction Agreement (the “2022 Amazon Transaction Agreement”), under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, a warrant (the “Amazon“2022 Amazon Warrant”) to acquire up to 16,000,000 shares (the “Amazon“2022 Amazon Warrant Shares”) of the Company’s common stock, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Amazon Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.
16
1,000,000 of the 2022 Amazon Warrant Shares vested immediately upon issuance of the 2022 Amazon Warrant. 15,000,000 of the 2022 Amazon Warrant Shares will vest in multiple tranches over the 7-year term of the 2022 Amazon Warrant based on payments made to the Company directly by Amazon or its affiliates, or indirectly through third parties, with 15,000,000 of the 2022 Amazon Warrant Shares fully vesting if Amazon-related payments of $2.1 billion are made in the aggregate. The exercise price for the first 9,000,000 2022 Amazon Warrant Shares is $22.9841 per share and the fair value on the grant date was $20.36. The exercise price for the remaining 7,000,000 2022 Amazon Warrant Shares will be an amount per share equal to 90% of the 30-day volume weighted average share price of the Company’s common stock
16
as of the final vesting event that results in full vesting of the first 9,000,000 2022 Amazon Warrant Shares. The 2022 Amazon Warrant is exercisable through August 24, 2029.
Upon the consummation of certain change of control transactions (as defined in the applicable warrant)2022 Amazon Warrant) prior to the vesting of at least 60% of the aggregate 2022 Amazon Warrant Shares, the 2022 Amazon Warrant will automatically vest and become exercisable with respect to an additional number of 2022 Amazon Warrant Shares such that 60% of the aggregate 2022 Amazon Warrant Shares shall have vested. If a change of control transaction is consummated after the vesting of at least 60% of the aggregate 2022 Amazon Warrant Shares, then no acceleration of vesting will occur with respect to any of the unvested 2022 Amazon Warrant Shares as a result of the transaction. The exercise price and the 2022 Amazon Warrant Shares issuable upon exercise of the 2022 Amazon Warrant are subject to customary antidilution adjustments.
At March 31, 2023,On August 24, 2022, 1,000,000 of the 2022 Amazon Warrant Shares issued pursuant to the 2022 Transaction Agreement had vested upon issuance.associated with tranche 1 vested. The warrant fair value associated with the vested shares of tranche 1 of $20.4 million was capitalized to contract assets in our condensed consolidated unaudited interim financial statements based on the grant date fair value and is subsequently amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of March 31, 2024 the balance of the contract asset related to tranche 1 was $19.3 million which is recorded in contract assets in the Company’s unaudited interim condensed consolidated balance sheet. During the second quarter of 2023, all 1,000,000 of the 2022 Amazon Warrant Shares associated with tranche 2 vested. The warrant fair value associated with the vested shares of tranche 2 was $20.4 million and was determined on the grant date of August 24, 2022. As of March 31, 2024 the balance of the contract asset related to tranche 2 was $19.3 million. Tranche 3 will vest over the next $1.0 billion of collections from Amazon and its affiliates. The grant date fair value of tranches 2 andtranche 3 will also be amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of March 31, 2024 the balance of the contract asset related to tranche 3 was $2.0 million. Because the exercise price has yet to be determined, the fair value of tranche 4 will be remeasured at each reporting period end and amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement.
As of March 31, 2024 and December 31, 2023, 2,000,000 of the 2022 Amazon Warrant Shares had vested and the 2022 Amazon Warrant had not been exercised. The total amount of provision for common stock warrants recorded as a reduction of revenue for the 2022 Amazon Warrant during the three months ended March 31, 2024 and 2023 was $0.7 million and $1.1 million.million, respectively.
The assumptions used to calculate the valuations of the 2022 Amazon Warrant as of August 24, 2022 and March 31, 20232024 are as follows:
| | | | | | | | |
|
| Tranches 1-3 |
| Tranche 4 |
| Tranches 1-3 |
| Tranche 4 |
| | August 24, 2022 | | March 31, 2023 | | August 24, 2022 | | March 31, 2024 |
Risk-free interest rate | | 3.15% | | 3.50% | | 3.15% | | 4.12% |
Volatility | | 75.00% | | 75.00% | | 75.00% | | 90.00% |
Expected average term | | 7 years | | 4 years | ||||
Expected average term (years) | | 7.00 | | 4.00 | ||||
Exercise price | | $22.98 | | $10.55 | | $22.98 | | $3.10 |
Stock price | | $20.36 | | $11.72 | | $20.36 | | $3.44 |
Amazon Transaction Agreement in 2017
On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the “2017 Amazon Transaction Agreement”), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a warrant (the “2017 Amazon Warrant”) to acquire up to 55,286,696 shares (the “2017 Amazon Warrant Shares,Shares”), subject to certain vesting events described below.events. The Company and Amazon entered into the 2017 Amazon Transaction Agreement in connection with existing commercial agreements between the Company and Amazon with respect to the deployment of the Company’s GenKey fuel cell technology at Amazon distribution centers. The vesting of the 2017 Amazon Warrant Shares was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements. AtOn December 31, 2021, all 55,286,696 of2020, the Amazon Warrant Shares had vested.
The warrant had been exercised with respect to 27,600,000 and 24,704,450 shares ofCompany waived the Company’s common stock as of March 31, 2023 and December 31, 2022, respectively.
remaining vesting conditions under
17
the 2017 Amazon Warrant, which resulted in the immediate vesting of all of the third tranche of the 2017 Amazon Warrant Shares.
As of March 31, 2024 and 2023, all 55,286,696 of the 2017 Amazon Warrant Shares had vested and the 2017 Amazon Warrant was exercised with respect to 34,917,912 shares of the Company’s common stock. The total amount of provision for common stock warrants recorded as a reduction of revenue for the 2017 Amazon Warrant during the three months ended March 31, 2024 and 2023 was $0.1 million and $0.2 million, respectively.
Walmart Transaction Agreement
On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the “Walmart Transaction Agreement”), pursuant to which the Company agreed to issue to Walmart a warrant (the “Walmart Warrant”) to acquire up to 55,286,696 shares of the Company’s common stock, subject to certain vesting events (the “Walmart Warrant Shares”). The Company and Walmart entered into the Walmart Transaction Agreement in connection with existing commercial agreements between the Company and Walmart with respect to the deployment of the Company’s GenKey fuel cell technology across various Walmart distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the warrant shares was conditioned upon payments made by Walmart or its affiliates (directly or indirectly through third parties) pursuant to transactions entered into after January 1, 2017 under existing commercial agreements.
The warrantexercise price for the first and second tranches of Walmart Warrant Shares was $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in eight installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of the Walmart Warrant Shares is $6.28 per share, which was determined pursuant to the terms of the Walmart Warrant as an amount equal to 90% of the 30-day volume weighted average share price of the Company’s common stock as of October 30, 2023, the final vesting date of the second tranche of the Walmart Warrant Shares. The Walmart Warrant is exercisable through July 20, 2027. The Walmart Warrant provides for net share settlement that, if elected by the holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Walmart Warrant provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. The Walmart Warrant is classified as an equity instrument.
As of March 31, 2024 and December 31, 2023, 37,464,010 and 34,917,912 of the Walmart Warrant Shares had beenvested, respectively, and the Walmart Warrant was exercised with respect to 13,094,217 shares of the Company’s common stock asstock. As of March 31, 2023 and December 31, 2022.
At March 31, 2023 and December 31, 2022, 27,643,3472024, the balance of the contract asset related to the Walmart Warrant Shares had vested.was $6.9 million. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended March 31, 2024 and 2023 was $3.7 million and 2022 was $12.9 million, and $1.7 million, respectively. During the three months ended March 31, 2023 and 2022, there were no exercises with respect to the Walmart Warrant.
The assumptions used to calculate the valuations of the final tranche of the Walmart Warrant as of March 31,January 1, 2019 and October 30, 2023 are as follows:
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13. Revenue
Disaggregation of revenue
The following table provides information about disaggregation of revenue (in thousands):
| | | | | | |
Major products/services lines | | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
|
| 2023 |
| 2022 | ||
Sales of fuel cell systems | | $ | 28,852 | | $ | 37,528 |
Sales of hydrogen infrastructure | | | 48,868 | | | 27,089 |
Sales of electrolyzers | | | 40,032 | | | 4,059 |
Sales of engineered equipment | | | 7,753 | | | 21,968 |
Services performed on fuel cell systems and related infrastructure | | | 9,097 | | | 8,240 |
Power Purchase Agreements | | | 7,937 | | | 10,037 |
Fuel delivered to customers and related equipment | | | 10,142 | | | 13,429 |
Sales of cryogenic equipment and other | | | 56,589 | | | 18,203 |
Other | | | 1,016 | | | 251 |
Net revenue | | $ | 210,286 | | $ | 140,804 |
| | | | |
|
| Tranches 1-2 |
| Tranche 3 |
| | January 1, 2019 | | October 30, 2023 |
Risk-free interest rate | | 2.63% | | 4.73% |
Volatility | | 95.00% | | 75.00% |
Expected average term (years) | | 8.55 | | 3.72 |
Exercise price | | $2.12 | | $6.28 |
Stock price | | $1.24 | | $5.70 |
18
12. Revenue
Disaggregation of revenue
The following table provides information about disaggregation of revenue (in thousands):
| | | | | | |
Major products/services lines | | Three months ended | ||||
| | March 31, | ||||
| | 2024 | | 2023 | ||
Sales of fuel cell systems | | $ | 19,003 | | $ | 28,852 |
Sales of hydrogen infrastructure | | | 12,295 | | | 48,868 |
Sales of electrolyzers | | | 1,351 | | | 40,032 |
Sales of engineered equipment | | | 4,216 | | | 7,753 |
Services performed on fuel cell systems and related infrastructure | | | 13,023 | | | 9,097 |
Power purchase agreements | | | 18,304 | | | 7,937 |
Fuel delivered to customers and related equipment | | | 18,286 | | | 10,142 |
Sales of cryogenic equipment and other | | | 31,430 | | | 56,589 |
Other | | | 2,356 | | | 1,016 |
Net revenue | | $ | 120,264 | | $ | 210,286 |
Contract balances
The following table provides information about receivables, contract assets and deferred revenue and contract liabilities from contracts with customers (in thousands):
| | | | | | | | | | | | |
| | March 31, | | December 31, | | March 31, | | December 31, | ||||
| | 2023 | | 2022 | | 2024 | | 2023 | ||||
Accounts receivable | | $ | 127,720 | | $ | 129,450 | | $ | 148,822 | | $ | 243,811 |
Contract assets | | | 124,430 | | | 104,287 | | | 160,374 | | | 155,989 |
Deferred revenue and contract liabilities | | | 220,150 | | | 229,898 | | | 255,802 | | | 288,302 |
Contract assets primarily relate to contracts for which revenue is recognized on a straight-line basis; however, billings escalate over the life of a contract. Contract assets also include amounts recognized as revenue in advance of billings to customers, which are dependent upon the satisfaction of another performance obligation. These amounts are included in contract assets on the accompanying unaudited interim condensed consolidated balance sheets.
The deferred revenue and contract liabilities relate to the advance consideration received from customers for services that will be recognized over time (primarily fuel cell and related infrastructure services)services and electrolyzer systems and solutions). Deferred revenue and contract liabilities also include advance consideration received from customers prior to delivery of products. These amounts are included within deferred revenue and other contract liabilities on the unaudited interim condensed consolidated balance sheets.
Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):
| | | | | | |
Contract assets | | | | | ||
|
| March 31, |
| December 31, | ||
| | 2023 | | 2022 | ||
Transferred to receivables from contract assets recognized at the beginning of the period | | $ | (19,709) | | $ | (33,394) |
Contract assets related to warrants | | | 5,577 | | | 26,455 |
Revenue recognized and not billed as of the end of the period | | | 34,275 | | | 72,469 |
Net change in contract assets | | $ | 20,143 | | $ | 65,530 |
| | | | | | |
Deferred revenue and contract liabilities | | | ||||
|
| March 31, |
| December 31, | ||
| | 2023 | | 2022 | ||
Increases due to cash received, net of amounts recognized as revenue during the period | | $ | 80,740 | | $ | 200,347 |
Contract liabilities assumed as part of acquisitions | | | — | | | 10,011 |
Revenue recognized that was included in the contract liability balance as of the beginning of the period | | | (90,488) | | | (163,550) |
Net change in deferred revenue and contract liabilities | | $ | (9,748) | | $ | 46,808 |
19
Significant changes in the contract assets and the deferred revenue and contract liabilities balances during the period are as follows (in thousands):
| | | | | | |
Contract assets | | Three months ended | | Year ended | ||
| | March 31, 2024 | | December 31, 2023 | ||
Transferred to receivables from contract assets recognized at the beginning of the period | | $ | (9,082) | | $ | (94,860) |
Change in contract assets related to warrants | | | 5,850 | | | 14,260 |
Impairment | | | — | | | (2,375) |
Revenue recognized and not billed as of the end of the period | | | 7,617 | | | 134,677 |
Net change in contract assets | | $ | 4,385 | | $ | 51,702 |
| | | | | | |
Deferred revenue and contract liabilities | | Three months ended | | Year ended | ||
| | March 31, 2024 | | December 31, 2023 | ||
Increases due to customer billings, net of amounts recognized as revenue during the period | | $ | 12,057 | | $ | 151,965 |
Change in contract liabilities related to warrants | | | 110 | | | 440 |
Revenue recognized that was included in the contract liability balance as of the beginning of the period | | | (44,667) | | | (94,001) |
Net change in deferred revenue and contract liabilities | | $ | (32,500) | | $ | 58,404 |
Estimated future revenue
The following table includes estimated revenue included in the backlog expected to be recognized in the future (sales of fuel cell systems, equipment, and hydrogen installations are expected to be recognized as revenue within one year; sales of services, Power Purchase Agreements (“PPAs”), and fuel are expected to be recognized as revenue over five to ten years) related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period, including provision for common stock warrants (in thousands):
| | | | | | | | | |
| | March 31, | | March 31, | | Expected recognition | |||
|
| 2023 | | 2024 | | period (years) | |||
Sales of fuel cell systems | | $ | 53,578 | | $ | 55,671 | | | 1 - 2 |
Sales of hydrogen installations and other infrastructure | | | 21,807 | | | 31,039 | | | 1 |
Sales of electrolyzers | | | 281,720 | | | 303,127 | | | 1 - 2 |
Sales of engineered equipment | | | 16,628 | | | 14,559 | | | 1 |
Services performed on fuel cell systems and related infrastructure | | | 121,418 | | | 142,111 | | | 5 - 10 |
Power Purchase Agreements | | | 385,096 | ||||||
Power purchase agreements | | | 419,406 | | | 5 - 10 | |||
Fuel delivered to customers and related equipment | | | 92,470 | | | 93,685 | | | 5 - 10 |
Sales of cryogenic equipment | | | 121,657 | ||||||
Sales of cryogenic equipment and other | | | 77,105 | | | 1 | |||
Total estimated future revenue | | $ | 1,094,374 | | $ | 1,136,703 | | | |
Contract costs
Contract costs consist of capitalized commission fees and other expenses related to obtaining or fulfilling a contract. Capitalized contract costs at March 31, 2023 and December 31, 2022 were $0.6 million.
14.13. Income Taxes
The Company recorded $1.3$0.2 million of income tax expense and $0.4$1.3 million of income tax benefit for the three months ended March 31, 2024 and 2023, and 2022, respectively. The income tax expense for the three months ended March 31, 2024 was due to an incremental change to the valuation allowance recorded in foreign jurisdictions. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its domestic net deferred tax assets, which remain fully reserved.reserved, and its valuation allowances recorded in foreign jurisdictions.
The domestic net deferred tax asset generated from the Company’s net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carry forwardcarryforward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
20
The Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion and Profit Shifting has proposed a global minimum corporate tax rate of 15% on multi-national corporations, commonly referred to as the Pillar Two rules that has been agreed upon in principle by over 140 countries. Numerous foreign countries have enacted legislation to implement the Pillar Two rules, effective beginning January 1, 2024, or are expected to enact similar legislation. As of March 31, 2024, the Company did not meet the consolidated revenue threshold and is not subject to the GloBE Rules under Pillar Two. The Company will continue to monitor the implementation of rules in the jurisdictions in which it operates.
15.14. Fair Value Measurements
The Company records the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are:
| ● | Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. |
| ● | Level 3 — unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value. |
There were no transfers between Level 1, Level 2, or Level 3 for the three months ended March 31, 2024. Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investments in HyVia, AccionaPlug, SK Plug Hyverse and Clean H2 Infra Fund.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
| | | | | | | | | | |
| | As of March 31, 2024 | ||||||||
| | Carrying | | Fair | | Fair Value Measurements | ||||
| | Amount | | Value | | Level 1 | | Level 2 | | Level 3 |
Liabilities | | | | | | | | | | |
Contingent consideration | $ | 106,326 | $ | 106,326 | $ | — | $ | — | $ | 106,326 |
| | | | | | | | | | |
| | As of December 31, 2023 | ||||||||
| | Carrying | | Fair | | Fair Value Measurements | ||||
| | Amount | | Value | | Level 1 | | Level 2 | | Level 3 |
Liabilities | | | | | | | | | | |
Contingent consideration | | 126,216 | | 126,216 | | — | | — | | 126,216 |
The liabilities measured at fair value on a recurring basis that have unobservable inputs and are therefore categorized as level 3 are related to contingent consideration. The fair value as of March 31, 2024 of $106.3 million is comprised of contingent consideration related to the Joule Processing LLC (“Joule”) acquisition in 2022, the Frames Holding B.V. (“Frames”) acquisition in 2021 and the Giner ELX, Inc. (“Giner”) and United Hydrogen Group Inc. (“UHG”) acquisitions in 2020.
In connection with the Joule acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable. The
2021
Securities reported at fair value utilizing Level 1 inputs represent assets whoseof this contingent consideration was $58.0 million and $75.5 million as of March 31, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was partially due to payments that reduced the fair value is determined based upon observable unadjusted quoted market prices for identical assetsof the liability by $10.0 million during the three months ended March 31, 2024. A further decrease of $7.5 million was recorded in active markets. Level 2 securities represent assets whosechange in fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. Available-for-sale securities are characterized as Level 2 assets, as their fair values are determined using observable market inputs. Equity securities are characterized as Level 1 assets, as their fair values are determined using active markets for identical assets. There were no transfers between Level 1, Level 2, or Level 3contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2023.
Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investments in HyVia, AccionaPlug, and SK Plug Hyverse. During the three months ended March 31, 2023, the Company contributed approximately $40.1 million to HyVia, AccionaPlug and SK Plug Hyverse.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
| | | | | | | | | | | | | | | |
| | As of March 31, 2023 | |||||||||||||
| | Carrying | | Fair | | Fair Value Measurements | |||||||||
|
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 208,358 | | $ | 208,358 | | $ | 208,358 | | $ | — | | $ | — |
Corporate bonds | | | 163,863 | | | 163,863 | | | — | | | 163,863 | | | — |
U.S. Treasuries | | | 864,508 | | | 864,508 | | | 864,508 | | | — | | | — |
Equity securities | | | 139,911 | | | 139,911 | | | 139,911 | | | — | | | — |
| | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | |
Contingent consideration | | | 123,473 | | | 123,473 | | | — | | | — | | | 123,473 |
| | | | | | | | | | | | | | | |
| | As of December 31, 2022 | |||||||||||||
| | Carrying | | Fair | | Fair Value Measurements | |||||||||
|
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 212,577 | | $ | 212,577 | | $ | 212,577 | | $ | — | | $ | — |
Corporate bonds | | | 193,633 | | | 193,633 | | | — | | | 193,633 | | | — |
U.S. Treasuries | | | 1,139,310 | | | 1,139,310 | | | 1,139,310 | | | — | | | — |
Equity securities | | | 134,836 | | | 134,836 | | | 134,836 | | | — | | | — |
| | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | |
Contingent consideration | | | 116,165 | | | 116,165 | | | — | | | — | | | 116,165 |
The liabilities measured at fair value on a recurring basis that have unobservable inputs and are therefore categorized as level 3 are related to contingent consideration. The fair value as of March 31, 2023 of $123.5 million is comprised of $59.9 million related to the acquisition of Joule, as well as $63.6 million from the Frames Holding B.V. (“Frames”) and Applied Cryo Technologies, Inc. (“Applied Cryo”) acquisitions in 2021 and the Giner ELX, Inc. and United Hydrogen Group Inc. acquisition in 2020.
In connection with the Applied Cryo acquisition, the Company recorded on its consolidated balance sheet an initial liability of $14.0 million representing the fair value of contingent consideration payable, and is recorded in the unaudited interim condensed consolidated balance sheet in contingent consideration, loss accrual for service contracts, and other current liabilities. The fair value of this contingent consideration was $19.0 million and $15.9 million as of March 31, 2023 and December 31, 2022, respectively, and as a result a $3.1 million increase was recorded due to a settlement with the sellers. We expect $19.0 million to be paid to the sellers in the second quarter of 2023.2024.
In connection with the Frames acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $29.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $29.7$28.6 million and $31.0$31.8 million as of March 31, 20232024 and December 31, 2022,2023, respectively. The change in fair valuedecrease compared to the year ended December 31, 20222023 was primarily due to a change in the foreign currency translation, partially offset by an decrease in the liability. The Companyof $2.5 million recorded an adjustment of $1.3 million for the three months ended March 31,
21
2023 in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations.operations for the three months ended March 31, 2024. A further decrease of $0.7 million was due to foreign currency translation gains.
In connection with the Giner ELX, Inc. acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $16.0 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $13.3$18.7 million and $14.5$18.0 million as of March 31, 20232024 and December 31, 2022, respectively, and as a result, a $1.3 million decrease2023, respectively. The increase compared to December 31, 2023 was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2023.2024.
In connection with the United Hydrogen Group Inc.UHG acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $1.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $1.6$1.0 million and $1.5$0.9 million as of March 31, 20232024 and December 31, 2022, respectively, and, as a result, a $0.1 million2023, respectively. The increase compared to December 31, 2023 was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2023.2024, respectively.
In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and iswas comprised of the following unobservable inputs for the three months endingas of March 31, 2023:2024:
| | | | | | | | | | | | | | | |
Financial Instrument |
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range (weighted average) |
| Fair Value | Valuation Technique | Unobservable Input | Range (weighted average) | ||
Contingent Consideration | | $ | 87,049 | | Scenario based method | | Credit spread | | 15.73% - 15.74% | ||||||
Contingent consideration | | $ | 106,326 | Scenario based method | Credit spread | 13.61% - 14.04% | |||||||||
| | | | | | | Discount rate | | 19.85% - 20.68% | | | | | Discount rate | 17.98% - 19.06% |
| | | 11,880 | | Monte carlo simulation | | Credit spread | | 15.74% | | | 106,326 | | | |
| | | | | | | Discount rate | | 20.00%-20.30% | ||||||
| | | | | | | Revenue volatility | | 45.29% | ||||||
| | | 24,544 | | Monte carlo simulation | | Credit spread | | 15.73% | ||||||
| | | | | | | Revenue volatility | | 35.7% - 23.1% (35.0%) | ||||||
| | | | | | | Gross profit volatility | | 106.7% - 23.2% (60.0%) | ||||||
| | $ | 123,473 | | | | | | | ||||||
In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and iswas comprised of the following unobservable inputs for the twelve months endingas of December 31, 2022:2023:
| | | | | | | | | | | | | | | |
Financial Instrument |
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range (weighted average) |
| Fair Value | Valuation Technique | Unobservable Input | Range (weighted average) | ||
Contingent Consideration | | $ | 85,269 | | Scenario based method | | Credit spread | | 15.73% - 15.74% | ||||||
Contingent consideration | | $ | 126,216 | Scenario based method | Credit spread | 13.61% | |||||||||
| | | | | | | Discount rate | | 19.85% - 20.68% | | | | | Discount rate | 17.71% - 19.06% |
| | | 11,310 | | Monte carlo simulation | | Credit spread | | 15.74% | | | 126,216 | | | |
| | | | | | | Discount rate | | 20.00%-20.30% | ||||||
| | | | | | | Revenue volatility | | 45.29% | ||||||
| | | 19,586 | | Monte carlo simulation | | Credit spread | | 15.73% | ||||||
| | | | | | | Revenue volatility | | 35.7% - 23.1% (35.0%) | ||||||
| | | | | | | Gross profit volatility | | 106.7% - 23.2% (60.0%) | ||||||
| | $ | 116,165 | | | | | | | ||||||
22
The change in the carrying amount of Level 3 liabilities forduring the three month periodmonths ended March 31, 20232024 was as follows (in thousands):
| | | |
|
| Three months ended | |
| | March 31, 2023 | |
Beginning balance at December 31, 2022 | | $ | 116,165 |
Payments | | | (2,000) |
Fair value adjustments | | | 8,769 |
Foreign currency translation adjustment | |
| 539 |
Ending balance at March 31, 2023 | | $ | 123,473 |
| | | |
|
| Three months ended | |
| | March 31, 2024 | |
Beginning balance as of December 31, 2023 | | $ | 126,216 |
Cash payments | | | (10,000) |
Fair value adjustments | | | (9,200) |
Foreign currency translation adjustment | |
| (690) |
Ending balance as of March 31, 2024 | | $ | 106,326 |
16.15. Investments
The fair values of the Company’s investments are based upon prices provided by an independent pricing service provider. Management has assessed and concluded that these prices are reasonable and has not adjusted any prices received from the independent pricing service provider.
The amortized cost, gross unrealized gains and losses, fair value of those investments classified as available-for-sale, and allowance for credit losses at March 31, 2023 are summarized as follows (in thousands):
| | | | | | | | | | | | | | | |
| | March 31, 2023 | |||||||||||||
|
| Amortized |
| Gross |
| Gross |
| Fair |
| Allowance for | |||||
| | Cost | | Unrealized Gains | | Unrealized Losses | | Value | | Credit Losses | |||||
Corporate bonds | | $ | 169,804 | | $ | 15 | | $ | (5,956) | | $ | 163,863 | | | — |
U.S. Treasuries | | | 875,927 | | | 106 | | | (11,525) | | | 864,508 | | | — |
Total | | $ | 1,045,731 | | $ | 121 | | $ | (17,481) | | $ | 1,028,371 | | $ | — |
The amortized cost, gross unrealized gains and losses, fair value of those investments classified as available-for-sale, and allowance for credit losses at December 31, 2022 are summarized as follows (in thousands):
| | | | | | | | | | | | | | | |
| | December 31, 2022 | |||||||||||||
|
| Amortized |
| Gross |
| Gross |
| Fair |
| Allowance for | |||||
| | Cost | | Unrealized Gains | | Unrealized Losses | | Value | | Credit Losses | |||||
Corporate bonds | | $ | 200,735 | | $ | 7 | | $ | (7,109) | | $ | 193,633 | | | — |
U.S. Treasuries | | | 1,154,879 | | | 111 | | | (15,680) | | | 1,139,310 | | | — |
Total | | $ | 1,355,614 | | $ | 118 | | $ | (22,789) | | $ | 1,332,943 | | $ | — |
The following table summarizes the fair value and gross unrealized losses on securities classified as available-for-sale, and length of time that the individual securities have been in a continuous loss position as of March 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | ||||||||||||||||
| | Less than 12 months | | 12 months or greater | | Total | ||||||||||||
|
| Fair Value of |
| |
| Fair Value of |
| |
| Fair Value of |
| | ||||||
| | Investments with | | Gross Unrealized | | Investments with | | Gross Unrealized | | Investments with | | Gross Unrealized | ||||||
| | Unrealized Losses | | Losses | | Unrealized Losses | | Losses | | Unrealized Losses | | Losses | ||||||
Corporate bonds | | $ | 8,794 |
| $ | (226) | | $ | 141,875 |
| $ | (5,730) | | $ | 150,669 |
| $ | (5,956) |
U.S. Treasuries | | | 24,884 | | | (94) | | | 307,587 | | | (11,431) | | | 332,471 | | | (11,525) |
Total available-for-sale securities | | $ | 33,678 | | $ | (320) | | $ | 449,462 | | $ | (17,161) | | $ | 483,140 | | $ | (17,481) |
We regularly review available-for-sale securities for declines in fair values that we determine to be credit related. In order to determine whether an allowance for credit losses was required, we considered factors such as whether amounts related to securities have become uncollectible, whether we intend to sell a security, and whether it is more likely than not that we will be required to sell a security prior to recovery. The Company also reviewed the declines in market value
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related to our available-for-sale securities and determined that these declines were due to fluctuations in interest rates. As of March 31, 2023, the Company did not have an allowance for credit losses related to available-for-sale securities.
The cost, gross unrealized gains and losses, and fair value of those investments classified as equity securities at March 31, 2023 are summarized as follows (in thousands):
| | | | | | | | | | | | |
| | March 31, 2023 | ||||||||||
|
| | |
| Gross |
| Gross |
| Fair | |||
| | Cost | | Unrealized Gains | | Unrealized Losses | | Value | ||||
Fixed income mutual funds | | $ | 70,257 |
| $ | | | $ | (2,245) | | $ | 68,012 |
Exchange traded mutual funds | | | 76,000 | | | | | | (4,101) | | | 71,899 |
Total | | $ | 146,257 | | $ | — | | $ | (6,346) | | $ | 139,911 |
The cost, gross unrealized gains and losses, and fair value of those investments classified as equity securities at December 31, 2022 are summarized as follows (in thousands):
| | | | | | | | | | | | |
| | December 31, 2022 | ||||||||||
| | | | | Gross | | Gross | | Fair | |||
|
| Cost |
| Unrealized Gains |
| Unrealized Losses |
| Value | ||||
Fixed income mutual funds | | $ | 70,257 |
| $ | — | | $ | (2,620) | | $ | 67,637 |
Exchange traded mutual funds | | | 75,999 | | | — | | | (8,800) | | | 67,199 |
Total | | $ | 146,256 | | $ | — | | $ | (11,420) | | $ | 134,836 |
A summary of the amortized cost and fair value of investments classified as available-for-sale, by contractual maturity, as of March 31, 2023 and December 31, 2022 was as follows (in thousands):
| | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 | ||||||||
|
| Amortized |
| Fair |
| Amortized |
| Fair | ||||
Maturity: | | Cost | | Value | | Cost | | Value | ||||
Less than 12 months | | $ | 817,369 |
| $ | 810,898 | | $ | 1,045,120 |
| $ | 1,039,333 |
12 months or greater | |
| 228,362 | |
| 217,473 | |
| 310,494 | |
| 293,610 |
Total | | $ | 1,045,731 | | $ | 1,028,371 | | $ | 1,355,614 | | $ | 1,332,943 |
Accrued interest income was $2.4 million and $3.0 million at March 31, 2023 and December 31, 2022, respectively, and included within the balance for prepaid expenses and other current assets in the unaudited interim condensed consolidated balance sheets.
Equity Method Investments
As of March 31, 20232024 and December 31, 2022,2023, the Company accounted for the following investments in the investee’s common stock under the equity method, which are included in the investments in non-consolidated entities and non-marketable equity securities on the unaudited interim unaudited condensed consolidated balance sheets (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | As of March 31, 2023 | | As of December 31, 2022 | | | | As of March 31, 2024 | | As of December 31, 2023 | ||||||||||||
|
| Formation |
| Common Stock |
| Carrying |
| Common Stock |
| Carrying |
| Formation | | Common Stock |
| Carrying | | Common Stock |
| Carrying | ||||
Investee | | Date | | Ownership % | | Value | | Ownership % | | Value | | Date | | Ownership % | | Value | | Ownership % | | Value | ||||
HyVia | | Q2 2021 | | 50% | | $ | 29,722 | | 50% | | $ | 11,281 | | Q2 2021 | | 50% | | $ | 1,402 | | 50% | | $ | (2,068) |
AccionaPlug S.L. | | Q4 2021 | | 50% | | | 1,941 | | 50% | | | 2,225 | ||||||||||||
AccionaPlug | | Q4 2021 | | 50% | | | 4,371 | | 50% | | | 3,198 | ||||||||||||
Clean H2 Infra Fund | | Q4 2021 | | 5% | | | 17,428 | | 5% | | | 13,357 | ||||||||||||
SK Plug Hyverse | | Q1 2022 | | 49% | | | 26,719 | | 49% | | | 8,937 | | Q1 2022 | | 49% | | | 37,871 | | 49% | | | 41,609 |
| | | | | | $ | 58,382 | | | | $ | 22,443 | | | | | | $ | 61,072 | | | | $ | 56,096 |
As of December 31, 2023, the Company’s investment in HyVia was negative due to historical losses. The Company is committed to fund its share of losses of the joint venture and, therefore, continued to record losses as incurred. The negative equity investment as of December 31, 2023 was recorded on the unaudited interim condensed consolidated balance sheet to the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item.
During the three months ended March 31, 2024, the Company contributed approximately $16.2 million, $1.7 million, $0 and $4.0 million, respectively, to HyVia, AccionaPlug, SK Plug Hyverse and Clean H2 Infra Fund. During the three months ended March 31, 2023, the Company contributed approximately $22.3 million, $0, $17.8 million and $0, respectively, to HyVia, AccionaPlug, SK Plug Hyverse and Clean H2 Infra Fund.
The Company’s capital commitments related to its equity method investments as of March 31, 2024 includes $98.1 million to be made during the remainder of 2024.
17.16. Operating and Finance Lease Liabilities
As of March 31, 2023,2024, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash and security deposits and pledged escrows (see also Note 1, “Nature
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of Operations”18, “Commitments and Contingencies”) as summarized below. These leases expire over the next one to nineseven years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.
Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include
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credit support in the form of either cash, collateral or letters of credit. See Note 19,18, “Commitments and Contingencies”, for a description of cash held as security associated with the leases.
The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of March 31, 2023.
Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of March 31, 20232024 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | | Finance | | Total | | | |
| Finance |
| Total | ||||
| | Operating Lease | | Lease | | Lease |
| Operating Lease | | Lease | | Lease | ||||||
|
| Liability |
| Liability |
| Liabilities | | Liability | | Liability | | Liabilities | ||||||
Remainder of 2023 | | $ | 64,464 | | $ | 8,712 | | $ | 73,176 | |||||||||
2024 | | | 85,832 | |
| 11,476 | | | 97,308 | |||||||||
Remainder of 2024 | | $ | 74,684 | | $ | 9,089 | | $ | 83,773 | |||||||||
2025 | | | 81,119 | |
| 14,387 | | | 95,506 | | | 94,822 | |
| 15,030 | | | 109,852 |
2026 | | | 71,088 | |
| 11,529 | | | 82,617 | | | 85,950 | |
| 12,172 | | | 98,122 |
2027 | | | 56,978 | | | 8,252 | | | 65,230 | | | 72,561 | |
| 8,482 | | | 81,043 |
2028 and thereafter | | | 102,913 | | | 1,330 | | | 104,243 | |||||||||
2028 | | | 50,427 | | | 1,896 | | | 52,323 | |||||||||
2029 and thereafter | | | 147,725 | | | 3,243 | | | 150,968 | |||||||||
Total future minimum payments | | | 462,394 | |
| 55,686 | | | 518,080 | | | 526,169 | |
| 49,912 | | | 576,081 |
Less imputed interest | | | (134,595) | | | (7,660) | | | (142,255) | | | (182,699) | | | (6,637) | | | (189,336) |
Total | | $ | 327,799 | | $ | 48,026 | | $ | 375,825 | | $ | 343,470 | | $ | 43,275 | | $ | 386,745 |
Rental expense for all operating leases was $21.9$26.3 million and $14.0$21.9 million for the three months ended March 31, 20232024 and 2022,2023, respectively.
At both March 31, 20232024 and December 31, 2022,2023, security deposits associated with sale/leaseback transactions were $6.0$7.4 million, and $5.8 million, respectively, and were included in other assets in the unaudited interim condensed consolidated balance sheets.
At March 31, 2023 and December 31, 2022, the right of use assets associated with finance leases was $62.4 million and $58.4 million, respectively. The accumulated depreciation for these right of use assets was $5.7 million and $4.7 million at March 31, 2023 and December 31, 2022, respectively.
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Other information related to the operating leases are presented in the following table:
| | | | | | | | | | | |
| | Three months ended | | Three months ended | Three months ended |
| Three months ended | ||||
|
| March 31, 2023 |
| March 31, 2022 | March 31, 2024 | | March 31, 2023 | ||||
Cash payments (in thousands) | | $ | 21,648 | | $ | 13,547 | |||||
Cash payments - operating cash flows (in thousands) | $ | 24,960 | | $ | 21,648 | ||||||
Weighted average remaining lease term (years) | | | 2.66 | | | 5.46 | | 7.21 | | | 2.66 |
Weighted average discount rate | | | 11.3% | | | 10.9% | | 11.5% | | | 11.3% |
Finance lease costs include amortization of the right of use assets (i.e., depreciation expense) and interest on lease liabilities (i.e., interest and other expense, net in the unaudited interim condensed consolidated statement of operations), and were $1.1$1.9 million and $0.8$1.1 million for the three months ended March 31, 2024, and 2023, respectively.
At March 31, 2024 and December 31, 2023, the right of use assets associated with finance leases, net was $56.1 million and $57.3 million, respectively. The accumulated depreciation for these right of use assets was $10.1 million and $9.0 million at March 31, 2024 and December 31, 2023, respectively.
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Other information related to the finance leases are presented in the following table:
| | | | | |
| Three months ended |
| Three months ended | ||
| March 31, 2024 | | March 31, 2023 | ||
Cash payments - operating cash flows (in thousands) | $ | 764 | | $ | 766 |
Cash payments - financing cash flows (in thousands) | $ | 2,272 | | $ | 2,059 |
Weighted average remaining lease term (years) | | 3.66 | | | 3.78 |
Weighted average discount rate | | 6.8% | | | 6.7% |
18.17. Finance Obligation
The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at March 31, 20232024 was $324.9$333.0 million, $59.9$75.7 million and $265.0$257.3 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 20222023 was $312.1$350.8 million, $55.4$74.0 million and $256.6$276.8 million of which was classified as short-term and long-term, respectively.respectively, on the unaudited interim condensed consolidated balance sheet. The amount is amortized using the effective interest method. Interest expense recorded related to finance obligations for the three months ended March 31, 2024 and 2023 was $10.0 million and 2022 was $9.2 million, and $6.7 million, respectively. The fair value of this finance obligation approximated the carrying value as of March 31, 2023 and December 31, 2022.
In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at March 31, 20232024 was $17.9$16.8 million, $3.5$9.5 million and $14.4$7.3 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 20222023 was $17.2$17.6 million, $3.5$10.0 million and $13.7$7.6 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheets. The fair value of this finance obligation approximated the carrying value as of March 31, 2023 and December 31, 2022.sheet.
Future minimum payments under finance obligations notes above as of March 31, 20232024 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | | | | Total | | | | | | | Total | ||||
| | Sale of future | | Sale/leaseback | | Finance | | Sale of Future | | Sale/Leaseback | | Finance | ||||||
|
| revenue - debt |
| financings |
| Obligations |
| Revenue - Debt |
| Financings |
| Obligations | ||||||
Remainder of 2023 | | $ | 70,471 | | $ | 3,591 | | $ | 74,062 | |||||||||
2024 | | | 93,961 | | | 10,589 | | | 104,550 | |||||||||
Remainder of 2024 | | $ | 82,353 | | $ | 9,924 | | $ | 92,277 | |||||||||
2025 | | | 88,705 | | | 1,686 | | | 90,391 | | | 104,547 | | | 2,229 | | | 106,776 |
2026 | | | 71,333 | | | 1,686 | | | 73,019 | | | 87,824 | | | 2,229 | | | 90,053 |
2027 | | | 54,831 | | | 1,686 | | | 56,517 | | | 71,253 | | | 2,229 | | | 73,482 |
2028 and thereafter | | | 44,364 | | | 1,955 | | | 46,319 | |||||||||
2028 | | | 51,188 | | | 2,015 | | | 53,203 | |||||||||
2029 and thereafter | | | 25,503 | | | 1,131 | | | 26,634 | |||||||||
Total future minimum payments | | | 423,665 | | | 21,193 | | | 444,858 | | | 422,668 | | | 19,757 | | | 442,425 |
Less imputed interest | | | (98,767) | | | (3,277) | | | (102,044) | | | (89,647) | | | (2,993) | | | (92,640) |
Total | | $ | 324,898 | | $ | 17,916 | | $ | 342,814 | | $ | 333,021 | | $ | 16,764 | | $ | 349,785 |
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Other information related to the above finance obligations are presented in the following table:
| | | | | |
| Three months ended | | Three months ended | ||
| March 31, 2024 | | March 31, 2023 | ||
Cash payments (in thousands) | $ | 28,660 | | $ | 24,311 |
Weighted average remaining term (years) | | 4.27 | | | 4.76 |
Weighted average discount rate | | 11.3% | | | 11.2% |
The fair value of the Company’s total finance obligations approximated their carrying value as of March 31, 2024 and December 31, 2023.
19.18. Commitments and Contingencies
Restricted Cash
In connection with certain of the above noted sale/leaseback agreements, cash of $445.2$552.8 million and $383.7$573.5 million was required to be restricted as security as of March 31, 20232024 and December 31, 2022,2023, respectively, which
26
restricted cash will be released over the lease term. As of March 31, 20232024 and December 31, 2022,2023, the Company also had certain letters of credit backed by security deposits totaling $363.2$351.8 million and $379.6$370.7 million, respectively, of which $340.5$321.0 million and $354.0$340.0 million are security for the above noted sale/leaseback agreements, respectively, and $22.7$30.8 million and $25.6$30.7 million are customs related letters of credit, respectively.
As of both March 31, 20232024 and December 31, 2022,2023, the Company had $75.5$76.9 million and $76.8 million held in escrow related to the construction of certain hydrogen plants.production plants, respectively.
The Company also had $5.0 million, $1.2 million and $1.8$0.2 million of consideration held by our paying agent in connection with each of the Applied Cryo, Joule and CIS acquisitions, respectively, reported as restricted cash as of March 31, 2023,2024, with a corresponding accrued liability on the Company’s unaudited interim condensed consolidated balance sheet. Additionally, the Company had $6.5$12.3 million and $10.8$11.7 million in restricted cash as collateral resulting from the Frames acquisition as of March 31, 20232024 and December 31, 2022,2023, respectively.
Litigation
Legal matters are defended and handled in the ordinary course of business. The outcome of any such matters, regardless of the merits, is inherently uncertain; therefore, assessing the likelihood of loss and any estimated damages is difficult and subject to considerable judgment. We describe below those legal matters for which a material loss is either (i) possible but not probable, and/or (ii) not reasonably estimable at this time. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company has not recorded any accruals related to any legal matters.
As previously disclosed, severalSecurities Litigation and Related Stockholder Derivative Litigation
2021 Securities Action and Related Derivative Litigation
Two actions were filedare pending in the U.S. District Courts for the Southern Districtwhich alleged stockholders of New York and for the Central District of California asserting claims under the federal securities laws against the Company assert claims derivatively, on the Company’s behalf, based on allegations and two of its senior officers, Mr. Marsh and Mr. Middleton. On July 22, 2021, the court consolidated those actions into claims that had been asserted in a putative securities class action, In re Plug Power, Inc. Securities Litigation, No. 1:21-cv-2004 pending in the U.S. District Court for the Southern District of New York(S.D.N.Y. (the “Securities“2021 Securities Action”) and appointed a lead plaintiff. On October 6, 2021, lead plaintiff filed a consolidated amended complaint asserting claims on behalf of a putative class composed of all persons who purchased or otherwise acquired the Company’s securities between November 9, 2020 and March 16, 2021 (the “Amended Complaint”). The Amended Complaint asserted a claim against all defendants for alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b5 promulgated thereunder and a claim under Section 20(a) of the Exchange Act against Mr. Marsh and Mr. Middleton as alleged controlling persons. The Amended Complaint alleged that defendants made “materially false” statements concerning (1) adjusted EBITDA; (2) fuel delivery and research and development expenses; (3) costs related to provision for loss contracts; (4) gross losses; and (5) the effectiveness of internal controls and procedures (the “accounting-related statements”), and that these alleged misstatements caused losses and damages for members of the alleged class. On December 6, 2021, defendants filed a motion to dismiss the Amended Complaint. In an opinion and order entered on September 29, 2022,in August 2023, the district court granted defendants’ motiondismissed the 2021 Securities Action with prejudice, and the plaintiffs in that action did not appeal.
A consolidated stockholder derivative action relating to dismiss the Amended Complaint in its entirety but permitted the lead plaintiff to further amend the complaint. On November 21, 2022, the lead plaintiff filed a second amended complaint purporting to assert claims under the same provisions against the same defendants on behalf of the same alleged class of purchasers of the Company’s securities (the “Second Amended Complaint”). The Second Amended Complaint largely repeated theand allegations in the Amended Complaint but, in addition, alleged that various public statements during the alleged class period were false or misleading because they allegedly failed to disclose the status of discussions and considerations relating to warrants to purchase the Company’s common stock that were granted to a customer in connection with a commercial agreement. The defendants filed a motion to dismiss the Second Amended Complaint in its entirety on January 12, 2023.
On March 31, 2021 Junwei Liu, an alleged Company stockholder, derivatively and on behalf of nominal defendant Plug, filed a complaintSecurities Action is pending in the U.S. District Court of Chancery for the Southern DistrictState of New York against certain Company directors and officers (the “Derivative Defendants”), captioned Liu v. Marsh et al., Case No. 1:21-cv-02753 (S.D.N.Y.) (the “LiuDelaware, styled In re Plug Power Inc. Stockholder Derivative Complaint”). The Liu Derivative Complaint alleges that, between November 9, 2020 and March 1, 2021, the Derivative Defendants “made, or caused the Company to make, materially false and misleading statements concerning Plug Power’s business, operations, and prospects” by “issu[ing] positive financial information and optimistic guidance, and made assurances that the Company’s internal controls were effective,” when, “[i]n reality, the Company’s internal controls suffered from material deficiencies that rendered them ineffective.” The Liu Derivative Complaint asserts claims for (1) breach of fiduciary duties, (2) unjust enrichment, (3) abuse of control, (4) gross mismanagement, (5) waste
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Litigation, Cons. C.A. No. 2022-0569-KSJM (Del. Ch.). By stipulation and order, the consolidated action was stayed until motions to dismiss were finally resolved in the 2021 Securities Action. On March 8, 2024, the alleged stockholder plaintiffs filed a consolidated amended complaint in which claims have been asserted against our officers Andrew J. Marsh, Paul B. Middleton, Gerard L. Conway, Jr., and Keith Schmid, and against our current or former directors George C. McNamee, Gary K. Willis, Maureen O. Helmer, Johannes M. Roth, Gregory L. Kenausis, Lucas Schneider, and Jonathan Silver. The Company is named as nominal defendant. Based on allegations in the first and second amended complaints in the 2021 Securities Action, the plaintiffs assert claims against the individual defendants for alleged breaches of corporate assets,fiduciary duty, disgorgement, and (6) contribution under Sections 10(b) and 21Dunjust enrichment based on alleged transactions in the Company’s securities while allegedly in possession of material non-public information concerning (i) the Exchange Act (asCompany’s financial accounting prior to the named officer defendants). The Liu Derivative Complaint seeks a judgment “[d]eclaring that Plaintiff may maintain this action on behalf of Plug”; “[d]eclaring that the [Derivative] Defendants have breached and/or aided and abetted the breach of their fiduciary duties”; “awarding to Plug Power the damages sustained by it as a result of the violations” set forth in the Liu Derivative Complaint, “together with pre-judgment and post-judgment interest thereon”; “[d]irecting Plug Power and the [Derivative] Defendants to take all necessary actions to reform and improve Plug Power’s corporate governance and internal procedures to comply with applicable laws”; and “[a]warding Plaintiff the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees, costs, and expenses”; and “[s]uch other and further relief as the [c]ourt may deem just and proper.”
On April 5, 2021, alleged Company stockholders Elias Levy and Camerohn X. Withers, derivatively and on behalf of nominal defendant Plug, filed a complaint in the U.S. District Court for the Southern District of New York against the Derivative Defendants named in the Liu Derivative Complaint, captioned Levy et al. v. McNamee et al., Case No. 1:21-cv-02891 (S.D.N.Y.) (the “Levy Derivative Complaint”). The Levy Derivative Complaint alleges that, from November 9, 2020 to April 5, 2021, the Derivative Defendants “breached their duties of loyalty and good faith” by failing to disclose “(1)announcement that the Company would be unableneed to timely file its 2020 annual report due to delays relatedrestate certain financial statements and (ii) the potential amendment and termination of a warrant agreement between the Company and a significant customer. Defendants’ responses to the review of classification of certain costs and the recoverability of the right to use assets with certain leases; (2) that the Company was reasonably likely to report material weaknesses in its internal control over financial reporting; and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.” The Levy Derivative Complaint asserts claims for (1) breach of fiduciary duty (as to the named director defendants), (2) unjust enrichment (as to certain named director defendants), (3) waste of corporate assets (as to the named director defendants), and (4) violations of Sections 10(b) and 21D of the Exchange Act (as to the named officer defendants). The Levy Derivative Complaint seeks a judgment “declaring that Plaintiffs may maintain this action on behalf of the Company”; finding the Derivative Defendants “liable for breaching their fiduciary duties owed to the Company”; directing the Derivative Defendants “to take all necessary actions to reform and improve the Company’s corporate governance, risk management, and internal operating procedures to comply with applicable laws”; “awarding damages to the Company for the harm the Company suffered as a result of Defendants’ wrongful conduct”; “awarding damages to the Company for [the named officer Derivative Defendants’] violations of Sections 10(b) and 21D of the Exchange Act”; “awarding Plaintiffs the costs and disbursements of this action, including attorneys’, accountants’, and experts’ fees”; and “awarding such other and further relief as is just and equitable.” The Liu Derivative Complaint and the Levy Derivative Complaint have been consolidated in In re Plug Power Derivative Litigation, Lead Case No. 1:21-cv-02753-ER and,complaint are due by stipulation approved by the Court, the cases have been stayed pending the resolution of the motion to dismiss in the Securities Class action.May 10, 2024.
On May 13, 2021, alleged Company stockholder Romario St. Clair derivatively and on behalf of nominal defendant Plug, filed a complaint in the Supreme Court of the State of New York, County of New York, asserting claims derivatively on behalf of the Company against certain current or former directors and officers of the derivative defendants named in the Liu derivative Complaint, captioned Company. The action is styled St. Clair v. Plug Power Inc. et al., Index No. 653167/2021 (N.Y. Sup. Ct., N.Y. Cty.)(. By stipulation and order, the “St. Clair Derivative Complaint”). The St. Clair derivative Complaintaction was stayed until motions to dismiss were finally resolved in the 2021 Securities Action. On March 25, 2024, the alleged stockholder plaintiff filed an amended complaint in which claims have been asserted against Mr. Marsh, Mr. Middleton, Mr. McNamee, Mr. Willis, Ms. Helmer, Mr. Kenausis, Mr. Roth, Mr. Schneider, and Mr. Silver, with the Company named as nominal defendant. As had been alleged in the 2021 Securities Action, the amended complaint alleges that for approximately two years from March 13, 2019 onwards, the company made a number of improper statements that “failed to disclose and misrepresented the following material, adverse facts, which the [derivative]individual defendants knew or consciously disregarded or were reckless in not knowing”, including: “(a) that the Company was experiencing known but undisclosed material weaknesses in its internal controls over financial reporting; (b)reporting and had made certain accounting errors later corrected in the Company was overstatingCompany’s financial restatement in 2021. The complaint further alleges that Mr. Marsh and Mr. Middleton engaged in transactions in the carrying amount of certain right of use assets and finance obligations associated with leases; (c) the Company was understating its loss accrual on certain service contracts; (d) the Company would need to take impairment charges relating to certain long-lived assets; (e) the Company was improperly classifying research and development costs versus costs of goods sold; and (f) the Company would be unable to file its annual Report for the 2020 fiscal year due toCompany’s securities before these errors.”issues were disclosed. The St. Clair Derivative Complaintplaintiff asserts claims for (1) breach of fiduciary and (2) unjust enrichment. The St. Clair Derivative Complaint seeks a judgment “foragainst the amount of damages sustained by the Company as a result of the defendants’ breaches of fiduciary duties and unjust enrichment”; “[d]irecting Plug Power to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws”;“[e]xtraordinary equitable and/or injunctive relief as permitted by law, equity, and state statutory provisions”; [a]warding to Plug Power restitution fromindividual defendants, and each of them, and ordering disgorgement of all profits, benefits, and other compensation obtained by the defendants”; [a]warding to plaintiff the costs and disbursements of the action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses”; and “[g]ranting such other and further relief as the
28
[c]ourt deems just and proper.” By stipulation approved by the Court, the case has been stayed pending the resolution of the motion to dismiss in the Securities Class action.
On June 13, 2022, alleged Company stockholder Donna Max, derivatively on behalf of the Company, as nominal defendant, filed afor breach of fiduciary and unjust enrichment. Defendants’ responses to the amended complaint are due by May 21, 2024.
2023 Securities Action and Related Derivative Litigation
A consolidated action is pending in the United States District Court for the District of Delaware asserting claims under the federal securities laws against the derivative defendants named in the Liu Derivative Complaint, captioned Max v. Marsh, et. al., Case No. 1:22-cv-00781(D. Del.) (the “Max Derivative Complaint”). The Max Derivative Complaint alleges that, for the years 2018, 2019Company and 2020, the defendants did not “assure that a reliable systemcertain of financial controls was in place and functioning effectively”; “failed to disclose errors in the Company's accounting primarily relating to (i) the reported book value of right of use assets and related finance obligations, (ii) loss accruals for certain service contracts, (iii) the impairment of certain long-lived assets, and (iv) the classification of certain expenses previously included in research and development costs”; and that certain defendants traded Company stock at “artificially inflated stock prices.” The Max Derivative Complaint asserts claims for (1) breach of fiduciary against all defendants; (2) breach of fiduciary duty for insider trading against certain defendants; and (3) contribution under Sections 10(b) and 21D of the Exchange Act against certain defendants. The Max Derivative Complaint seeks an award “for the damages sustained by [the Company]” and related relief. By stipulation approved by the Court, the case has been stayed pending the resolution of the motion to dismiss in the Securities Action.
On June 29, 2022, alleged Company stockholder Abbas Khambati, derivativelyits senior officers on behalf of the Company as nominal defendant, filed a complaint in the Courtputative class of Chancery in the State of Delaware against the derivative defendants named in the Liu Derivative Complaint and Gerard A. Conway, Jr. and Keith Schmid, captioned Khambati v. McNamee, et. al., C.A. No. 2022-05691(Del. Ch.) (the “Khambati Derivative Complaint”). The Khambati Derivative Complaint alleges that the defendants “deceive[d] the investing public, including stockholders of Plug Power, regarding the Individual Defendants’ management of Plug Power’s operations and the Company’s compliance with the SEC's accounting rules”; “facilitate[d” certain defendants’ sales of “their personally held shares while in possession of material, nonpublic information”; and “enhance[d] the Individual Defendants’ executive and directorial positions at Plug Power and the profits, power, and prestige that the Individual Defendants enjoyed as a result of holding these positions.” The Khambati Derivative Complaint asserts claims for (1) breach of fiduciary; and (2) disgorgement and unjust enrichment. The Khambati Derivative Complaint seeks an award “for the damages sustained by [the Company] as a result of the breaches” alleged or “disgorgement or restitution”; “disgorgement of insider trading profits” and “all profits, benefits and other compensation obtained by [defendants’] insider trading and further profits flowing therefrom”; an order “[d]irecting the Company to take all necessary actions to reform and improve its corporate governance and internal procedures”; and related relief.
On July 19, 2022, alleged Company stockholder Anne D. Graziano, as Trustee of the Anne D. Graziano Revocable Living Trust, derivatively on behalf of the Company as nominal defendant, filed a complaint in the Court of Chancery in the State of Delaware against the derivative defendants named in the Khambati Derivative Complaint, captioned Graziano v. Marsh, et. al., C.A. No. 2022-0629 (Del. Ch.) (the “Graziano Derivative Complaint”). The Graziano Derivative Complaint alleges that the director defendants (i) “either knowingly or recklessly issued or caused the Company to issue the materially false and misleading statements” concerning “certain critical accounting issues”; (ii) “willfully ignored, or recklessly failed to inform themselves of, the obvious problems with the Company’s internal controls, practices, and procedures, and failed to make a good faith effort to correct the problems or prevent their recurrence”; (iii) the members of the Audit Committee failed “to prevent, correct, or inform the Board of the issuance of material misstatements and omissions regarding critical accounting issues and the adequacypurchasers of the Company’s internal controls”; (iv) “received payments, benefits, stock options, and other emoluments by virtue of their membership on the Board and their control of the Company”; (v) violated the Company’s Code of Conduct because they knowingly or recklessly engaged in and participated in making and/or causing the Company to make the materially false and misleading statements; and (vi) certain defendants “sold large amounts of Company stock while it was trading at artificially inflated prices.” The Graziano Derivative Complaint asserts claims for (1) breach of fiduciary; (2) breach of fiduciary duty against certain defendants for insider trading; (3) unjust enrichment; (4) aiding and abetting breach of fiduciary duty; and (5) waste of corporate assets. The Graziano Derivative Complaint seeks an award of “the amount of damages sustained by the Company”; seeks an order “[d]irecting Plug Power to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect Plug Power and its stockholders from a repeat of the damaging events described herein”; and related relief. The parties to the Graziano Derivative Complaint and Khambati Derivative Complaint have been consolidated in securities, styled In re Plug Power, Inc. Stockholder DerivativeSecurities Litigation Consolidated C.A., No.
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2022-0569 and, by stipulation approved by the court, the cases have been stayed pending the resolution of the motion to dismiss 1:23-cv-00576-MN (the “2023 Securities Action”). The plaintiffs filed a consolidated complaint on September 28, 2023, in the Securities Action.
On April 12, 2023, an action was filed in the U.S. District Court for the District of Delaware assertingwhich they assert claims under the federal securities laws against the Company and four of its senior officers, Mr. Marsh, Mr. Middleton, Mr.Sanjay Shrestha, and former officer David Mindnich, and Mr. Hull, captioned Melton v. Plug Power Inc et al., Case No. 1:23-cv-00409 (D. Del.). The complaint asserts claims on behalf of a putative class composed of all persons who purchased or otherwise acquired the Company’s securitiespurchasers of Plug Power common stock between August 9,January 19, 2022 and March 1, 2023. The complaint asserted a claim against all defendants for alleged violations of Section 10(b) ofalleges that the Exchange Act and Rule 10b5 promulgated thereunder and a claim under Section 20(a) of the Exchange Act against Mr. Marsh, Mr. Middleton, Mr. Mindnich, and Mr. Hull as alleged controlling persons. The complaint alleged that defendants made “materially false and/or misleading statements” about the Company’s business and operations, including that “the Company was unable to effectively manage its supply chain and product manufacturing, resulting in reduced revenues and margins, increased inventory levels, and several large deals being delayed until at least 2023, among other issues.” Underissues The defendants filed a motion to dismiss the Private Securities Litigation Reform Actcomplaint on December 14, 2023, and briefing was completed in March 2024. All proceedings are stayed pending resolution of 1995, applicationsthe motion to serve as lead plaintiff(s) are due to be filed on or before June 12, 2023.dismiss.
As previously disclosed, two lawsuitsBeginning on September 13, 2023, three separate actions were filed in the U.S. District Court for the District of Delaware and in the U.S. District Court for the Southern District of New York asserting claims derivatively and on behalf of the Company against certain former and current Company officers and directors based on the claims asserted in the 2023 Securities Action. Those cases have been consolidated in the District of Delaware under the caption In re Plug Power, Inc. Stockholder Deriv. Litig., No. 1:23-cv-01007-MN (D. Del.). The defendants named in the constituent complaint were Mr. Marsh, Mr. Middleton, Mr. Mindnich, Martin Hull, Ms. Helmer, Mr. Kenausis, Mr. McNamee, Mr. Schneider, Mr. Silver, Mr. Willis, and current or former directors Jean Bua, Kavita Mahtani, and Kyungyeol Song. In an order entered on April 26, 2024, the Court approved the parties’ stipulation to stay all proceedings until motions to dismiss have been resolved in the 2023 Securities Action.
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2024 Securities Litigation
On March 22, 2024, Ete Adote filed a complaint in the United States District Court for the Northern District of New York asserting claims under the federal securities laws against the Company, Mr. Marsh, and other companiesMr. Middleton, on behalf of an alleged class of purchasers of Plug common stock between May 9, 2023 and January 16, 2024, styled Adote v. Plug Power, Inc. et al., No. 1:24-cv-00406-MAD-DJS (N.D.N.Y.). The allegations in the 9th2024 Securities Action are substantially similar to those in the consolidated 2023 Securities Action but cover a different putative class period that extends into 2024. On April 30, 2024, a second complaint asserting substantially similar claims against the same defendants, but on behalf of a putative class of purchasers of Plug Power common stock between March 1, 2023 and January 16, 2024, was filed in the Northern District Court, Rapides Parish, Louisiana, arising from the previously disclosed May 2018 accident involving a forklift powered by the Company's fuel cell at a Procter & Gamble facility in Louisiana. Additional defendants included Structural Composite Industries, Deep South Equipment Company, Air Products and Chemicals Inc., Hyster-Yale Group. Westport Industries and Quality Thermistor, Inc. The first suit,of New York, styled Lott, et alLee v. Plug Power, et al,al. was filed by a number of individual plaintiffs alleging personal injury claims. Procter & Gamble intervened in that suit to recover workers compensation benefits paid to or for the employees/dependents. Procter & Gamble filed a separate suit for property damage, business interruption. The Company aggressively defended both lawsuits. The Lott case was settled in April 2022 on terms that were extremely favorable for the company. An agreement to settle the separate P&G suit was recently reached, also on terms that are extremely favorable for the Company. Both settlements are funded by the Company's commercial liability insurer, and the amounts are substantially below the policy limits., No. 1:24;cv-0598-MAD-DJS (N.D.N.Y.).
Other Litigation
On May 2, 2023, a lawsuit entitled Jacob Thomas and JTurbo Engineering & Technology, LLC.LLC v. Joule Processing, LLC.LLC and Plug Power Inc., Case No. 4:23-cv-01615, was filed in the United States District Court for the Southern District of Texas against the Company.Joule Processing, LLC and Plug Power Inc. The complaint alleges misappropriation of trade secrets under both the federal Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836, and the Texas Uniform Trade Secrets Act, three breach of contract claims, tortand four common law claims and a claim for unfair competition under Texas law. On December 5, 2023, the Court granted, in part, the partial motion to dismiss filed by Joule Processing, LLC and Plug Power Inc., and the Court dismissed with prejudice one of the breach of contract claims and the four common law claims. The Company finds all allegationsCourt also transferred another of the breach of contract claims to be lackingthe United States District Court for the Northern District of New York, Case No. 1:23-cv-01528. That claim was dismissed without prejudice, and that matter was closed on April 4, 2024. Currently pending before the United States District Court for the Southern District of Texas is Plaintiff[s’] Verified Amended Application for Temporary Restraining Order, Preliminary Injunction and Permanent Injunctive Relief (the “Amended Application for Injunctive Relief”). Joule Processing, LLC and Plug Power Inc. filed their Response in substanceOpposition to the Amended Application for Injunctive Relief on March 27, 2024, and merit. As appropriate,Jacob Thomas and JTurbo Engineering & Technology, LLC filed their Reply in Support of the Amended Application for Injunctive Relief on April 4, 2024.
On May 10, 2023, an action entitled Ringling v. Plug Power, Inc., et al, Case No. 1:23-cv-572, was filed in the U.S. District Court for the Northern District of New York asserting claims pursuant to 42 U.S.C. § 1981, Title VII of the Civil Rights Act of 1964, and the New York State Human Rights Law against the Company, Tom Rourke, individually, and/or Tom O’Grady, individually. The complaint asserts that the plaintiff is seeking damages to redress injuries suffered as a result of harassment and discrimination on the basis of his race, together with creating a hostile work environment, failure to promote, retaliation, and constructive discharge. The parties entered into a settlement agreement and filed a stipulation of dismissal.
On July 24, 2023, an action entitled Felton v. Plug Power, Inc., Case No. 1:23-cv-887, was filed in the U.S. District Court for the Northern District of New York asserting claims against the Company pursuant to the New York State Human Rights Law. The complaint asserts that the plaintiff is seeking damages to redress injuries suffered as a result of harassment and discrimination on the basis of his race, together with creating a hostile work environment, and retaliation. Plug disagrees with plaintiff’s representations about his time at Plug and intends to vigorously defend itself against his allegations. Plaintiff’s counsel moved to withdraw from the plaintiffscase, which the court approved on March 18, 2024, and exercise all recourse available in a court of law. therefore plaintiff is now pro se.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, restricted cash and accounts receivable and marketable securities.receivable. Cash and restricted cash are maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $0.3 million.$250 thousand. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s available-for-sale securities consists primarily of investments in U.S. Treasury securities and short-term high credit quality corporate debt securities. Equity securities are comprised of fixed income and equity market index mutual funds.
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Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.
At March 31, 2023, one customer2024, three customers comprised 10%approximately 30.3% of the totalCompany’s consolidated accounts receivable balance. At December 31, 2022,2023, one customer comprised approximately 24.9%21.5% of the totalCompany’s consolidated accounts receivable balance.
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For purposes of assigning a customer to a sale/leaseback transaction completed with a financial institution, the Company considers the end user of the assets to be the ultimate customer. For the three months ended March 31, 2023, 25.5%2024, two customers accounted for 44.2% of total consolidated revenues were associated with two customers.revenues. For the three months ended March 31, 2022, 67.0%2023, two customers accounted for 25.5% of total consolidated revenues were associated with five customers.revenues.
Guarantee
On May 30, 2023, our joint venture, HyVia, entered into a government grant agreement with Bpifrance. As part of the agreement, our wholly-owned subsidiary, Plug Power France, was required to issue a guarantee to Bpifrance in the amount of €20 million through the end of January 2027. Plug Power France is liable to the extent of the guarantee for sums due to Bpifrance from HyVia under the agreement based on the difference between the total amount paid by Bpifrance and the final amount certified by HyVia and Bpifrance. As part of the agreement, there are certain milestones that HyVia is required to meet, and the nonperformance of these milestones or termination of this agreement could result in this guarantee being called upon. As of March 31, 2024, no payments related to this guarantee have been made by the Company and Plug Power France did not record a liability for this guarantee as the likelihood of the guarantee being called upon is remote.
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, take or pay contracts and service agreements. For certain vendors, the Company’s unconditional obligation to purchase a minimum quantity of raw materials at an agreed upon price is fixed and determinable; while certain other raw material costs will vary due to product forecasting and future economic conditions.
Future payments under non-cancelable unconditional purchase obligations with a remaining term in excess of one year as of March 31, 2024, were as follows (in thousands):
| | | |
Remainder of 2024 |
| $ | 37,742 |
2025 | | | 8,023 |
2026 | | | 8,023 |
2027 | | | 2,638 |
2028 | | | — |
2029 and thereafter | | | — |
Total | | | 56,426 |
20.19. Employee Benefit Plans
2011 and 2021 Stock Option and Incentive Plan
The Company has issued stock-based awards to employees and members of its Board of Directors (the “Board”) consisting of stock options and restricted stock and restricted stock unit awards. The Company accounts for all stock-based awards to employees and members of the Board as compensation costs in the consolidated financial statements based on their fair values measured as of the date of grant. These costs are recognized over the requisite service period. Stock-based compensation costs recognized, excluding the Company’s matching contributions of $3.0$3.2 million to the Plug Power Inc.
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401(k) Savings & Retirement Plan and quarterly Board compensation, were $40.2$10.4 million and $40.8$40.2 million for the three months ended March 31, 20232024 and March 31, 2022,2023, respectively. The methods and assumptions used in the determination of the fair value of stock-based awards are consistent with those described in our 20222023 Form 10-K.
The components and classification of stock-based compensation expense, excluding the Company’s matching contributions to the Plug Power Inc. 401(k) Savings & Retirement Plan and quarterly Board compensation, were as follows (in thousands):
| | | | | | | | | | | |
| | Three months ended | Three months ended | ||||||||
|
| March 31, 2023 |
| March 31, 2022 | March 31, 2024 | | March 31, 2023 | ||||
Cost of sales | | $ | 2,677 | | $ | 1,798 | $ | 2,006 | | $ | 2,677 |
Research and development | | | 2,283 | | | 1,722 | | 2,342 | | | 2,283 |
Selling, general and administrative | | | 35,221 | | | 37,248 | | 6,023 | | | 35,221 |
| | $ | 40,181 | | $ | 40,768 | $ | 10,371 | | $ | 40,181 |
Option Awards
The Company issues options that are time and performance-based awards. All option awards are determined to be classified as equity awards.
Service Stock Options Awards
The following table reflects the service stock option activity for the three months ended March 31, 2023:2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| Weighted |
| | |
| |
| |
| Weighted |
| | | ||||
| | | | | Weighted | | Average | | | | | | | Weighted | | Average | | | | ||||
| | | | | Average | | Remaining | | Aggregate | | | | Average | | Remaining | | Aggregate | ||||||
| | | | | Exercise | | Contractual | | Intrinsic | | | | Exercise | | Contractual | | Intrinsic | ||||||
|
| Shares |
| Price |
| Terms |
| Value | | Shares | | Price | | Terms | | Value | |||||||
Options outstanding at December 31, 2022 | | $ | 12,078,269 | | $ | 14.34 | | $ | 7.57 | | $ | 42,835 | |||||||||||
Options outstanding at December 31, 2023 | | 17,336,362 | | $ | 11.37 | | | 7.86 | | $ | 11,391 | ||||||||||||
Options exercisable at December 31, 2023 | | 8,288,944 | | | 11.84 | | | 6.18 | | | 7,250 | ||||||||||||
Options unvested at December 31, 2023 | | 9,047,418 | | | 10.94 | | | 9.39 | | | 4,141 | ||||||||||||
Granted | | | 94,550 | | | 15.44 | | | | | | | | 313,000 | | | 3.28 | | | — | | | — |
Exercised | | | (124,269) | | | 5.43 | | | | | | | | (20,000) | | | 2.10 | | | — | | | — |
Forfeited | | | (89,017) | | | 22.97 | | | | | | | | (920,300) | | | 19.42 | | | — | | | — |
Options outstanding at March 31, 2023 | | $ | 11,959,533 | | $ | 14.38 | | $ | 7.34 | | $ | 38,278 | |||||||||||
Options exercisable at March 31, 2023 | | | 6,879,596 | | | 9.71 | | | 6.24 | | | 37,976 | |||||||||||
Options unvested at March 31, 2023 | | $ | 5,079,937 | | $ | 20.70 | | $ | 8.83 | | $ | 302 | |||||||||||
Options outstanding at March 31, 2024 | | 16,709,062 | | $ | 10.79 | | | 7.60 | | $ | 3,858 | ||||||||||||
Options exercisable at March 31, 2024 | | 8,334,755 | | | 11.93 | | | 5.90 | | | 3,792 | ||||||||||||
Options unvested at March 31, 2024 | | 8,374,307 | | $ | 9.65 | | | 9.29 | | $ | 66 | ||||||||||||
The weighted average grant-dategrant date fair value of the service stock options granted during the three months ended March 31, 2024 and 2023 was $2.41 and 2022 was $10.48, and $15.34, respectively. The total intrinsic fair value of service stock options exercised during the three months ended March 31, 2024 and 2023 was $30 thousand and 2022 was $1.3 million, respectively. The total fair value of the service stock options that vested during the three months ended March 31, 2024 and $1.12023 was approximately $6.1 million and $7.5 million, respectively. The
Compensation cost associated with service stock options represented approximately $6.9 million and $8.2 million of the total share-based payment expense recorded for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there was approximately $40.7 million of unrecognized compensation cost related to service stock option awards to be recognized over the weighted average remaining period of 1.99 years.
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total fair value of the service stock options that vested during the three months ended March 31, 2023 and 2022 was approximately $7.5 million and $5.6 million, respectively.
Compensation cost associated with service stock options represented approximately $8.2 million and $5.9 million of the total share-based payment expense recorded for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and 2022, there was approximately $51.4 million and $47.0 million, respectively, of unrecognized compensation cost related to service stock option awards to be recognized over the weighted average remaining period of 1.94 years.
Performance Stock Option Awards
The following table reflects the Performance Stock Optionperformance stock option award activity for the three monthmonths ended March 31, 2023.2024. Solely for the purposes of this table, the number of performance options is based on participants earning the maximum number of performance options (i.e. 200% of the target number of performance options):
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|
| |
| |
| Weighted |
| | |
| |
| |
| Weighted |
| | | ||
| | | | Weighted | | Average | | | | | | | Weighted | | Average | | | | ||
| | | | Average | | Remaining | | Aggregate | | | | Average | | Remaining | | Aggregate | ||||
| | | | Exercise | | Contractual | | Intrinsic | | | | Exercise | | Contractual | | Intrinsic | ||||
|
| Shares |
| Price |
| Terms |
| Value | | Shares | | Price | | Terms | | Value | ||||
Options outstanding at December 31, 2022 | | 15,520,000 | | $ | 26.87 | | 5.81 | | $ | — | ||||||||||
Options exercisable at December 31, 2022 | | 1,391,000 | | | 26.92 | | 5.73 | | | — | ||||||||||
Options unvested at December 31, 2022 | | 14,129,000 | | $ | 26.86 | | 5.82 | | $ | — | ||||||||||
Options outstanding at March 31, 2023 | | 15,520,000 | | $ | 26.87 | | 5.57 | | $ | — | ||||||||||
Options exercisable at March 31, 2023 | | 1,391,000 | | | 26.92 | | 5.48 | | | — | ||||||||||
Options unvested at March 31, 2023 | | 14,129,000 | | $ | 26.86 | | 5.58 | | $ | — | ||||||||||
Options outstanding at December 31, 2023 | | 21,925,000 | | $ | 21.32 | | 5.27 | | $ | — | ||||||||||
Options exercisable at December 31, 2023 | | 2,782,000 | | | 26.9 | | 4.7 | | | — | ||||||||||
Options unvested at December 31, 2023 | | 19,143,000 | | | 20.50 | | 5.35 | | | — | ||||||||||
Granted | | — | | | — | | — | | | — | ||||||||||
Exercised | | — | | | — | | — | | | — | ||||||||||
Forfeited | | (2,250,000) | | | — | | — | | | — | ||||||||||
Options outstanding at March 31, 2024 | | 19,675,000 | | $ | 21.44 | | 4.95 | | $ | — | ||||||||||
Options exercisable at March 31, 2024 | | 2,782,000 | | | 26.92 | | 4.48 | | | — | ||||||||||
Options unvested at March 31, 2024 | | 16,893,000 | | $ | 20.54 | | 5.03 | | $ | — | ||||||||||
There were noThe weighted average grant-date fair value of the performance stock options granted during the three months ended March 31, 2024 and 2023 or 2022.was $0, respectively. There were no performance stock options exercised during the three months ended March 31, 20232024 or 2022. There were no2023. The total fair value of the performance stock options that vested was $0 during the three months ended March 31, 2024 and 2023, or 2022.
As of March 31, 2023, there were 2,782,000 unvested stock options for which the employee requisite service period has not been rendered but are expected to vest. The aggregate intrinsic value of these unvested stock options is $0 as of March 31, 2023. The weighted average remaining contractual term of these unvested stock options was 5.48 years as of March 31, 2023.respectively.
Compensation cost associated with performance stock options represented approximately $17.4($6.1) million and $25.1$17.4 million of the total share-based payment expense recorded for the three months ended March 31, 2024 and 2023, and 2022, respectively. Compensation cost for the three months ended March 31, 2024 includes non-cash reversals due to forfeitures of unvested performance stock options of ($15.2) million during the period. The non-cash compensation expense reversals were offset by compensation costs of $9.1 million during the three months ended March 31, 2024. As of March 31, 2023,2024, there was approximately $53.1$21.0 million of unrecognized compensation cost related to performance stock option awards to be recognized over the weighted average remaining period of 1.631.38 years.
As of March 31, 2024, there were 3,904,333 unvested performance stock options for which the employee requisite service period had not been rendered but were expected to vest. The aggregate intrinsic value of these unvested performance stock options was $0 as of March 31, 2024. The weighted average exercise price of these unvested performance stock options was $14.66 and the weighted average remaining contractual term was 5.54 years as of March 31, 2024.
Restricted Common Stock and Restricted Stock Unit Awards
The Company recorded expense associated with its restricted common stock and restricted stock unit awards of approximately $14.6 million and $9.8 million forfollowing table reflects the three months ended March 31, 2023 and 2022, respectively. Additionally, as of March 31, 2023, there was $95.5 million of unrecognized compensation cost related to restricted stock and restricted common stock unit awards to be recognized over the weighted average period of 1.98 years. As of March 31, 2022, there was $83.7 million of unrecognized compensation cost related to restricted common stock and restricted stock unit awards to be recognized over the weighted average period of 2.1 years.
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A summary of restricted stock and restricted stock unit activity for the three months ended March 31, 2023 is as follows2024 (in thousands except share amounts):
| | | | | | | | | | | | | | | | |
|
| |
| Weighted |
| Aggregate |
| | | Weighted |
| Aggregate | ||||
| | | | Average Grant Date | | Intrinsic | | | | Average Grant Date | | Intrinsic | ||||
|
| Shares | | Fair Value |
| Value | | Shares | | Fair Value | | Value | ||||
Unvested restricted common stock and restricted stock units at December 31, 2022 | | 6,276,376 | | $ | 21.56 | | $ | 77,639 | ||||||||
Unvested restricted stock and restricted stock units at December 31, 2023 | | 6,732,884 | | $ | 15.66 | | $ | 30,298 | ||||||||
Granted | | 94,550 | | | 15.44 | | | — | | 17,000 | | | 5.23 | | | — |
Vested | | (409,431) | | | 32.97 | | | — | | (230,675) | | | 28.42 | | | — |
Forfeited | | (73,482) | | | 22.70 | | | — | | (604,353) | | | 18.69 | | | — |
Unvested restricted common stock and restricted stock units at March 31, 2023 | | 5,888,013 | | $ | 20.65 | | $ | 67,968 | ||||||||
Unvested restricted stock and restricted stock units at March 31, 2024 | | 5,914,856 | | $ | 14.82 | | $ | 20,347 | ||||||||
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The weighted average grant-date fair value of the restricted common stock and restricted stock unit awards granted during the three months ended March 31, 2024 and 2023 was $5.23 and 2022, was $15.44, and $23.86, respectively. The total fair value of restricted shares of common stock and restricted stock unit awards that vested for the three months ended March 31, 2024 and 2023 was $6.6 million and 2022 was $13.5 million, respectively.
Compensation cost associated with restricted common stock and $3.9restricted stock unit awards represented approximately $9.6 million and $14.6 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there was $63.3 million of unrecognized compensation cost related to restricted stock and restricted common stock unit awards to be recognized over the weighted average period of 1.85 years.
Included in the total unvested restricted common stock and restricted stock units as of March 31, 2024, there were 375,000 restricted common stock units outstanding with a performance target. The Company recorded expense associated with the restricted common stock units with a performance target of $0.6 million for the three months ended March 31, 2024. As of March 31, 2024 there was $2.5 million of unrecognized compensation cost related to the restricted common stock units outstanding with a performance target to be recognized over the weighted average period of 2.33 years.
401(k) Savings & Retirement Plan
The Company issued 219,970895,258 shares of common stock and 96,539219,970 shares of common stock pursuant to the Plug Power Inc. 401(k) Savings & Retirement Plan during the three months ended March 31, 20232024 and 2022,2023, respectively.
The Company’s expense for this plan was approximately $3.0$3.2 million and $2.2$3.0 million for the three months ended March 31, 20232024 and 2022,2023, respectively.
Non-Employee Director Compensation
The Company granted 10,31653,598 shares of common stock and 3,29010,316 shares of common stock to non-employee directors as compensation for the three months ended March 31, 20232024 and 2022,2023, respectively. All common stock issued is fully vested at the time of issuance and is valued at fair value on the date of issuance. The Company’s share-based compensation expense in connection with non-employee director compensation was approximately $0.1$0.2 million and $0.1 million for the three months ended March 31, 20232024 and 2022,2023, respectively.
21.20. Accrued Expenses
Accrued expenses at March 31, 20232024 and December 31, 20222023 consisted of (in thousands):
| | | | | | | | | | | | |
| | March 31, | | December 31, |
| March 31, |
| December 31, | ||||
|
| 2023 |
| 2022 | | 2024 | | 2023 | ||||
Accrued payroll and compensation related costs | | $ | 19,887 | | $ | 18,231 | | $ | 24,193 | | $ | 32,584 |
Accrual for capital expenditures | | | 31,346 | | | 53,089 | | | 48,072 | | | 83,781 |
Accrued accounts payable | | | 93,532 | | | 53,899 | | | 63,435 | | | 64,767 |
Accrued sales and other taxes | | | 9,718 | | | 15,112 | | | 17,738 | | | 17,207 |
Accrued interest | | | 2,271 | | | 421 | | | 969 | | | 562 |
Accrued other | | | 11,000 | | | 15,678 | | | 407 | | | 1,643 |
Total | | $ | 167,754 | | $ | 156,430 | | $ | 154,814 | | $ | 200,544 |
22.21. Segment and Geographic Area Reporting
Our organization is managed from a sales perspective based on the basis of “go-to-market” sales channels, emphasizing shared learning across end userend-user applications and common supplier/vendor relationships. These sales channels are structured to serve a range of customers for our products and services. As a result of this structure, we concluded that we have one operating and reportable segment — the design, development and sale of hydrogen products and solutions that help customers meet their business goals while decarbonizing their operations. Our chief executive officer was identified as the chief operating decision maker (CODM). All significant operating decisions made by management are largely based
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have one operating and reportable segment — the design, development and sale of fuel cells and hydrogen producing equipment. Our chief executive officer was identified as the chief operating decision maker (CODM). All significant operating decisions made by management are largely based upon the analysis of Plug Power Inc. on a total company basis.basis, including assessments related to our incentive compensation plans.
| | | | | | | | | | | | |
| | Revenues | | Long-Lived Assets as of | ||||||||
| | Three Months Ended | | Three Months Ended | ||||||||
|
| March 31, 2023 |
| March 31, 2022 |
| March 31, 2023 |
| December 31, 2022 | ||||
| | | | | | | | | | | | |
North America | | $ | 161,807 | | $ | 113,678 | | $ | 1,382,681 | | $ | 1,209,900 |
Europe | | | 40,153 | | | — | | | 18,459 | | | 13,215 |
Asia | | | 3,255 | | | — | | | — | | | — |
Other | | | 5,071 | | | 27,126 | | | — | | | — |
Total | | $ | 210,286 | | $ | 140,804 | | $ | 1,401,140 | | $ | 1,223,115 |
The revenue and long-lived assets based on geographic location are as follows (in thousands):
| | | | | | | | | | | |
| Revenues | | Long-Lived Assets | ||||||||
| Three months ended | | As of | ||||||||
| March 31, 2024 | | March 31, 2023 | | March 31, 2024 | | December 31, 2023 | ||||
North America | $ | 105,914 | | $ | 161,807 | | $ | 1,904,277 | | $ | 1,881,315 |
Europe | | 8,571 | | | 40,153 | | | 108,869 | | | 122,489 |
Asia | | 5,074 | | | 3,255 | | | — | | | — |
Other | | 705 | | | 5,071 | | | 1,286 | | | 884 |
Total | $ | 120,264 | | $ | 210,286 | | $ | 2,014,432 | | $ | 2,004,688 |
22. Related Party Transactions
HyVia
Our 50/50 joint venture, HyVia, manufactures and sells fuel cell powered electric light commercial vehicles (“FCE-LCVs”) and supplies hydrogen fuel and fueling stations to support the FCE-LCV market, in each case primarily in Europe. For the three months ended March 31, 2024 and 2023, we recognized related party total revenue of $3.1 million and $3.8 million, respectively. As of March 31, 2024 and December 31, 2023, we had related party outstanding accounts receivable of $2.8 million and $2.3 million, respectively.
SK Plug Hyverse
Our 49/51 joint venture, SK Plug Hyverse, aims to provide hydrogen fuel cell systems, hydrogen fueling stations, electrolyzers and clean hydrogen to the Korean and other selected Asian markets. For the three months ended March 31, 2024 and 2023, we recognized related party total revenue of $3.4 million and $0.2 million, respectively. As of March 31, 2024 and December 31, 2023, we had related party outstanding accounts receivable of $4.3 million and $1.7 million, respectively.
23. Restructuring
In February 2024, in a strategic move to enhance our financial performance and ensure long-term value creation in a competitive market, we approved a comprehensive initiative that encompasses a broad range of measures, including operational consolidation, strategic workforce adjustments, and various other cost-saving actions (the “Restructuring Plan”). These measures are aimed at increasing efficiency, improving scalability, and maintaining our leadership position in the renewable energy industry. We began executing the Restructuring Plan in February 2024 and expect the Restructuring Plan to be completed in the second half of 2024, subject to local law and consultation requirements.
The determination of when we accrue for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. We account for involuntary termination benefits that are provided pursuant to one-time benefit arrangements in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”) whereas involuntary termination benefits that are part of an ongoing written or substantive plan are accounted for in accordance with ASC 712, Nonretirement Postemployment Benefits. We accrue a liability for termination benefits under ASC 420 in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, we accrue a liability for termination benefits under ASC 712 when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. The restructuring charges that have been incurred but not yet paid are recorded in accrued expenses and other current liabilities in our unaudited interim condensed consolidated balance sheets, as they are expected to be paid within the next twelve months.
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During the three months ended March 31, 2024, we incurred $6.0 million in restructuring costs recorded as severance expenses of $5.2 million, and other restructuring costs of $0.8 million in the restructuring financial statement line item in the unaudited interim condensed consolidated statement of operations. We expect to incur another $1.1 million in restructuring costs in subsequent quarters, which are primarily related to severance expenses, and are expected to be incurred during the third quarter of 2024. The actual timing and amount of costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.
Severance expense recorded during the three months ended March 31, 2024 in accordance with ASC 420 was a result of the separation of full-time employees associated with the Restructuring Plan. As of March 31, 2024, $0.8 million of accrued severance-related costs were included in accrued expenses in our unaudited interim condensed consolidated balance sheets and are expected to be paid during the third quarter of 2024. Other costs are represented by (1) $0.2 million of legal and professional services costs, and (2) $0.6 million of other one-time employee termination benefits. As of March 31, 2024, $0.1 million of accrued other costs were included in accrued expenses in our unaudited interim condensed consolidated balance sheets and are expected to be paid during the third quarter of 2024.
24. Subsequent Events
We have evaluated events asCommon Stock At Market Issuance Sales Agreement
From March 31, 2024 through the date of May 9, 2023 and have not identified any subsequent events.filing of the Quarterly Report on Form 10-Q, the Company sold 55,801,292 shares of common stock at a weighted-average sales price of $2.65 per share for gross proceeds of $147.8 million with related issuance costs of $2.6 million.
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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our accompanying unaudited interim condensed consolidated financial statements and notes thereto included within this Quarterly Report on Form 10-Q, and our audited and notes thereto included in our 20222023 Form 10-K. In addition to historical information, this Quarterly Report on Form 10-Q and the following discussion contain statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases, you can identify these statements by forward-looking words such as “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “plan,”“believe”, “could”, “continue”, “estimate”, “expect”, “forecast”, “intend”, “may”, “should”, “will”, “would”, “plan”, “project” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:
| ● | the anticipated benefits and actual savings and costs resulting from the implementation of the Restructuring Plan that was announced in February 2024; |
| ● | our ability to achieve our business objectives and to continue to meet our obligations, which is dependent upon our ability to maintain a certain level of liquidity and will depend in part on our ability to manage our cash flows, including successfully implementing our cost savings initiatives; |
| ● | the risk that we continue to incur losses and might never achieve or maintain profitability; |
| ● | the risk that we will need to raise additional capital to fund our operations and such capital may not be available to us; |
| ● | the risk that we may not be able to expand our business or manage our future growth effectively; |
| ● | the risk of loss related to an inability to remediate the material weaknesses identified in internal control over financial reporting as of December 31, 2023 or inability to otherwise maintain an effective system of internal control over financial reporting; |
| ● | the risk that delays in or not completing our product development and hydrogen plant construction goals may adversely affect our revenue and profitability; |
| ● | the risk that we may not be |
| ● | our ability to achieve the forecasted revenue and costs on the sale of our products; |
| ● | the risk that we may not be able to convert all of our estimated future revenue into revenue and cash flows; |
| ● | the risk that purchase orders may not ship, be installed and/or converted to revenue, in whole or in part; |
| ● | the risk that some or all of the recorded intangible assets and property, plant, and equipment could be subject to impairment; |
| ● | the risks associated with global economic uncertainty, including inflationary pressures, fluctuating interest rates, currency fluctuations, and supply chain disruptions; |
| ● | the risk of |
| ● | the risk that our lack of extensive experience in manufacturing and marketing of certain of our products may impact our ability to manufacture and market said products on a profitable and large-scale commercial basis; |
| ● | the risk that a sale or issuance of a significant number of shares of stock could depress the market price of our common stock; |
| ● | the risk |
| ● | the risk that negative publicity related to our business or stock could result in a negative impact on our stock value and profitability; |
| ● | our ability to leverage, attract and retain key personnel; |
| ● | the risk of increased costs associated with legal proceedings and legal compliance; |
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| ● | the risk that a loss of one or more of our major customers, or the delay in payment or the failure to pay receivables by one of our major customers, could have a material adverse effect on our financial condition; |
| ● | the risk of potential losses related to any contract disputes; |
| ● | the risk of potential losses related to any product liability |
| ● | the cost and timing of developing, marketing, and selling our products; |
| ● | the risks involved with participating in joint ventures, including our ability or inability to execute our strategic growth plan through joint ventures; |
| ● | our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers; |
| ● | the cost and availability of fuel and fueling infrastructures for our products; |
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| ● | the risk that our convertible senior notes, if settled in cash, could have a material adverse effect on our financial results; |
| ● | the risk that our convertible note hedges may affect the value of our convertible senior notes and our common stock; |
| ● | the risks related to the use of flammable fuels in our products; |
| ● | the risks, liabilities, and costs related to environmental, health, and safety matters; |
| ● | market acceptance of our products and services; |
| ● | our ability to establish and maintain relationships with third parties with respect to product development, manufacturing, distribution, and servicing, and the supply of key product components; |
| ● | the risk that we may be unable to successfully pursue, integrate, or execute upon our new business ventures; |
| ● | the cost and availability of components and parts for our products; |
| ● | the risk that possible new tariffs could have a material adverse effect on our business; |
| ● | our ability to develop commercially viable products; |
| ● | our ability to reduce product and manufacturing costs; |
| ● | our ability to successfully market, distribute and service our products and services internationally; |
| ● | our ability to improve system reliability for our products; |
| ● | competitive factors, such as price competition and competition from other traditional and alternative energy companies; |
| ● | our ability to protect our intellectual property; |
| ● | the |
| ● | the cost of complying with current and future federal, state and international governmental regulations; |
| ● | the risks associated with past and potential future acquisitions; |
| ● | the risks associated with geopolitical instability, including the |
| ● | the volatility of our stock price. |
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks discussed in the section titled “Risk Factors” included under Part I, Item 1A, in our 20222023 Form 10-K and supplemented by Part II, Item 1A of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from these contained in any forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. These forward-looking statements speak only as of the date on which the statements were made. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.
References in this Quarterly Report on Form 10-Q to “Plug,”“Plug”, the “Company,” “we,”“Company”, “we”, “our” or “us” refer to Plug Power Inc., including as the context requires, its subsidiaries.
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Overview
Plug is facilitating the paradigm shift to an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell solutions.
While we continue to develop commercially viable hydrogen and fuel cell product solutions, we have expanded our offerings to support a variety of commercial operations that can be powered with greenclean hydrogen. We provide electrolyzers that allow customers — such as refineries, producers of chemicals, steel, fertilizer and commercial refueling stations — to generate hydrogen on-site. on-site. We are focusing our efforts on (a) industrial mobility applications, including electric forklifts and electric industrial vehicles, at multi-shiftmulti shift high volume manufacturing and high throughput distribution sites where we believe our products and services provide a unique combination of productivity, flexibility, and environmental benefits; (b) production of hydrogen; and (c) stationary power systems that will support critical operations, such as data centers, microgrids, and generation facilities, in either a backup power or continuous power role, and replace batteries, diesel generators or the grid for telecommunication logistics, transportation, and utility customers; and (c) production of hydrogen.customers. Plug expects to support these products and customers with an ecosystem of vertically integrated products that produce, transport, store and handle, dispense, and use hydrogen for mobility and power applications.
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Our current productsproduct and services include:service portfolio includes:
GenDriveGenDrive: : GenDrive is our hydrogen fueled Proton Exchange Membrane (“PEM”)PEM fuel cell system, providing power to material handling electric vehicles (“EVs”), including Class 1, 2, 3 and 6 electric forklifts, Automated Guided Vehicles,automated guided vehicles, and ground support equipment.
GenFuelGenSure: : GenFuel is our liquid hydrogen fueling delivery, generation, storage, and dispensing system.
GenCare: GenCare is our ongoing “Internet of Things”-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products and ProGen fuel cell engines.
GenSure: GenSure is our stationary fuel cell solution providing scalable, modular PEM fuel cell power to support the backup and grid-support power requirements of the telecommunications, transportation, and utility sectors; our GenSure High Power Fuel Cell Platform will supportsupports large scale stationary power and data center markets.
GenKeyProgen: : Progen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans. This includes Plug’s membrane electrode assembly (“MEA”), a critical component of the fuel cell stack used in zero-emission fuel cell EV engines.
GenFuel: GenFuel is our liquid hydrogen fueling, delivery, generation, storage, and dispensing system.
GenCare: GenCare is our ongoing “Internet of Things”-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products and Progen fuel cell engines.
GenKey: GenKey is our vertically integrated “turn-key” solution combining either GenDrive or GenSure fuel cell power with GenFuel fuel and GenCare aftermarket service, offering complete simplicity to customers transitioning to fuel cell power.
ProGenElectrolyzers: : ProGen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans. This includes Plug’s membrane electrode assembly, a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle engines.
Electrolyzers: The design and implementation of 55MW and 10MW electrolyzer systems that are modular, scalable hydrogen generators optimized for clean hydrogen production. Electrolyzers generate hydrogen from water using electricity and a special membrane and “green” hydrogen is generated by using renewable energy inputs, such as solar or wind power.
Liquefaction SystemsSystems: : Plug’s 15 ton-per-day and 30 ton-per-day liquefiers are engineered for high efficiency, reliability, and operational flexibility — providing consistent liquid hydrogen to customers. This design increases plant reliability and availability while minimizing parasitic losses like heat leak and seal gas losses.
Cryogenic Equipment: EngineeredEngineered equipment including trailers and mobile storage equipment for the distribution of liquified hydrogen, oxygen, argon, nitrogen and other cryogenic gases.
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Liquid Hydrogen: Liquid hydrogen provides an efficient fuel alternative to fossil-based energy. We produce liquid hydrogen through our electrolyzer systems and liquefaction systems. Liquid hydrogen supply will be used by customers in material handling operations, fuel cell electric vehicle fleets, and stationary power applications.
We provide our products and solutions worldwide through our direct sales force, and by leveraging relationships with original equipment manufacturers (“OEMs”) and their dealer networks. We arePlug is currently targeting Asia, Australia, Europe, Middle East and North America for expansion in adoption. The European Union (the “EU”) has rolled out ambitious targets for the hydrogen economy, as part ofwith the EU strategy for energy integrationUnited Kingdom also taking steps in this direction, and we arePlug is seeking to execute on our strategy to become one of the European leaders in the hydrogen economy. This includes a targeted account strategy for material handling, securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. Our global strategy includes leveraging a network of integrators or contract manufacturers. Additionally, we have a joint venture with Niloco Hydrogen Holdings LLC, a wholly-owned subsidiary of Olin named “Hidrogenii”.Plug has been successful with acquisitions, strategic partnerships and joint ventures, and we plan to continue this mix.
Part of our long-term plan includes Plug penetrating the European and Asian hydrogen market, on-road vehicle market, and large-scale stationary market. Plug’s formation of joint ventures with HyVia and AccionaPlug in Europe and SK Plug Hyverse in Asia not only support this goal but are expected to provide us with a more global footprint.
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We manufacture our commercially viable products in Latham, New York,York; Rochester, New York,York; Slingerlands, New York,York; Houston, Texas,Texas; Lafayette, Indiana,Indiana; and Spokane, Washington, and support liquid hydrogen production and logistics in Charleston, Tennessee and Kingsland, Georgia.
Recent Developments
Cyber-security
In or around March 2023, an unauthorized actor accessed our computer network and executed a ransomware attack, resulting in the encryption of certain of our computer systems, including systems used to store proprietary and confidential data, and exfiltration of limited data sets. Upon detection, we took immediate steps to contain, assess and remediate the incident, including engaging outside legal counsel and external forensic investigators. Necessarily, the Company has incurred costs in addressing the incident, including related to investigation, containment, restoration, and remediation. As a result of the unauthorized access, the Company’s employees experienced interruption of access to the internal network, which created temporary disruption of certain internal operations and automated processes. As of the date of the filing of this Quarterly Report on Form 10-Q, the Company has restored the affected systems and throughout this restoration period the Company’s business remained fully operational with no material disruption. Based on information available to date, we do not believe the ransomware event has had a material impact on our business.
COVID-19 Update
The COVID-19 pandemic caused significant transportation challenges for global suppliers and while we expect that these challenges will lessen over time, we continue to take proactive steps through our supply chain team to limit the impact of any such challenges on our business and we continue to work closely with our suppliers and transportation vendors to ensure availability of products and implement other cost savings initiatives.
Inflation, Material Availability and Labor Shortages
Most components essential to our business are generally available from multiple sources; however, we believe there are some component suppliers and manufacturing vendors, particularly those that supply materials in very limited supply worldwide, whose loss to us could have a material adverse effect upon our business and financial condition. We are mitigating these potential risks by introducing alternate system architectures that we expect will allow us to diversify our supply chain with multiple fuel cell, electrolyzer stack and air supply component vendors. In addition, we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components and localized manufacturing when feasible. We are also working closely with these vendors and other key suppliers on coordinated product introduction plans, product and sales forecasting, strategic inventories, and internal and external manufacturing schedules and levels; however, changes to our products designs or incorrect forecasting could present challenges to those strategies despite best efforts in leveraging supplier relationship and capabilities. Recent cost pressures from global energy prices and inflation have negatively impacted access to our key raw materials. In cases where we have single sourced suppliers (typically due to new technology and products) or there have been worldwide shortages due to global demand, we have worked to engineer alternatives in our product design or develop new supply sources while covering short- and medium-term risks with supply contracts, building up inventory, and development partnerships. However, if we, or the industry or economy at large, were to experience a recession and the demand for our product decreases, then we may have a large stock of pre-purchased inventory that could be unused and aging for a period of time.
In January 2023, the Company entered into a strategic partnership with Johnson Matthey Hydrogen Technologies Limited, a subsidiary of Johnson Matthey PLC and a global leader in sustainable technologies (“JM”), pursuant to which JM will supply the Company catalyst coated membrane for use in the production of fuel cells as well as catalysts and membranes for use in the production of electrolyzers. In addition, the Company and JM intend to develop their existing and new technology and commercial products and co-invest in a manufacturing facility in the United States.
Additionally, we have observed an increasingly competitive labor market. Tight labor markets have resulted in labor inflation and longer times to fill open positions. Increased employee turnover, changes in the availability of our
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workers as well as labor shortages in our supply chain have resulted in, and could continue to result in, increased costs which could negatively affect our component or raw material purchasing abilities, and, in turn, our financial condition, results of operations, or cash flows.
Results of Operations
Our primary sources of revenue are from sales of fuel cell systems,equipment, related infrastructure and equipment,other, services performed on fuel cell systems and related infrastructure, Power Purchase Agreements (PPAs),power purchase agreements, and fuel delivered to customers.customers and related equipment. A certain portion of our sales result from acquisitions in legacy markets, which we are working to transition to renewable solutions. Revenue from sales of fuel cell systems,equipment, related infrastructure and equipmentother represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and on road storage, hydrogen liquefaction systems, electrolyzers and hydrogen fueling infrastructure. Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. Revenue from PPAspower purchase agreements primarily representsrepresent payments received from customers who make monthly payments to access the Company’s GenKey solution. Revenue associated with fuel delivered to customers and related equipment represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site.at our hydrogen production plant.
Provision for Common Stock Warrants
On August 24, 2022, the Company and Amazon entered into the 2022 Transaction Agreement, under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, thea warrant (the “2022 Amazon Warrant”) to acquire up to 16,000,000 shares (the “2022 Amazon Warrant to acquireShares”) of the Amazon Warrant Shares,Company’s common stock, par value $.01 per share (the “common stock”), subject to certain vesting events described below. The Company andbelow under “Common Stock Transactions – Amazon entered into the 2022 Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.2022”.
In 2017, in separate transactions, the Company issued a warrant to each of Amazon.com NV Investment Holdings LLC and Walmart Inc. (“Walmart”) warrants to purchase up to 55,286,696 shares of the Company’s common stock.stock, subject to certain vesting events described below under “Common Stock Transactions – Amazon Transaction Agreement in 2017” and “Common Stock Transactions – Walmart Transaction Agreement”. The Company recorded a portion of the estimated fair value of the warrants as a reduction of revenue based upon the projected number of shares of common stock expected to vest under the warrants, the proportion of purchases by Amazon, Walmart and their affiliates within the period relative to the aggregate purchase levels required for vesting of the respective warrants, and the then-current fair value of the warrants. For the third tranche of the shares under Walmart’s warrant, the exercise price will be determined once the second tranche vests. For the third tranche of the Amazon Warrant Shares, see below for the exercise price and measurement dates used.
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The amount of provision for common stock warrantsthe Amazon and Walmart Warrants recorded as a reduction of revenue forduring the three months ended March 31, 20232024 and 2022,2023, respectively, is shown in the table below (in thousands):
| | | | | | | | | | | | |
| | Three months ended |
| Three months ended | ||||||||
| | March 31, | | March 31, 2024 |
| March 31, 2023 | ||||||
|
| 2023 |
| 2022 | ||||||||
Sales of fuel cell systems, related infrastructure and equipment | | $ | (434) | | $ | (17) | ||||||
Sales of equipment, related infrastructure and other | | $ | (2,267) | | $ | (434) | ||||||
Services performed on fuel cell systems and related infrastructure | |
| (374) | |
| (150) | |
| (448) | |
| (374) |
Power purchase agreements | |
| (7,185) | |
| (974) | |
| (1,074) | |
| (7,185) |
Fuel delivered to customers | |
| (6,182) | |
| (711) | ||||||
Fuel delivered to customers and related equipment | |
| (706) | |
| (6,182) | ||||||
Total | | $ | (14,175) | | $ | (1,852) | | $ | (4,495) | | $ | (14,175) |
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Net revenue, cost of revenue, gross profit profit/(loss) and gross margin margin/(loss) percentage for the three months ended March 31, 20232024 and 20222023 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | | | | | | | | | | Cost of |
| Gross |
| Gross | | ||
| | Three Months Ended | Net Revenue | | Revenue | | Profit/(Loss) | | Margin/(Loss) |
| |||||||||||||
| | | March 31, | | |||||||||||||||||||
| | | | | Cost of |
| Gross |
| Gross | | |||||||||||||
|
| Net Revenue |
| Revenue |
| Profit/(Loss) |
| Margin |
| ||||||||||||||
For the period ended March 31, 2023: | | | | | | | | | | | | | |||||||||||
For the year ended March 31, 2024: | | | | | | | | | | | | ||||||||||||
Sales of equipment, related infrastructure and other | | $ | 182,094 | | $ | 158,320 | | $ | 23,774 |
| 13.1 | % | $ | 68,295 | | $ | 135,125 | | $ | (66,830) |
| (97.9) | % |
Services performed on fuel cell systems and related infrastructure | |
| 9,097 | |
| 12,221 | |
| (3,124) |
| (34.3) | % |
| 13,023 | |
| 12,957 | |
| 66 |
| 0.5 | % |
Provision for loss contracts related to service | | | — | | | 6,889 | | | (6,889) | | N/A | | | — | | | 15,745 | | | (15,745) | | N/A | |
Power purchase agreements | |
| 7,937 | |
| 46,816 | |
| (38,879) |
| (489.8) | % |
| 18,304 | |
| 55,228 | |
| (36,924) |
| (201.7) | % |
Fuel delivered to customers and related equipment | |
| 10,142 | |
| 54,501 | |
| (44,359) |
| (437.4) | % |
| 18,286 | |
| 58,573 | |
| (40,287) |
| (220.3) | % |
Other | |
| 1,016 | |
| 935 | |
| 81 |
| 8.0 | % |
| 2,356 | |
| 1,711 | |
| 645 |
| 27.4 | % |
Total | | $ | 210,286 | | $ | 279,682 | | $ | (69,396) |
| (33.0) | % | $ | 120,264 | | $ | 279,339 | | $ | (159,075) |
| (132.3) | % |
For the period ended March 31, 2022: | | | | | | | | | | | | | |||||||||||
For the year ended March 31, 2023: | | | | | | | | | | | | ||||||||||||
Sales of equipment, related infrastructure and other | | $ | 108,847 | | $ | 88,828 | | $ | 20,019 |
| 18.4 | % | $ | 182,094 | | $ | 158,320 | | $ | 23,774 |
| 13.1 | % |
Services performed on fuel cell systems and related infrastructure | |
| 8,240 | |
| 13,875 | |
| (5,635) |
| (68.4) | % |
| 9,097 | |
| 12,221 | |
| (3,124) |
| (34.3) | % |
Provision for loss contracts related to service | | | — | | | 2,048 | | | (2,048) | | N/A | | | — | | | 6,889 | | | (6,889) | | N/A | |
Power purchase agreements | |
| 10,037 | |
| 31,753 | |
| (21,716) |
| (216.4) | % |
| 7,937 | |
| 46,816 | |
| (38,879) |
| (489.8) | % |
Fuel delivered to customers and related equipment | |
| 13,429 | |
| 39,272 | |
| (25,843) |
| (192.5) | % |
| 10,142 | |
| 54,501 | |
| (44,359) |
| (437.4) | % |
Other | |
| 251 | |
| 377 | |
| (126) |
| (50.2) | % |
| 1,016 | |
| 935 | |
| 81 |
| 8.0 | % |
Total | | $ | 140,804 | | $ | 176,153 | | $ | (35,349) |
| (25.1) | % | $ | 210,286 | | $ | 279,682 | | $ | (69,396) |
| (33.0) | % |
Net Revenue
Revenue – sales of equipment, related infrastructure and other. Revenue from sales of equipment, related infrastructure and other represents revenue from the salesales of our fuel cells, such as GenDrive units, and GenSure stationary backup power units, as well ascryogenic stationary and on road storage, hydrogen liquefaction systems, electrolyzers and hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzer stacks and systems, and other equipment such as liquefiers and cryogenic storage equipment.installations. Revenue from sales of equipment, related infrastructure and other for the three months ended March 31, 2023 increased $73.22024 decreased $113.8 million, or 67.3%62.5%, to $182.1$68.3 million from $108.9$182.1 million for the three months ended March 31, 20222023. The revenue related to electrolyzers decreased $38.7 million, primarily due to increasesa decrease in revenue related1MW electrolyzer stack sales during the three months ended March 31, 2024 compared to hydrogen site installations, liquefiers, cryogenic equipment, and electrolyzer stacks and systems.the three months ended March 31, 2023. The increasedecrease in hydrogen infrastructure revenue of $21.8$36.6 million was due to 14three hydrogen site installations for the three months ended March 31, 20232024 compared to seven14 for the three months ended March 31, 2022. The increase in the2023. Additionally, revenue related tofrom cryogenic storage equipment and liquefiers of $38.4decreased $25.2 million was due to an increase in sales of liquefiers, as well as an increase in revenue of $11.1 million due to the acquisition of CIS in which there was no revenue recognized in the first quarter of 2022. Revenue related to electrolyzers increased $36.0 million, which was due to increased volume of 62 one megawatt equivalent units sold for the three months ended March 31, 20232024 primarily due to a slower rate of progress on existing projects as they near completion compared to 2 one megawatt equivalent unitsthe rate of progress for three months ended March 31, 2023. The decrease in revenue related to fuel cell systems of $9.8 million was due to the mix of class types sold forduring the three months ended March 31, 2022. Partially offsetting these increases was2024 as well as a decrease in revenue relatedhigher concentration of direct sales compared to GenDrives of $8.3 million, as the number of units decreased from 1,229 for the three months ended March 31, 2022 to 1,035 for the three months ended March 31, 2023 due to timing of site deployments, as well as2023. Additionally, there was a decrease in revenue of $14.2$3.5 million related to thedecreased sales of engineered oil and gas equipment from anthe Frames acquisition, thatfor which sales are not expected to continue beyond current commitments. Additionally,Included in the above, there was aan increase in the provision for common stock warrants recorded as a reduction of $0.4revenue, which increased to $2.3 million and $17 thousand for the three months ended March 31, 2023 and 2022, respectively.2024 compared to $0.4 million for the three months ended March 31, 2023.
Revenue – services performed on fuel cell systems and related infrastructure. Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned primarily on our service and maintenance contracts as well asand sales of spare parts. At March 31, 2023, there were 20,154 fuel cell units and 95 hydrogen installations under extended maintenance contracts, an increase from 19,409 fuel cell units and 84 hydrogen installations at March 31,
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2022. Revenue from services performed on fuel cell systems and related infrastructure for the three months ended March 31, 20232024 increased $0.9$3.9 million, or 10.4%43.2%, to $9.1$13.0 million as compared to $8.2from $9.1 million for the three months ended
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March 31, 2022.2023. The increase in revenue from services performed on fuel cell systems and related infrastructure was primarily related to the increase in number of units in service, with the number of GenDrive units under maintenance contracts during the three months ended March 31, 2024 of 21,948 compared to 20,154 for the three months ended March 31, 2023, compared to 2022 was primarily related to our expanding customer base and growth within our current customer base.coupled with an increase in service rates negotiated with certain customers.
Revenue – Power Purchase Agreements.power purchase agreements. Revenue from PPAsPower Purchase Agreements (“PPAs”) represents payments received from customers for power generated through the provision of equipment and service. At March 31, 2023, there were 117 GenKey sites associated with PPAs, as compared to 77 at March 31, 2022. Revenue from PPAs for the three months ended March 31, 2023 decreased $2.12024 increased $10.4 million, or 20.9%130.6%, to $7.9$18.3 million from $10.0$7.9 million for the three months ended March 31, 2022.2023. The decreaseincrease in revenue was primarily due toa result of an increase in the number of units and customer sites party to these agreements. There were 32,026 GenDrive units under PPA arrangements during the three months ended March 31, 2024 compared to 28,253 during the three months ended March 31, 2023. In addition, there were 146 hydrogen sites under PPA arrangements during the three months ended March 31, 2024 compared to 117 during the three months ended March 31, 2023. Also, both pricing rates and mix of units to new customer sites were favorable in the first quarter of 2024 compared to the first quarter of 2023. In addition, there was a decrease in the provision for common stock warrants recorded as a reduction of revenue, which went from $1.0decreased to $1.1 million for the three months ended March 31, 20222024 compared to $7.2 million for the three months ended March 31, 2023. Partially offsetting the increase in provision for common stock warrants was an increase in revenue from PPAs for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily attributable to the new sites for existing customers and new customers accessing the PPA solution. All of the new PPA sites in the first quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
Revenue – fuel delivered to customers and related equipment. Revenue associated with fuel and related equipment delivered to customers and related equipment represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site.at our hydrogen production plant. Revenue associated with fuel delivered to customers for the three months ended March 31, 2023 decreased $3.32024 increased $8.1 million, or 24.5%80.3%, to $10.1$18.3 million from $13.4$10.1 million for the three months ended March 31, 2022.2023. The decreaseincrease in revenue was primarily due to an increasea decrease in the provision for common stock warrants recorded as a reduction of revenue, which went fromdecreased to $0.7 million for the three months ended March 31, 20222024 compared to $6.2 million for the three months ended March 31, 2023. Partially offsetting the increase in provision for common stock warrantsAdditionally, there was an increase in revenue due to an increase in the number of sites with fuel contracts, from 159with 253 sites receiving fuel delivery as of March 31, 20222024 compared to 210 sites as of March 31, 2023. All of the new fuel sites in the first quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
Cost of Revenue
Cost of revenue – sales of equipment, related infrastructure and other. Cost of revenue from sales of equipment, related infrastructure and other includes direct materials, labor costs, and allocated overhead costs related to the manufacture of our fuel cells such as GenDrive units and GenSure stationary backupback-up power units, cryogenic stationary and on road storage, and electrolyzers, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzer stacks and systems, and other equipment such as cryogenic storage equipment and liquefiers.installations. Cost of revenue from sales of fuel cell systems,equipment, related infrastructure and equipmentother for the three months ended March 31, 2023 increased 78.2%2024 decreased $23.2 million, or 14.7%, or $69.5to $135.1 million tofrom $158.3 million, compared to $88.8 million for the three months ended March 31, 2022.2023. The increase in hydrogen infrastructure cost of revenue of $13.8related to hydrogen infrastructure decreased $17.9 million was due to 14the decrease in the number of hydrogen site installations, with three hydrogen site installations for the three months ended March 31, 20232024 compared to seven14 for the three months ended March 31, 2022. The increase in cryogenic storage equipment of $31.0 million was due to an increase in costs related to the sales of liquefiers, as well as an increase in the cost of revenue of $10.0 million due to the acquisition of CIS in which there were no costs of revenue recognized in the first quarter of 2022.2023. The cost of revenue related to electrolyzer stacks and systems increased $32.8decreased $14.8 million, which was due to 62 one megawatt1MW equivalent units sold for the three months ended March 31, 20232024 compared to 2 one megawatt62 1MW equivalent units sold for the three months ended March 31, 2022.2023. The decrease in cryogenic storage equipment and liquefiers cost of revenue related to GenDrives increased $4.9of $13.6 million as the number of units decreased from 1,229 for the three months ended March 31, 20222024 is primarily due to 1,035a slower rate of progress on existing projects as they near completion compared to the rate of progress for the three months ended March 31, 2023. Additionally, there was a decrease in cost of revenue of $1.9 million related to decreased sales of engineered equipment from the Frames acquisition, for which sales are not expected to continue beyond current commitments. Partially offsetting these increases is a decreasedecreases was an increase in the cost of $12.9 millionrevenue related to fuel cell systems of $25.0 million due to an increase in the legacy oilvolume of GenDrive units sold, with 1,298 units sold for the three months ended March 31, 2024 compared to 1,035 units sold for the three months ended March 31, 2023. Gross loss generated from sales of equipment, related infrastructure and gas contracts. Grossother was (97.9%) for the three months ended March 31, 2024 compared to a gross margin decreased toof 13.1% for the three months ended March 31, 2023, compared to 18.4% for the three months ended March 31, 2022.2023. The decrease infrom gross margin to gross loss was primarily due to ramp up of coststo: customer mix, lower margins on new product offerings, for high power stationary unitsinventory valuation adjustments and electrolyzers as well as an increasedecline in volume due to timing of deployments which impacted leveraging of labor and overhead in the provision for common stock warrants. The provision for common stock warrants was $0.4 million and $17 thousand for the three months ended March 31, 2023 and 2022, respectively.first quarter of 2024.
Cost of revenue – services performed on fuel cell systems and related infrastructure. Cost of revenue from services performed on fuel cell systems and related infrastructure includes the labor, material costs and allocated overhead
4140
costs incurred for our product service and hydrogen site maintenance contracts and spare parts. At March 31, 2023, there were 20,154 fuel cell units and 95 hydrogen installations under extended maintenance contracts, an increase from 19,409 fuel cell units and 84 hydrogen installations at March 31, 2022, respectively. Cost of revenue from services performed on fuel cell systems and related infrastructure for the three months ended March 31, 2023 decreased 11.9%2024 increased $0.7 million, or 6.0%, or $1.7to $13.0 million tofrom $12.2 million, compared to $13.9 million for the three months ended March 31, 2022.2023. The increase in cost of revenue was primarily due to the increase in number of units and sites in service. There were 21,948 fuel cell units and 106 hydrogen installations under extended maintenance contracts as of March 31 2024, an increase from 20,154 fuel cell units and 95 hydrogen installations as of March 31, 2023. Gross margin increased to 0.5% for the three months ended March 31, 2024 compared to gross loss decreased toof (34.3%) for the three months ended March 31, 2023, compared2023. The increase in gross margin was primarily due to (68.4%) foran increase in negotiated rates discussed above, as well as an increase in the release of the loss accrual during the three months ended March 31, 2022. The decrease in cost of revenue and improvement in gross loss are both due primarily due to cost down and quality related initiatives.2024.
Cost of revenue – provision for loss contracts related to service. The Company also recorded a provision for loss contracts related to service of $15.7 million for the three months ended March 31, 2024 compared to $6.9 million for the three months ended March 31, 2023, compared2023. The Company increased the provision due to $2.1 million forcontinued cost and inflationary increases of labor, parts and related overhead coupled with the three months ended March 31, 2022,timing of the remaining period of service required. Accordingly, the Company increased its estimated projected costs to service fuel cell systems and related primarily to new service contracts entered into during the first quarter of 2023.infrastructure.
Cost of revenue – Power Purchase Agreementspower purchase agreements. Cost of revenue from PPAs includes depreciation of assets utilized and service costs to fulfill PPA obligations and interest costs associated with certain financial institutions for leased equipment. At March 31, 2023, there were 117 GenKey sites associated with PPAs, as compared to 77 at March 31, 2022. Cost of revenue from PPAs for the three months ended March 31, 20232024 increased 47.4%$8.4 million, or 18.0%, or $15.1 million, to $46.8$55.2 million from $31.8$46.8 million for the three months ended March 31, 2022 due to the2023. The increase in cost was primarily a result of an increase in units and sites under PPA contractcontracts as well as increased freight costs. There were 32,026 GenDrive units under PPA arrangements during the three months ended March 31, 2024 compared to 28,253 during the three months ended March 31, 2023. In addition, there were 146 hydrogen sites under PPA arrangements during the three months ended March 31, 2024 compared to 117 during the three months ended March 31, 2023. Gross loss increaseddecreased to (201.7%) for the three months ended March 31, 2024 compared to (489.8%) for the three months ended March 31, 2023, as compared to (216.4%) for the three months ended March 31, 20222023. The decrease in gross loss was primarily due to theimproved pricing and mix of units as well as a decrease in provision for common stock warrants of $7.2 million for the three months ended March 31, 2023 compared to $1.0 million for the three months ended March 31, 2022.warrants.
Cost of revenue – fuel delivered to customers and related equipment. Cost of revenue from fuel delivered to customers and related equipment represents the purchase of hydrogen from suppliers and internally produced hydrogen that is ultimately is sold to customers and costs for onsite generation.customers. Cost of revenue from fuel delivered to customers for the three months ended March 31, 20232024 increased 38.8%$4.1 million, or 7.5%, or $15.2 million, to $54.5$58.6 million from $39.3$54.5 million for the three months ended March 31, 2022.2023. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, inefficiencies in fueling systems, and higherincreased logistics costs to cover the hydrogen network while our Georgia plant was ramping to full production. There were 253 sites receiving fuel costs. The grossdelivery as of March 31, 2024 compared to 210 sites as of March 31, 2023. Gross loss increaseddecreased to (220.3%) during the three months ended March 31, 2024 compared to (437.4%) during the three months ended March 31, 2023, compared to (192.5%) during the three months ended March 31, 2022,2023. The decrease in gross loss was primarily due to the increase in cost of revenue described above, as well as a reduction of revenue resulting from an increase in thelower provision for common stock warrants of $6.2 million and $0.7 million for the three months endedperiod ending March 31, 2023 and 2022, respectively.2024 compared to 2023.
Expenses
Research and development expense. Research and development (“R&D”) expense includes:expenses include: materials to build development and prototype units, cash and non-cash stock-based compensation and benefits for the engineering and related staff, expenses for contract engineers, fees paid to consultants for services provided, materials and supplies consumed, facility related costs such as computer and network services, and other general overhead costs associated with our research and development activities.
Research and development expense for the three months ended March 31, 2023 increased $6.12024 decreased $1.2 million, or 29.7%4.5%, to $26.5$25.3 million from $20.5$26.5 million for the three months ended March 31, 2022.2023. The overall growthdecrease was primarily related to a decrease in R&D investment is commensurate with the Company’s future expansion into new markets, new product lines, acquisitions and varied vertical integrations.component materials.
Selling, general and administrative expenses. Selling, general and administrative expenses includesinclude cash and non-cash stock-based compensation, benefits, amortization of intangible assets and related costs in support of our general corporate functions, including general management, finance and accounting, human resources, selling and marketing, information
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technology and legal services.
Selling, general and administrative expenses for the three months ended March 31, 2023, increased $23.12024 decreased $26.1 million, or 28.6%25.1%, to $104.0$78.0 million from $80.9$104.0 million for the three months ended March 31, 2022. This2023. The decrease was primarily due to a decrease in stock compensation of $29.2 million, of which $17.2 million was related to forfeitures resulting from the Restructuring Plan announced in February 2024.
Restructuring. Expenses related to the Restructuring Plan for the three months ended March 31, 2024 was $6.0 million. The increase was due to severance and benefits related to the Restructuring Plan the Company announced in February 2024.
Impairment. Impairment for the three months ended March 31, 2024 decreased $0.8 million, or 73.8%, to $0.3 million from $1.1 million for the three months ended March 31, 2023. The decrease was primarily related to increased headcount, which resulted in increased salaries and stock-based compensation.the Company recording a lower impairment charge on long-lived assets during the three months ended March 31, 2024.
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ContingentChange in fair value of contingent consideration. The change in fair value of the contingent consideration is related to earnouts for the Joule, Frames, Giner ELX, Inc., United Hydrogen Group Inc., Frames, Applied Cryo and JouleUHG acquisitions. The change in fair value of contingent consideration for the three months ended March 31, 2024 and 2023 was $(9.2) million and $8.8 million, respectively. The decrease was primarily due to changes in assumptions related to future earnout payments due primarily to renegotiated agreements during the passage of time and settlement of the Applied Cryo earnout, which is expected to be paid in the secondfirst quarter of 2023.2024.
Interest income. Interest income primarily consists of income generated by our investment holdings, restricted cash escrow accounts, and money market accounts. Interest income for the three months ended March 31, 2023 increased $15.62024 decreased $8.3 million as compared to the three months ended March 31, 2022.2023. The increasedecrease during the three months ended March 31, 2024 compared to March 31, 2023 was primarily relateddue to the increase in interest ratesmaturities and sale of the Company’s available-for-sale portfolio of higher-yielding U.S. treasury securities during 2023.
Interest expense. Interest expense consists of interest expense related to our long-term debt, convertible senior notes, obligations under finance leases and our finance obligations. Interest expense for the three months ended March 31, 20232024 was commensurate with interest expense for the three months ended March 31, 2023.
Other expense, net. Other expense, net primarily consists of gains and losses related to energy contracts and foreign currency. Other expense, net for the three months ended March 31, 2024 increased $2.0$2.2 million compared to the three months ended March 31, 2022,2023. The increase was primarily relateddue to a decrease in capitalized interest, offset by an increase in finance obligations.
Realized loss on investments, net. Realized loss on investments, net consists of the sales related to available-for-sale debt securities. For the three months ended March 31, 2022, the Company had a loss of $0.8 million of net realized loss on investments, compared to $0 for the three months ended March 31, 2023. foreign currency losses.
Change in fair value of equity securities. Change in fair value of equity securities consists of the changes in fair value for equity securities from the purchase date to the end of the period. The change in fair value of equity securities improved $10.2was $0 for the three months ended March 31, 2024 compared to a gain of $5.1 million for the three months ended March 31, 2023 from March 31, 2022.2023. The decrease in the change in fair value of equity securities is due to the Company selling its remaining equity securities during the fourth quarter of 2023.
Loss on equity method investments. Loss on equity method investments consists of our interest in HyVia, which is our 50/50 joint venture with Renault, AccionaPlug, S.L., which is our 50/50 joint venture with Acciona, and SK Plug Hyverse, which is our 49/51 joint venture with SK E&S.&S, and Clean H2 Infra Fund. For the three months ended March 31, 2023,2024, the Company recorded a loss of $5.3$13.1 million on equity method investments.investments compared to a loss of $5.3 million for the three months ended March 31, 2023. These losses are driven from the start-up activities for commercial and production operations.operations of the aforementioned investments.
Loss on extinguishment of debt. Loss on extinguishment of debt arises from the difference between the net carrying amount of the Company’s debt and the fair value of the assets transferred to extinguish the debt. For the three months ended March 31, 2024, the Company recorded a loss of $14.0 million on extinguishment of debt. These losses are driven from the exchange of $138.8 million in aggregate principal amount of the Company’s 3.50% Convertible Senior Notes for $140.4 million in aggregate principal amount of the Company’s new 7.00% Convertible Senior Notes during the first quarter of 2024.
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Income Taxes
The Company recorded $1.3$0.2 million of income tax expense and $0.4$1.3 million of income tax benefit for the three months ended March 31, 2024 and 2023, and 2022, respectively. The income tax expense for the three months ended March 31, 2024 was due to an incremental change to the valuation allowance recorded in foreign jurisdictions. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its domestic net deferred tax assets, which remain fully reserved.reserved, and its valuation allowances recorded in foreign jurisdictions.
The domestic net deferred tax asset generated from the Company’s net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carry forwardcarryforward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
The Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion and Profit Shifting has proposed a global minimum corporate tax rate of 15% on multi-national corporations, commonly referred to as the Pillar Two rules that has been agreed upon in principle by over 140 countries. Numerous foreign countries have enacted legislation to implement the Pillar Two rules, effective beginning January 1, 2024, or are expected to enact similar legislation. As of March 31, 2024, the Company did not meet the consolidated revenue threshold and is not subject to the GloBE Rules under Pillar Two. The Company will continue to monitor the implementation of rules in the jurisdictions in which it operates.
Liquidity and Capital Resources
Liquidity
As of March 31, 20232024 and December 31, 2022,2023, the Company had $474.9$172.9 million and $690.6$135.0 million, respectively, of cash and cash equivalents and $898.4 million and $858.7 million$1.0 billion of restricted cash, respectively. Additionally, the Company had $1.0 billion and $1.3 billion of available-for-sale securities as of March 31, 2023 and December 21, 2022, respectively.cash.
The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses of $206.6$295.8 million and $156.5$206.6 million for the three months ended March 31, 20232024 and 2022,2023, respectively, and had an accumulated deficit of $3.3$4.8 billion atas of March 31, 2023.2024.
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The net cash used in operating activities for the three months ended March 31, 2024 and 2023 and 2022 was $276.9$167.7 million and $209.9$276.9 million, respectively. This increasedecrease in net cash used in operating activities was primarily due to a larger decrease in accounts receivable and a smaller increase in inventory, partially offset by an increase in spend related tonet loss and an increase in inventory as well as other working capital changes.valuation adjustments. The Company’s working capital was $2.3 billion$855.1 million as of March 31, 2023,2024, which included unrestricted cash and cash equivalents of $474.9$172.9 million. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capacity, construction of hydrogen plants and to fund strategic acquisitions and partnerships and capital projects. Future use of the Company’s funds is discretionary and the Company believes that its working capital and cash position will be sufficient to fund its operations for at least one year after the date the financial statements are issued.
The net cash (used in)/provided by investing activities for the three months ended March 31, 2024 and 2023 was ($120.6) million and 2022 was $95.8 million, and $273.9 million, respectively. This decrease wasThe change from cash inflow to cash outflow from investing activities is primarily due to a reduction ofdecrease in proceeds from maturities of available-for-sale securities compared toduring the prior year, partially offset by an increase of capital spending. Included in purchases of property, plant and equipment and outflows associated with materials, labor, and overhead are costs necessary to construct new leased property. Cash outflows related to equipment that we lease directly to customers are included in net cash used in investing activities.
three months ended March 31, 2024 as the Company no longer holds available-for-sale securities. The net cash provided by financing activities for the three months ended March 31, 2024 and 2023 was $283.1 million and $7.2 million, compared to netrespectively. The increase in cash used inprovided by financing activities forwas primarily driven by proceeds from the At Market Issuance Sales Agreement during the three months ended March 31, 20222024, partially offset by a decrease in proceeds from finance obligations.
On January 17, 2024, the Company entered into the At Market Issuance Sales Agreement (the “Original ATM Agreement”) with B. Riley Securities, Inc. (“B. Riley”), pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of $18.2the Company’s common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had $697.9 million remaining authorized for issuance under the Original ATM Agreement. On February 23, 2024, the Company and B. Riley entered into Amendment No. 1 to the Original ATM Agreement (the “Amendment” and, together with the Original ATM Agreement, the “ATM Agreement”) to increase the aggregate offering price of shares of the Company’s common stock available for future issuance under the Original ATM Agreement to $1.0 billion. Under the ATM Agreement, for a period of 18 months, the Company has the right at its sole discretion to direct B. Riley to act on a principal basis and purchase directly from the Company up to $11.0 million of shares of its common stock on any trading day (the “Maximum Commitment Advance
43
Purchase Amount”) and up to $55.0 million of shares in any calendar week (the “Maximum Commitment Advance Purchase Amount Cap”). On and after June 1, 2024, so long as the Company’s market capitalization is no less than $1.0 billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company’s market capitalization is less than $1.0 billion on and after June 1, 2024, the Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. Through the date of filing of the Quarterly Report on Form 10-Q, the Company sold 135,354,467 shares of common stock at a weighted-average sales price of $3.38 per share for gross proceeds of $457.1 million with related issuance costs of $6.5 million. The change was primarily driven by lower principal paymentsCompany believes that its working capital and cash position, together with its right to direct B. Riley to purchase shares directly from the Company under the ATM Agreement, will be sufficient to fund its on-going operations for a period of long-term debt comparedat least 12 months subsequent to the prior year due to decreased outstanding principal debt balances.issuance of the accompanying condensed consolidated financial statements.
The Company’s significant obligations consisted of the following as of March 31, 2023:2024:
| (i) | Operating and finance leases totaling |
| (ii) | Finance obligations totaling |
| (iii) | Convertible senior notes totaling |
| (iv) | Capital commitments totaling $98.1 million related to the Company’s equity method investments, of which all $98.1 million is due within the next 12 months. See Note 15, “Investments”, for more details. |
| (v) | Future payments under non-cancelable unconditional purchase obligations with a remaining term in excess of one year totaling $56.4 million, of which $39.7 million is due within the next 12 months. See Note 18, “Commitments and Contingencies”, for more details. |
| (vi) | Contingent consideration with an estimated fair value of approximately $106.3 million, of which $69.2 million is due within the next 12 months. See Note 14, “Fair Value Measurements”, for more details. |
Public and Private Offerings of Equity and Debt
Common Stock IssuancesAt Market Issuance Sales Agreement
InAs described above, on January 17, 2024, the Company entered into an At Market Issuance Sales Agreement with B. Riley, pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company’s common stock, having an aggregate offering price of up to $1.0 billion. As of February 2021,23, 2024, the Company had $697.9 million remaining authorized for issuance under the ATM Agreement. On February 23, 2024, the Company amended the ATM Agreement to increase the amount of shares of the Company’s common stock available for sale under the ATM Agreement to $1.0 billion. During the three months ended March 31, 2024, the Company sold 54,966,18879,553,175 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.
In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32,200,000 million shares of its common stock at a purchaseweighted-average sales price of $65.00$3.89 per share for netgross proceeds of approximately $2.0 billion.
In November 2020, the Company issued and sold in a registered direct offering an aggregate$309.3 million with related issuance costs of 43,700,000 shares of its common stock at a purchase price of $22.25 per share for net proceeds of approximately $927.3 million.
In August 2020, the Company issued and sold in a registered direct offering an aggregate of 35,276,250 shares of its common stock at a purchase price of $10.25 per share for net proceeds of approximately $344.4$3.9 million.
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Convertible Senior Notes
In May 2020, the Company issued $212.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were $205.1 million. The Company used $90.2 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to repurchase $66.3 million of the $100 million in aggregate principal amount of the 5.5% Convertible Senior Notes. In addition, the Company used approximately $16.3 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to enter into privately negotiated capped called transactions.In the fourth quarter of 2020, $33.5 million of the remaining 5.5% Convertible Senior Notes were converted into 14.6 million shares of common stock, resulting in a gain of approximately $4.5 million which was recorded on the consolidated statement of operations on the gain (loss) on extinguishment of debt line. As of December 31, 2020, approximately $0.2 million aggregate principal amount of the 5.5% Convertible Senior Notes remained outstanding, all of which were converted to common stock in January 2021.
Secured Debt
In March 2019, the Company entered into a loan and security agreement, as amended, with Generate Lending, LLC, providing for a secured term loan facility in the amount of $100 million (the “Term Loan Facility”). In December 2022, the Company fully repaid the outstanding balance of the Term Loan Facility.
In June 2020, the Company acquired debt as part of its acquisition of United Hydrogen Group Inc. During the three months ended March 31, 2024, the Company repaid $0.3 million of principal related to this outstanding debt. The outstanding carrying value of the debt was $9.0$3.8 million as of March 31, 2023.2024. The remaining outstanding principal on the debt was $11.1$5.2 million and the unamortized debt discount was $2.1$1.4 million, bearing varying interest rates ranging from 2.2%7.3% to 8.3%7.6%. The debt is scheduled to mature in 2026. As of March 31, 2023,2024, the principal balance indicated below wasis due at each of the following dates as follows (in thousands):
| | | | |
December 31, 2023 | $ | 5,660 | ||
December 31, 2024 | | 3,357 | | 3,057 |
December 31, 2025 | | 1,200 | | 1,200 |
December 31, 2026 | | 900 | | 900 |
| $ | 11,117 | ||
Total outstanding principal | $ | 5,157 | ||
7.00% Convertible Senior Notes
On March 20, 2024, the Company entered into separate, privately negotiated exchange agreements with certain holders of the Company’s outstanding 3.75% Convertible Senior Notes pursuant to which the Company exchanged $138.8 million in aggregate principal amount of the 3.75% Convertible Senior Notes, and accrued and unpaid interest of $1.6 million on such notes to, but excluding, March 20, 2024, for $140.4 million in aggregate principal amount of the Company’s new 7.00% Convertible Senior Notes due 2026, in each case, pursuant to the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”). Following the exchange, approximately $58.5 million in aggregate principal amount of the 3.75% Convertible Senior Notes remained outstanding with terms unchanged.
This transaction was accounted for as an extinguishment of debt. As a result, the Company recorded a loss on extinguishment of debt of $14.0 million in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024. Loss on extinguishment of debt arises from the difference between the net carrying amount of the Company’s debt and the fair value of the assets transferred to extinguish the debt.
The 7.00% Convertible Senior Notes are the Company’s senior, unsecured obligations and are governed by the terms of an Indenture (the “Indenture”), dated as of March 20, 2024, entered into between the Company and Wilmington Trust, National Association, as trustee. The 7.00% Convertible Senior Notes bear cash interest at the rate of 7.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2024, to holders of record at the close of business on the preceding May 15 and November 15, respectively. The 7.00% Convertible Senior Notes mature on June 1, 2026, unless earlier converted or redeemed or repurchased by the Company.
The conversion rate for the 7.00% Convertible Senior Notes is initially 235.4049 shares of the Company’s common stock per $1,000 principal amount of 7.00% Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $4.25 per share of common stock, which represents a premium of approximately 20% over the last reported sale price of Plug’s common stock on the Nasdaq Capital Market on March 12, 2024. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. Prior to the close of business on the business day immediately preceding December 1, 2025, the 7.00% Convertible Senior Notes will be convertible at the option of the holders of the 7.00% Convertible Senior Notes only upon the satisfaction of specified conditions and during certain periods. On or after December 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, the 7.00% Convertible Senior Notes will be convertible at the option of the holders of the 7.00% Convertible Senior Notes at any time regardless of these conditions. Conversions of the 7.00% Convertible Senior Notes will be settled in cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election.
Subject to certain exceptions and subject to certain conditions, holders of the 7.00% Convertible Senior Notes may require the Company to repurchase their 7.00% Convertible Senior Notes upon the occurrence of a “Fundamental Change” (as defined in the Indenture) prior to maturity for cash at a repurchase price equal to 100% of the principal amount
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of the 7.00% Convertible Senior Notes to be repurchased plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The 7.00% Convertible Senior Notes will be redeemable, in whole or in part, at the Company’s option at any time on or after June 5, 2025, at a cash redemption price equal to the principal amount of the 7.00% Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the then-applicable conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the three trading days immediately preceding the date the Company sends the related redemption notice, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company sends such redemption notice.
In certain circumstances, conversions of 7.00% Convertible Senior Notes in connection with “Make-Whole Fundamental Changes” (as defined in the Indenture) or conversions of 7.00% Convertible Senior Notes called for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 282.4859 shares of the Company’s common stock per $1,000 principal amount of 7.00% Convertible Senior Notes, subject to adjustment. In such circumstance, a maximum of 39,659,890 shares of common stock, subject to adjustment, may be issued upon conversion of the 7.00% Convertible Senior Notes. There were no conversions of the 7.00% Convertible Senior Notes during the three months ended March 31, 2024.
The 7.00% Convertible Senior Notes consisted of the following (in thousands):
| | |
| March 31, | |
| 2024 | |
Principal amounts: | | |
Principal | $ | 140,396 |
Unamortized debt premium, net of offering costs (1) | | 11,440 |
Net carrying amount | $ | 151,836 |
| (1) | Included in the unaudited interim condensed consolidated balance sheets within convertible senior notes, net and amortized over the remaining life of the notes using the effective interest rate method. |
The following table summarizes the total interest expense and effective interest rate related to the 7.00% Convertible Senior Notes for the three months ended March 31, 2024 (in thousands, except for the effective interest rate):
| | | |
| | March 31, | |
|
| 2024 | |
Interest expense | | $ | 296 |
Amortization of premium | | | (159) |
Total | | $ | 137 |
Effective interest rate | | | 3.0% |
The estimated fair value of the 7.00% Convertible Senior Notes at March 31, 2024 was approximately $153.2 million. The fair value estimation was primarily based on a quoted price in an active market.
3.75% Convertible Senior Notes
On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. DuringOn March 12, 2024, the three months ended March 31, 2023, thereCompany exchanged $138.8 million in aggregate principal amount of the 3.75% Convertible Senior Notes for $140.4 million in aggregate principal amount of the Company’s new 7.00% Convertible Senior Notes due 2026. Following the exchange, approximately $58.5 million in aggregate principal amount of the 3.75% Convertible Senior Notes remained outstanding with terms unchanged. There were no conversions of the 3.75% Convertible Senior Notes.Notes during the three months ended March 31, 2024 and 2023.
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The 3.75% Convertible Senior Notes consisted of the following (in thousands):
| | | | | | | | | | | |
| | March 31, | | December 31, | March 31, | | December 31, | ||||
| | 2023 | | 2022 | 2024 | | 2023 | ||||
Principal amounts: | | | | | | | | | | | |
Principal | | $ | 197,278 | | $ | 197,278 | $ | 58,462 | | $ | 197,278 |
Unamortized debt issuance costs (1) | | | (3,028) | | | (3,359) | | (496) | | | (2,014) |
Net carrying amount | | $ | 194,250 | | $ | 193,919 | $ | 57,966 | | $ | 195,264 |
| Included in the unaudited interim condensed consolidated balance sheets within |
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The following table summarizes the total interest expense the amortization of debt issuance costs and the effective interest rate related to the 3.75% Convertible Senior Notes for the three months ended March 31, 2024 and 2023 (in thousands, except for the effective interest rate):
| | | | | | | | | | | | |
| | March 31, | | | March 31, | | March 31, | | | March 31, | ||
|
| 2023 |
| | 2022 |
| 2024 |
| | 2023 | ||
Interest expense | | $ | 1,849 | | $ | 1,849 | | $ | 1,690 | | $ | 1,849 |
Amortization of debt issuance costs | | | 331 | | | 316 | | | 316 | | | 331 |
Total | | | 2,180 | | | 2,165 | | $ | 2,006 | | $ | 2,180 |
Effective interest rate | | | 4.5% | | | 4.5% | | | 4.5% | | | 4.5% |
Based on the closing price of the Company’s common stock of $11.72 on March 31, 2023, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the note3.75% Convertible Senior Notes at March 31, 20232024 was approximately $433.6$60.4 million. The fair value estimation was primarily based on a quoted price in an active stock exchange trade on March 29, 2023 of the 3.75% Convertible Senior Notes.market.
Capped Call
In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions (the “3.75% Notes Capped Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call covers, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 3.75% Convertible Senior Notes and is generally expected to reduce potential dilution to the Company’s common stock upon any conversion of the 3.75% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 3.75% Notes Capped Call is initially $6.7560 per share, which represents a premium of approximately 60%over the last then-reported sale price of the Company’s common stock of $4.11 per share on the date of the transaction and is subject to certain adjustments under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.
The net cost incurred in connection with the 3.75% Notes Capped Call werewas recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets. The book value of the 3.75% Notes Capped Call is not remeasured.
5.5% Convertible Senior Notes and Common Stock Forward
In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior Notes due on March 15, 2023, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which have been fully repaid. In connection with the issuance of the 5.5% Convertible Senior Notes, the Company entered into a forward stock purchase transaction (the “Common Stock Forward”), pursuant to which the Company agreed to purchase 14,397,906 shares of its common stock for settlement on or about March 15, 2023. On May 18, 2020, the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. The number of shares of common stock that the Company will ultimately repurchase under the Common Stock Forward is subject to
47
customary anti-dilution adjustments. The Common Stock Forward is subject to early settlement or settlement with alternative consideration in the event of certain corporate transactions.
The net cost incurred in connection with the Common Stock Forward of $27.5 million was recorded as an increase in treasury stock in the unaudited interim condensed consolidated balance sheets. The related shares were accounted for as a repurchase of common stock. The book value of the Common Stock Forward is not remeasured.
There were no shares of common stock that settled in connection with the Common Stock Forward during the three months ended March 31, 2023 or during the three months ended March 31, 2022.30, 2024 and 2023.
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Amazon Transaction Agreement in 2022
On August 24, 2022, the Company and Amazon entered into a Transaction Agreement (the “2022 Amazon Transaction Agreement”), under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, a warrant (the “Amazon“2022 Amazon Warrant”) to acquire up to 16,000,000 shares (the “Amazon“2022 Amazon Warrant Shares”) of the Company’s common stock, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Amazon Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.
1,000,000 of the 2022 Amazon Warrant Shares vested immediately upon issuance of the 2022 Amazon Warrant. 15,000,000 of the 2022 Amazon Warrant Shares will vest in multiple tranches over the 7-year term of the 2022 Amazon Warrant based on payments made to the Company directly by Amazon or its affiliates, or indirectly through third parties, with 15,000,000 of the 2022 Amazon Warrant Shares fully vesting if Amazon-related payments of $2.1 billion are made in the aggregate. The exercise price for the first 9,000,000 2022 Amazon Warrant Shares is $22.9841 per share and the fair value on the grant date was $20.36. The exercise price for the remaining 7,000,000 2022 Amazon Warrant Shares will be an amount per share equal to 90% of the 30-day volume weighted average share price of the Company’s common stock as of the final vesting event that results in full vesting of the first 9,000,000 2022 Amazon Warrant Shares. The 2022 Amazon Warrant is exercisable through August 24, 2029.
Upon the consummation of certain change of control transactions (as defined in the applicable warrant)2022 Amazon Warrant) prior to the vesting of at least 60% of the aggregate 2022 Amazon Warrant Shares, the 2022 Amazon Warrant will automatically vest and become exercisable with respect to an additional number of 2022 Amazon Warrant Shares such that 60% of the aggregate 2022 Amazon Warrant Shares shall have vested. If a change of control transaction is consummated after the vesting of at least 60% of the aggregate 2022 Amazon Warrant Shares, then no acceleration of vesting will occur with respect to any of the unvested 2022 Amazon Warrant Shares as a result of the transaction. The exercise price and the 2022 Amazon Warrant Shares issuable upon exercise of the 2022 Amazon Warrant are subject to customary antidilution adjustments.
At March 31, 2023,On August 24, 2022, 1,000,000 of the 2022 Amazon Warrant Shares issued pursuant to the 2022 Transaction Agreement had vested upon issuance.associated with tranche 1 vested. The warrant chargefair value associated with the vested shares of tranche 1 of $20.4 million was capitalized to contract assets in our condensed consolidated unaudited interim financial statements based on the grant date fair value and is subsequently amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of March 31, 2024 the balance of the contract asset related to tranche 1 was $19.3 million which is recorded in contract assets in the Company’s unaudited interim condensed consolidated balance sheet. During the second quarter of 2023, all 1,000,000 of the 2022 Amazon Warrant Shares associated with tranche 2 vested. The warrant fair value associated with the vested shares of tranche 2 was $20.4 million and was determined on the grant date of August 24, 2022. As of March 31, 2024 the balance of the contract asset related to tranche 2 was $19.3 million. Tranche 3 will vest over the next $1.0 billion of collections from Amazon and its affiliates. The grant date fair value of tranches 2 andtranche 3 will also be amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of March 31, 2024 the balance of the contract asset related to tranche 3 was $2.0 million. Because the exercise price has yet to be determined, the fair value of tranche 4 will be remeasured at each reporting period end and amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement.
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As of March 31, 2024 and December 31, 2023, 2,000,000 of the 2022 Amazon Warrant Shares had vested and the 2022 Amazon Warrant had not been exercised. The total amount of provision for common stock warrants recorded as a reduction of revenue for the 2022 Amazon Warrant during the three months ended March 31, 2024 and 2023 was $0.7 million and $1.1 million.million, respectively.
The assumptions used to calculate the valuations of the 2022 Amazon Warrant as of August 24, 2022 and March 31, 20232024 are as follows:
| | | | | | | | |
| | Tranches 1-3 | | Tranche 4 |
| Tranches 1-3 |
| Tranche 4 |
|
| August 24, 2022 |
| March 31, 2023 | | August 24, 2022 | | March 31, 2024 |
Risk-free interest rate | | 3.15% | | 3.50% | | 3.15% | | 4.12% |
Volatility | | 75.00% | | 75.00% | | 75.00% | | 90.00% |
Expected average term | | 7 years | | 4 years | ||||
Expected average term (years) | | 7.00 | | 4.00 | ||||
Exercise price | | $22.98 | | $10.55 | | $22.98 | | $3.10 |
Stock price | | $20.36 | | $11.72 | | $20.36 | | $3.44 |
Amazon Transaction Agreement in 2017
On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the “2017 Amazon Transaction Agreement”), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a warrant (the “2017 Amazon Warrant”) to acquire up to 55,286,696 shares (the “2017 Amazon Warrant Shares,Shares”), subject to certain vesting events described below.events. The Company and Amazon entered into the 2017 Amazon Transaction Agreement in connection with existing commercial agreements between the Company and Amazon with respect to the deployment of the Company’s GenKey fuel cell
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technology at Amazon distribution centers. The vesting of the 2017 Amazon Warrant Shares was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements. AtOn December 31, 2021,2020, the Company waived the remaining vesting conditions under the 2017 Amazon Warrant, which resulted in the immediate vesting of all of the third tranche of the 2017 Amazon Warrant Shares.
As of March 31, 2024 and 2023, all 55,286,696 of the 2017 Amazon Warrant Shares had vested.
The warrant had beenvested and the 2017 Amazon Warrant was exercised with respect to 27,600,000 and 24,704,45034,917,912 shares of the Company’s common stock. The total amount of provision for common stock warrants recorded as a reduction of revenue for the 2017 Amazon Warrant during the three months ended March 31, 2024 and 2023 was $0.1 million and December 31, 2022,$0.2 million, respectively.
Walmart Transaction Agreement
On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the “Walmart Transaction Agreement”), pursuant to which the Company agreed to issue to Walmart a warrant (the “Walmart Warrant”) to acquire up to 55,286,696 shares of the Company’s common stock, subject to certain vesting events (the “Walmart Warrant Shares”). The Company and Walmart entered into the Walmart Transaction Agreement in connection with existing commercial agreements between the Company and Walmart with respect to the deployment of the Company’s GenKey fuel cell technology across various Walmart distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the warrant shares was conditioned upon payments made by Walmart or its affiliates (directly or indirectly through third parties) pursuant to transactions entered into after January 1, 2017 under existing commercial agreements.
The warrantexercise price for the first and second tranches of Walmart Warrant Shares was $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in eight installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of the Walmart Warrant Shares is $6.28 per share, which was determined pursuant to the terms of the Walmart Warrant as an amount equal to 90% of the 30-day volume weighted average share price of the Company’s common stock as of October 30, 2023, the final
49
vesting date of the second tranche of the Walmart Warrant Shares. The Walmart Warrant is exercisable through July 20, 2027. The Walmart Warrant provides for net share settlement that, if elected by the holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Walmart Warrant provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. The Walmart Warrant is classified as an equity instrument.
As of March 31, 2024 and December 31, 2023, 37,464,010 and 34,917,912 of the Walmart Warrant Shares had beenvested, respectively, and the Walmart Warrant was exercised with respect to 13,094,217 shares of the Company’s common stock asstock. As of March 31, 2023 and December 31, 2022.
At March 31, 2023 and December 31, 2022, 27,643,3472024, the balance of the contract asset related to the Walmart Warrant Shares had vested.was $6.9 million. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended March 31, 2024 and 2023 was $3.7 million and 2022 was $12.9 million, and $1.7 million, respectively. During the three months ended March 31, 2023 and 2022, there were no exercises with respect to the Walmart Warrant.
The assumptions used to calculate the valuations of the final tranche of the Walmart Warrant as of March 31,January 1, 2019 and October 30, 2023 are as follows:
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| | | | |
|
| Tranches 1-2 |
| Tranche 3 |
| | January 1, 2019 | | October 30, 2023 |
Risk-free interest rate | | 2.63% | | 4.73% |
Volatility | | 95.00% | | 75.00% |
Expected average term (years) | | 8.55 | | 3.72 |
Exercise price | | $2.12 | | $6.28 |
Stock price | | $1.24 | | $5.70 |
Operating and Finance Lease Liabilities
As of March 31, 2023,2024, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash and security deposits and pledged escrows (see also Note 1, “Nature of Operations”18, “Commitments and Contingencies”) as summarized below. These leases expire over the next one to nineseven years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.
Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include credit support in the form of either cash, collateral or letters of credit. See Note 19,18, “Commitments and Contingencies”, for a description of cash held as security associated with the leases.
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The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of March 31, 2023.
Finance Obligation
The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at March 31, 20232024 was $324.9$333.0 million, $59.9$75.7 million and $265.0$257.3 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 20222023 was $312.1$350.8 million, $55.4$74.0 million and $256.6$276.8 million of which was classified as short-term and long-term, respectively.respectively, on the unaudited interim condensed consolidated balance sheet. The amount is amortized using the effective interest method. Interest expense recorded related to finance obligations for the three months ended March 31, 2024 and 2023 was $10.0 million and 2022 was $9.2 million, and $6.7 million, respectively. The fair value of this finance obligation approximated the carrying value as of March 31, 2023 and December 31, 2022.
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In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at March 31, 20232024 was $17.9$16.8 million, $3.5$9.5 million and $14.4$7.3 million of which was classified as short-term and long-term, respectively, on the accompanyingunaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 20222023 was $17.2$17.6 million, $3.5$10.0 million and $13.7$7.6 million of which was classified as short-term and long-term, respectively, on the accompanyingunaudited interim condensed consolidated balance sheets. sheet.
The fair value of thisthe Company’s total finance obligationobligations approximated thetheir carrying value as of March 31, 20232024 and December 31, 2022.2023.
Restricted Cash
In connection with certain of the above noted sale/leaseback agreements, cash of $445.2$552.8 million and $383.7$573.5 million was required to be restricted as security as of March 31, 20232024 and December 31, 2022,2023, respectively, which restricted cash will be released over the lease term. As of March 31, 20232024 and December 31, 2022,2023, the Company also had certain letters of credit backed by security deposits totaling $340.5$351.8 million and $379.6$370.7 million, respectively, thatof which $321.0 million and $340.0 million are security for the above noted sale/leaseback agreements. As of March 31, 2023, the Company also had certain customeragreements, respectively, and $30.8 million and $30.7 million are customs related letters of credit, totaling $22.7 million.respectively.
As of both March 31, 20232024 and December 31, 2022,2023, the Company had $75.5$76.9 million and $76.8 million held in escrow related to the construction of certain hydrogen plants.production plants, respectively.
The Company also had $5.0 million, $1.2 million and $1.8$0.2 million of consideration held by our paying agent in connection with each of the Applied Cryo, Joule and CIS acquisitions, respectively, reported as restricted cash as of March 31, 2023,2024, with a corresponding accrued liability on the Company’s unaudited interim condensed consolidated balance sheet. Additionally, the Company had $6.5$12.3 million and $10.8$11.7 million in restricted cash as collateral resulting from the Frames acquisition as of March 31, 20232024 and December 31, 2022,2023, respectively.
InvestmentsGuarantee
Our investment portfolio, including cashOn May 30, 2023, our joint venture, HyVia, entered into a government grant agreement with Bpifrance. As part of the agreement, our wholly-owned subsidiary, Plug Power France, was required to issue a guarantee to Bpifrance in the amount of €20 million through the end of January 2027. Plug Power France is liable to the extent of the guarantee for sums due to Bpifrance from HyVia under the agreement based on the difference between the total amount paid by Bpifrance and cash equivalents, totaled $1.6 billion atthe final amount certified by HyVia and Bpifrance. As part of the agreement, there are certain milestones that HyVia is required to meet, and the nonperformance of these milestones or termination of this agreement could result in this guarantee being called upon. As of March 31, 2023. Purchases2024, no payments related to this guarantee have been made by the Company and Plug Power France did not record a liability for this guarantee as the likelihood of the guarantee being called upon is remote.
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, take or pay contracts and service agreements. For certain vendors, the Company’s unconditional obligation to purchase a minimum quantity of raw materials at an agreed upon price is fixed maturity securities are classified as available-for-sale at the time of purchase based on individual security.and determinable; while certain other raw material costs will vary due to product forecasting and future economic conditions.
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The compositionFuture payments under non-cancelable unconditional purchase obligations with a remaining term in excess of our investment portfolio, including cash and cash equivalents,one year as of March 31, 2023, is shown in the following table2024, were as follows (in thousands):
| | | | | |
| | Carrying | | Percentage of | |
|
| Amount |
| Portfolio | |
Fixed maturity securities - available-for-sale | | | | | |
U.S. Treasuries | | $ | 864,508 | | 52.6% |
Corporate bonds | | | 163,863 | | 10.0% |
Total fixed maturity securities - available-for-sale | | $ | 1,028,371 | | 62.6% |
Equity securities | | | 139,911 | | 8.5% |
Cash and cash equivalents | | | 474,861 | | 28.9% |
Total investments, including cash and cash equivalents | | $ | 1,643,143 | | 100.0% |
| | | |
Remainder of 2024 |
| $ | 37,742 |
2025 | | | 8,023 |
2026 | | | 8,023 |
2027 | | | 2,638 |
2028 | | | — |
2029 and thereafter | | | — |
Total | | | 56,426 |
Restructuring
In February 2024, in a strategic move to enhance our financial performance and ensure long-term value creation in a competitive market, we approved a comprehensive initiative that encompasses a broad range of measures, including operational consolidation, strategic workforce adjustments, and various other cost-saving actions (the “Restructuring Plan”). These measures are aimed at increasing efficiency, improving scalability, and maintaining our leadership position in the renewable energy industry. We began executing the Restructuring Plan in February 2024 and expect the Restructuring Plan to be completed in the second half of 2024, subject to local law and consultation requirements.
The determination of when we accrue for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. We account for involuntary termination benefits that are provided pursuant to one-time benefit arrangements in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”) whereas involuntary termination benefits that are part of an ongoing written or substantive plan are accounted for in accordance with ASC 712, Nonretirement Postemployment Benefits. We accrue a liability for termination benefits under ASC 420 in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, we accrue a liability for termination benefits under ASC 712 when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. The restructuring charges that have been incurred but not yet paid are recorded in accrued expenses and other current liabilities in our unaudited interim condensed consolidated balance sheets, as they are expected to be paid within the next twelve months.
During the three months ended March 31, 2024, we incurred $6.0 million in restructuring costs recorded as severance expenses of $5.2 million, and other restructuring costs of $0.8 million in the restructuring financial statement line item in the unaudited interim condensed consolidated statement of operations. We expect to incur another $1.1 million in restructuring costs in subsequent quarters, which are primarily related to severance expenses, and are expected to be incurred during the third quarter of 2024. The actual timing and amount of costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.
Severance expense recorded during the three months ended March 31, 2024 in accordance with ASC 420 was a result of the separation of full-time employees associated with the Restructuring Plan. As of March 31, 2024, $0.8 million of accrued severance-related costs were included in accrued expenses in our unaudited interim condensed consolidated balance sheets and are expected to be paid during the third quarter of 2024. Other costs are represented by (1) $0.2 million of legal and professional services costs, and (2) $0.6 million of other one-time employee termination benefits. As of March 31, 2024, $0.1 million of accrued other costs were included in accrued expenses in our unaudited interim condensed consolidated balance sheets and are expected to be paid during the third quarter of 2024.
Extended Maintenance Contracts
On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systemssales of equipment, related infrastructure and related infrastructureother that have been sold. The following table shows the rollforwardroll forward of balancebalances in
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the accrual for loss contracts, including changes due to the provision for loss accrual, loss accrual from acquisition, releases to service cost of sales, and releases due to the provision for warrants, and foreign currency translation adjustment (in thousands):
| | | | | | | |||||
| | Three months | | Year | | | | | | ||
| | ended | | ended | Three months ended | | Year ended | ||||
|
| March 31, 2023 |
| December 31, 2022 | March 31, 2024 |
| December 31, 2023 | ||||
Beginning balance | | $ | 81,066 | | $ | 89,773 | $ | 137,853 | | $ | 81,066 |
Provision for loss accrual | | | 6,981 | | | 23,295 | | 15,111 | | | 85,375 |
Releases to service cost of sales | | | (6,668) | | | (35,446) | | (11,936) | | | (29,713) |
Increase/(decrease) to loss accrual related to customer warrants | | | (92) | | | 3,506 | |||||
Increase to loss accrual related to customer warrants | | 634 | | | 971 | ||||||
Foreign currency translation adjustment | | | 25 | | | (62) | | (93) | | | 154 |
Ending balance | | $ | 81,312 | | $ | 81,066 | $ | 141,569 | | $ | 137,853 |
The Company increased its loss accrual to $141.6 million for the three months ended March 31, 2024 primarily due to continued cost increases of GenDrive labor, parts and related overhead coupled with new GenDrive contracts entered into requiring provisions to be set up. As a result, the Company increased its estimated projected costs.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon ourThe consolidated financial statements whichof the Company have been prepared in accordanceconformity with GAAP. The preparation of these consolidated financial statements requires usU.S. generally accepted accounting principles, which require management to make estimates and judgmentsassumptions that affect the reported amounts of assets and liabilities revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including but not limited to those related to revenue recognition, valuation of inventories, intangible assets, valuation of long-lived assets, accrual for service loss contracts, operating and finance leases, allowance for doubtful accounts receivable, unbilled revenue, common stock warrants.warrants, stock-based compensation, income taxes, and contingencies. We base our estimates and judgments on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about (1) the carrying values of assets and liabilities and (2) the amount of revenue and expenses realized that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no changes in our critical accounting estimates from those reported in our 20222023 Form 10-K.
Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
Other than the adoption of the accounting guidance mentioned in our 2022 Form 10-K, thereThere have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.
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Recent Accounting GuidanceRecently Issued and Not Yet EffectiveAdopted Accounting Pronouncements
All recently issued but not yet effectiveadopted accounting and reporting standards as of March 31, 20232024 are either not applicable to the Company or are not expected to have a material impact on the Company.
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Item 3 — Quantitative and Qualitative Disclosures about Market Risk
There has been no material change from the information provided in the Company’s 20222023 Form 10-K under the section titled “Item 7A: QuantitativeItem 7A, “Quantitative and Qualitative Disclosures About Market Risk.”Risk”.
Item 4 — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) as appropriate, to allow for timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2023, our disclosure controls and procedures were not effective because of material weaknesses in internal control over financial reporting described2024.
Remediation Efforts to Address the Material Weaknesses
Our remediation efforts, which we previously identified in Part II, Item 9A, “Controls and Procedures”, of our 20222023 Form 10-K. The10-K, to address the identified material weaknesses are ongoing as we continue to implement and document necessary policies, procedures, and internal controls. While we believe the steps taken to date will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts and cannot conclude that the material weaknesses have been remediated as of March 31, 2023.2024. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
There were no changes during the quarter ended March 31, 20232024 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1 – Legal Proceedings
See “Note 19: CommitmentsNote 18, “Commitments and Contingencies”, within Item 1 of this Quarterly Report on Form 10-Q for a discussion regarding material legal proceedings.
Except as otherwise noted, there have been no material developments in legal proceedings. For previously reported information about legal proceedings, refer to Part I, Item 3, “Legal Proceedings,”Proceedings”, of the Company’s 20222023 Form 10-K.
Item 1A – Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that could materially affect the Company’s business, financial condition or future results discussed in the Company’s 20222023 Form 10-K in Part I, Item 1A. “Risk Factors.” Factors”. The risks described in the 20222023 Form 10-K are not the only risks that could affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. As a supplement to the risk factors identified in the 20222023 Form 10-K, below we have set forth an updated risk factors.factor. Other than as provided below, there have been no material changes to ourthe risk factors since December 31, 2022.identified in the 2023 Form 10-K.
We areOur ability to achieve our business objectives and to continue to meet our obligations is dependent upon our ability to maintain a certain level of liquidity, which will depend in part on information technology in our operations and the failure of such technology may adversely affectability to manage our business. Security breaches ofcash flows, including successfully implementing our information technology systems, including cyber-attacks, ransomware attacks, or use of malware or phishing or other malicious techniques by threat actors, could lead to liability, could impact our operations, or could damage our reputation and financial results.cost savings initiatives.
We haveTo operate more efficiently and control our expenditures, we announced the Restructuring Plan in February 2024 that encompassed a broad range of cost-saving measures, including operational consolidation, strategic workforce reductions and various other cost reduction initiatives. There can be no assurance that the past and may inanticipated cost savings, operating efficiencies or other benefits will be achieved, within the future experience problems with the operation of our current information technology systemsanticipated timeframes or the technology systems of third parties on which we rely, as well as the development and deployment of new information technology systems, that could adversely affect, or even temporarily disrupt,at all, or a portionthat they will not be significantly and materially less than anticipated. Our ability to realize the anticipated cost savings is subject to many estimates and assumptions, including business, economic and competitive uncertainties and contingencies, such as our ability to maintain business relationships and successfully negotiate changes to existing agreements with respect to pricing increases, contract terms, and delivery times, among others. Many of these uncertainties and contingencies are beyond our operations until resolved. The inabilitycontrol and if our estimates and assumptions prove to implement new systemsbe incorrect, if we experience delays, or delays in implementing new information technology systemsif other unforeseen events occur, it may also affectimpact our ability to realize projected or expectedthe anticipated cost savings. Additionally, the inabilityIn addition, our cost savings initiatives may subject us to implementlitigation risks and expenses and may have other consequences, such as attrition beyond our planned reduction in workforce or delays in implementing new security measures can also affect oura negative effect on employee morale, productivity or ability to protect against increasingly sophisticated threat actors. Any systems failures could impede our ability to timely collect and report financial results in accordance with applicable laws.attract highly skilled employees.
Information technology system and/If the Restructuring Plan fails to achieve some or network disruptions could harm the Company’s operations. Failure to effectively prevent, detect, and recover from security compromises or breaches, including cyber-attacks, could result in the misuse of company assets, unauthorized use or publication of our trade secrets and confidential business information, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales, reduction in value of our investment in research and development, among other costs to the company. We have experienced and may continue to experience both successful and unsuccessful attempts to gain unauthorized access to our information technology systems on which we maintain proprietary and confidential information. For example, in or around March 2023, an unauthorized actor accessed our computer network and executed a ransomware attack, resulting in the encryption of certain of our computer systems, including systems used to store proprietary and confidential data, and exfiltration of limited data sets. Upon detection, we took immediate steps to contain, assess and remediate the incident, including engaging outside legal counsel and external forensic investigators. Asall of the date of the filing of this Quarterly Report on Form 10-Q, we have restored the affected systems and throughout this restoration period our business remained fully operational with no material disruption. Based on information available to date, we do not believe the ransomware event has had a materialexpected benefits, it may negatively impact on our business. However, as a result of the incident, we have incurred costs in addressing the incident, including costs related to investigation, containment, restoration, and remediation.
The risk of a security compromise, breach, or disruption, particularly through cyber-attacks, or cyber intrusion, including by computer hackers, insider threats, and cyber terrorists, has generally increased as cyber-attacks have become
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more prevalent and harder to detect and fight against and threat actors continue to become more sophisticated in their malicious techniques. Additionally, outside or unauthorized parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information through phishing emails or deceptive advertising campaigns. We actively seek to prevent, detect, and investigate any unauthorized access. These threats are also continually evolving, and as a result, will become increasingly difficult to detect. In addition, as a result of the COVID-19 pandemic, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks. Despite the implementation of network security measures, our information technology system have been and could be penetrated by outside or unauthorized parties. Going forward, we may expend additional resources, expenses, and legal and professional fees to further enhance the security of our information technology systems and continually assess our current security measures. In addition,forecast of cash flows and we may be required to initiate further cost savings activities or negotiate further changes to existing agreements with vendors, suppliers and service providers. Further, the Restructuring Plan may result in unexpected expenses or liabilities and/or write-offs. Our lack of cash flows may also constrain our business and subject us to governmental investigations, enforcement actions, regulatory fines or litigation, or we may suffer from reputational damage or public statements against us as a result of unauthorized accesssignificant risks, including being unable to make the necessary investments in our information technology systems.
Adverse developments affecting the financial services industry,business such as actual eventsin our hydrogen plants, raw materials or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affectother resources to effectively pursue our business financial condition and results of operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companiesobjectives, delays in the financial services industryconstruction of our hydrogen plants or the financial services industry generally, or concerns or rumors about any eventsreceipt of these kinds or other similar risks, have in the pastraw materials due to payment issues, and may in the future leadinability to market-wide liquidity problems. For example, the recent closures of Silicon Valley Bank, Signature Bank and Silvergate Capital Corp. ledfulfill purchase orders. Our inability to disruption and volatility, and erosion of customer confidence, in the banking system, including deposit outflows, at many mid-sized banks, increasing the need for liquidity. Further, uncertainty remains over liquidity concerns in the broader financial services industry. For example, Credit Suisse recently agreed to be acquired by UBS following the intervention of the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority, and it was recently announced that JPMorgan Chase Bank, National Association would assume all of First Republic Bank’s deposits and substantially all of its assets.
Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, it is not clear that the Federal Reserve or the FDIC will treat future bank failures similarly. We maintain deposits at financial institutions as a part of doing business that could be at risk if another similar event were to occur. Our ongoing cash management strategy is to maintain the majority of our deposit accounts in large financial institutions, but there can be no assurance this strategy will be successful. In addition, bank failures and bailouts and their potential broader effects and potential systemic risk on the global banking sector generally and its participants may adversely affectsuccessfully execute our business more generally. If any of our customers, suppliers or other parties with whom we conduct business are unable to access funds pursuant to instruments or lending arrangements with such a financial institution or if any of our customers, suppliers or other parties with whom we conduct business declare bankruptcy or insolvency, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to usobjectives could be adversely affected. For example, a leaseholder bank for one of our sale leaseback transactions was recently placed in receivership and, while this did not have a material impact on our financial condition or results of operations, it could limit our access to proceeds from the transaction.
In addition, any decline in available funding or access to our cash and liquidity resources could, among other risks, limit our ability to meet our capital needs and fund future growth or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, including the corporate bond market, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impactseffect on our business, financial condition and results of operations.
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Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) None.
Item 3 — Defaults Upon Senior Securities
None.
Item 4 — Mine Safety Disclosures
None.
Item 5 — Other Information
None.(c) Director and Officer Trading Arrangements
During the three months ended March 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
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Item 6 — Exhibits
|
|
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
3.7 | |
3.8 | |
3.9 | |
| |
4.2 | Form of 7.00% Convertible Senior Notes due 2026 (included as part of Exhibit 4.1) |
10.1 | |
10.2 | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101.INS* | Inline XBRL Instance Document |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Submitted electronically herewith. |
** | Pursuant to Item 601(b)(32)(ii) of Regulation S-K, this certification is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
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Signatures
Pursuant to requirements 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.
| | |
| PLUG POWER INC. | |
| | |
Date: May 9, | By: | /s/ Andrew Marsh |
| | Andrew Marsh |
| | President, Chief Executive |
| | |
Date: May 9, | By: | /s/ Paul B. Middleton |
| | Paul B. Middleton |
| | Chief Financial Officer (Principal |
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