UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q | | | | | |
(Mark One) | |
☑þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterquarterly period ended September 30, 20222023 |
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 NumberNumber: 001-38598
BLOOM ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
________________________________________________________________________ | | | | | |
Delaware | 77-0565408 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
4353 North First Street, San Jose, California | 95134 |
(Address of principal executive offices) | (Zip Code) |
| |
(408) 543-1500 |
(Registrant’s telephone number, including area code) |
| | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act: |
Title of Each Class(1) | Trading SymbolSymbol(s) | Name of each exchange on which registered |
Class A Common Stock, $0.0001 par value | BE | New York Stock Exchange |
(1) Our Class B Common Stock is not registered but is convertible into shares of Class A Common Stock at the election of the holder.
|
________________________________________________________________________ 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 þ 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 þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ 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 þ
The numberAs of November 1, 2023, there were 224,048,769 shares of the registrant’s common stock outstanding as of November 1, 2022 was as follows:
Class A Common Stock, $0.0001 par value, 179,378,926 shares
Class B Common Stock, $0.0001 par value, 15,800,568 sharesoutstanding.
Bloom Energy Corporation
Quarterly Report on Form 10-Q for the Three and Nine Months Ended September 30, 20222023
Table of Contents
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| Page |
PART I - FINANCIAL INFORMATION | |
Item 1 - Financial Statements (unaudited) | |
Condensed Consolidated Balance Sheets | |
Condensed Consolidated Statements of Operations | |
Condensed Consolidated Statements of Comprehensive Loss | |
Condensed Consolidated Statements of Changes in Stockholders'Stockholders’ Equity (Deficit) | |
Condensed Consolidated Statements of Cash Flows | |
Notes to Unaudited Condensed Consolidated Financial Statements | |
Item 2 - Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3 - Quantitative and Qualitative Disclosures About Market Risk | |
Item 4 - Controls and Procedures | |
| |
PART II - OTHER INFORMATION | |
Item 1 - Legal Proceedings | |
Item 1A - Risk Factors | |
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3 - Defaults Upon Senior Securities | |
Item 4 - Mine Safety Disclosures | |
Item 5 - Other Information | |
Item 6 - Exhibits | |
| |
Signatures | |
Unless the context otherwise requires, the terms “Company”,“Company,” “we,” “us,“us,” “our,“our,” “Bloom” and “Bloom“Bloom Energy,” each refer to Bloom Energy Corporation and all of its subsidiaries.
PartPART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Bloom Energy Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
| | | | | | | | | | | | | | | September 30, | | December 31, |
| | September 30, | | December 31, | | 2023 | | 2022 |
| | 2022 | | 2021 | | | | |
Assets | Assets | | | | | Assets | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents1 | Cash and cash equivalents1 | | $ | 492,120 | | | $ | 396,035 | | Cash and cash equivalents1 | | $ | 557,384 | | | $ | 348,498 | |
Restricted cash1 | Restricted cash1 | | 42,104 | | | 92,540 | | Restricted cash1 | | 42,614 | | | 51,515 | |
| Accounts receivable less allowance for doubtful accounts of $119 as of September 30, 2022 and December 31, 20211 | | 71,184 | | | 87,789 | | |
Contract assets | | 25,768 | | | 25,201 | | |
Inventories | | 254,895 | | | 143,370 | | |
Deferred cost of revenue | | 31,812 | | | 25,040 | | |
Customer financing receivable1 | | — | | | 5,784 | | |
Accounts receivable less allowance for doubtful accounts of $119 as of September 30, 2023 and December 31, 20221, 2 | | Accounts receivable less allowance for doubtful accounts of $119 as of September 30, 2023 and December 31, 20221, 2 | | 334,495 | | | 250,995 | |
Contract assets3 | | Contract assets3 | | 143,875 | | | 46,727 | |
Inventories1 | | Inventories1 | | 475,649 | | | 268,394 | |
Deferred cost of revenue4 | | Deferred cost of revenue4 | | 62,212 | | | 46,191 | |
| Prepaid expenses and other current assets1 | Prepaid expenses and other current assets1 | | 46,489 | | | 30,661 | | Prepaid expenses and other current assets1 | | 66,243 | | | 43,643 | |
Total current assets | Total current assets | | 964,372 | | | 806,420 | | Total current assets | | 1,682,472 | | | 1,055,963 | |
Property, plant and equipment, net1 | Property, plant and equipment, net1 | | 646,768 | | | 604,106 | | Property, plant and equipment, net1 | | 490,535 | | | 600,414 | |
Operating lease right-of-use assets | | 114,053 | | | 106,660 | | |
Customer financing receivable1 | | — | | | 39,484 | | |
Operating lease right-of-use assets1 | | Operating lease right-of-use assets1 | | 127,973 | | | 126,955 | |
Restricted cash1 | Restricted cash1 | | 135,098 | | | 126,539 | | Restricted cash1 | | 37,698 | | | 118,353 | |
Deferred cost of revenue | Deferred cost of revenue | | 3,462 | | | 1,289 | | Deferred cost of revenue | | 4,286 | | | 4,737 | |
| Other long-term assets1 | Other long-term assets1 | | 38,316 | | | 41,073 | | Other long-term assets1 | | 33,208 | | | 40,205 | |
Total assets | Total assets | | $ | 1,902,069 | | | $ | 1,725,571 | | Total assets | | $ | 2,376,172 | | | $ | 1,946,627 | |
Liabilities, redeemable convertible preferred stock, redeemable noncontrolling interest and stockholders’ equity (deficit) | | | | | |
Liabilities and stockholders’ equity | | Liabilities and stockholders’ equity | | | | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | | $ | 120,444 | | | $ | 72,967 | | |
Accounts payable1 | | Accounts payable1 | | $ | 153,793 | | | $ | 161,770 | |
Accrued warranty | Accrued warranty | | 13,344 | | | 11,746 | | Accrued warranty | | 16,537 | | | 17,332 | |
Accrued expenses and other current liabilities1 | | 102,010 | | | 114,138 | | |
Deferred revenue and customer deposits1 | | 98,841 | | | 89,975 | | |
Accrued expenses and other current liabilities1, 5 | | Accrued expenses and other current liabilities1, 5 | | 116,480 | | | 144,183 | |
Deferred revenue and customer deposits1, 6 | | Deferred revenue and customer deposits1, 6 | | 119,157 | | | 159,048 | |
| Operating lease liabilities | | 12,671 | | | 13,101 | | |
Operating lease liabilities1 | | Operating lease liabilities1 | | 16,666 | | | 16,227 | |
Financing obligations | Financing obligations | | 16,682 | | | 14,721 | | Financing obligations | | 39,093 | | | 17,363 | |
Recourse debt | Recourse debt | | 12,792 | | | 8,348 | | Recourse debt | | — | | | 12,716 | |
Non-recourse debt1 | Non-recourse debt1 | | 15,943 | | | 17,483 | | Non-recourse debt1 | | — | | | 13,307 | |
| Total current liabilities | Total current liabilities | | 392,727 | | | 342,479 | | Total current liabilities | | 461,726 | | | 541,946 | |
| Deferred revenue and customer deposits1 | Deferred revenue and customer deposits1 | | 68,727 | | | 90,310 | | Deferred revenue and customer deposits1 | | 14,499 | | | 56,392 | |
Operating lease liabilities | | 122,412 | | | 106,187 | | |
Operating lease liabilities1 | | Operating lease liabilities1 | | 133,602 | | | 132,363 | |
| Financing obligations | Financing obligations | | 443,665 | | | 461,900 | | Financing obligations | | 410,365 | | | 442,063 | |
Recourse debt | Recourse debt | | 274,742 | | | 283,483 | | Recourse debt | | 840,492 | | | 273,076 | |
Non-recourse debt1 | Non-recourse debt1 | | 179,955 | | | 217,416 | | Non-recourse debt1 | | 1,483 | | | 112,480 | |
| Other long-term liabilities | Other long-term liabilities | | 8,917 | | | 16,772 | | Other long-term liabilities | | 8,805 | | | 9,491 | |
Total liabilities | Total liabilities | | 1,491,145 | | | 1,518,547 | | Total liabilities | | $ | 1,870,972 | | | $ | 1,567,811 | |
Commitments and contingencies (Note 13) | Commitments and contingencies (Note 13) | | | | | Commitments and contingencies (Note 13) | | | | |
Redeemable convertible preferred stock, Series A: 10,000,000 shares authorized and 10,000,000 shares and no shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. | | 208,551 | | | 208,551 | | |
Redeemable noncontrolling interest | | — | | | 300 | | |
Stockholders’ equity (deficit): | | |
| Common stock: $0.0001 par value; Class A shares - 600,000,000 shares authorized and 179,165,539 shares and 160,627,544 shares issued and outstanding and Class B shares - 600,000,000 shares authorized and 15,802,146 shares and 15,832,863 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. | | 19 | | | 18 | | |
Stockholders’ equity: | | Stockholders’ equity: | |
| Common stock: $0.0001 par value; Class A shares - 600,000,000 shares authorized and 223,860,870 shares and 189,864,722 shares issued and outstanding and Class B shares - 600,000,000 shares authorized and 0 shares and 15,799,968 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | | Common stock: $0.0001 par value; Class A shares - 600,000,000 shares authorized and 223,860,870 shares and 189,864,722 shares issued and outstanding and Class B shares - 600,000,000 shares authorized and 0 shares and 15,799,968 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | | 21 | | | 20 | |
Additional paid-in capital | Additional paid-in capital | | 3,691,715 | | | 3,219,081 | | Additional paid-in capital | | 4,360,080 | | | 3,906,491 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (1,531) | | | (350) | | Accumulated other comprehensive loss | | (2,378) | | | (1,251) | |
Accumulated deficit | Accumulated deficit | | (3,517,311) | | | (3,263,075) | | Accumulated deficit | | (3,871,110) | | | (3,564,483) | |
Total equity (deficit) attributable to Class A and Class B common stockholders | | 172,892 | | | (44,326) | | |
Total equity attributable to common stockholders | | Total equity attributable to common stockholders | | 486,613 | | | 340,777 | |
Noncontrolling interest | Noncontrolling interest | | 29,481 | | | 42,499 | | Noncontrolling interest | | 18,587 | | | 38,039 | |
Total stockholders' equity (deficit) | | $ | 202,373 | | | $ | (1,827) | | |
Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interest and stockholders' equity (deficit) | | $ | 1,902,069 | | | $ | 1,725,571 | | |
Total stockholders’ equity | | Total stockholders’ equity | | $ | 505,200 | | | $ | 378,816 | |
Total liabilities and stockholders’ equity | | Total liabilities and stockholders’ equity | | $ | 2,376,172 | | | $ | 1,946,627 | |
1We have a variable interest entitiesentity related to PPAs,PPA V (see Note 10 - Portfolio Financings) and a joint venture in the Republic of Korea (see Note 16 - SK ecoplant Strategic Investment), which represent a portion of the consolidated balances recorded within these financial statement line items initems.
In August 2023, we sold the condensedconsolidated balance sheetsPPA V entity as a result of the PPA V Repowering of Energy Servers (see Note 1110 - - Portfolio FinancingsFinancings)., as such the consolidated balances recorded within these financial statement line items as of September 30, 2023 exclude PPA V balances.
2 Including amounts from related parties of $247.9 million and $4.3 million as of September 30, 2023 and December 31, 2022, respectively.
3 Including amounts from related parties of $3.4 million as of September 30, 2023. There was no respective related party amounts as of December 31, 2022.
4 Including amounts from related parties of $23.4 million as of September 30, 2023. There was no respective related party amounts as of December 31, 2022.
5 Including amounts from related parties of $5.7 million as of September 30, 2023. There was no respective related party amounts as of December 31, 2022.
6 Including amounts from related parties of $11.1 million as of September 30, 2023. There was no respective related party amounts as of December 31, 2022.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Bloom Energy Corporation
Condensed Consolidated Statements of Operations
(in thousands, except net loss per share data)
(unaudited)
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 | |
| | | | | | | | | | | | | | | | | | | | |
Revenue: | Revenue: | | | Revenue: | | |
Product | Product | | $ | 213,243 | | | $ | 128,550 | | | $ | 520,415 | | | $ | 413,347 | | | Product | | $ | 304,976 | | | $ | 213,243 | | | $ | 713,427 | | | $ | 520,415 | | |
Installation | Installation | | 22,682 | | | 22,172 | | | 48,964 | | | 53,710 | | | Installation | | 21,916 | | | 22,682 | | | 66,762 | | | 48,964 | | |
Service | Service | | 37,347 | | | 39,251 | | | 111,012 | | | 111,375 | | | Service | | 47,535 | | | 37,347 | | | 130,496 | | | 111,012 | | |
Electricity | Electricity | | 19,002 | | | 17,255 | | | 56,158 | | | 51,273 | | | Electricity | | 25,841 | | | 19,002 | | | 65,869 | | | 56,158 | | |
Total revenue | | 292,274 | | | 207,228 | | | 736,549 | | | 629,705 | | | |
Total revenue1 | | Total revenue1 | | 400,268 | | | 292,274 | | | 976,554 | | | 736,549 | | |
Cost of revenue: | Cost of revenue: | | | | | | | | | | Cost of revenue: | | | | | | | | | |
Product | Product | | 158,176 | | | 93,704 | | | 393,337 | | | 289,889 | | | Product | | 182,832 | | | 158,176 | | | 457,591 | | | 393,337 | | |
Installation | Installation | | 28,333 | | | 25,616 | | | 57,836 | | | 66,756 | | | Installation | | 25,902 | | | 28,333 | | | 77,881 | | | 57,836 | | |
Service | Service | | 41,792 | | | 39,586 | | | 124,646 | | | 111,269 | | | Service | | 57,370 | | | 41,792 | | | 165,877 | | | 124,646 | | |
Electricity | Electricity | | 13,029 | | | 11,439 | | | 83,819 | | | 32,913 | | | Electricity | | 139,378 | | | 13,029 | | | 169,802 | | | 83,819 | | |
Total cost of revenue | Total cost of revenue | | 241,330 | | | 170,345 | | | 659,638 | | | 500,827 | | | Total cost of revenue | | 405,482 | | | 241,330 | | | 871,151 | | | 659,638 | | |
Gross profit | | 50,944 | | | 36,883 | | | 76,911 | | | 128,878 | | | |
Gross (loss) profit | | Gross (loss) profit | | (5,214) | | | 50,944 | | | 105,403 | | | 76,911 | | |
Operating expenses: | Operating expenses: | | | | | | | | | | Operating expenses: | | | | | | | | | |
Research and development | Research and development | | 36,146 | | | 27,634 | | | 112,286 | | | 76,602 | | | Research and development | | 35,126 | | | 36,146 | | | 122,309 | | | 112,286 | | |
Sales and marketing | Sales and marketing | | 23,275 | | | 20,124 | | | 65,084 | | | 62,803 | | | Sales and marketing | | 20,002 | | | 23,275 | | | 73,935 | | | 65,084 | | |
General and administrative | General and administrative | | 44,115 | | | 33,014 | | | 119,965 | | | 90,470 | | | General and administrative | | 43,366 | | | 44,115 | | | 131,004 | | | 119,965 | | |
Total operating expenses | Total operating expenses | | 103,536 | | | 80,772 | | | 297,335 | | | 229,875 | | | Total operating expenses | | 98,494 | | | 103,536 | | | 327,248 | | | 297,335 | | |
Loss from operations | Loss from operations | | (52,592) | | | (43,889) | | | (220,424) | | | (100,997) | | | Loss from operations | | (103,708) | | | (52,592) | | | (221,845) | | | (220,424) | | |
Interest income | Interest income | | 1,109 | | | 72 | | | 1,364 | | | 222 | | | Interest income | | 7,419 | | | 1,109 | | | 13,771 | | | 1,364 | | |
Interest expense | Interest expense | | (13,099) | | | (14,514) | | | (41,000) | | | (43,798) | | | Interest expense | | (68,037) | | | (13,099) | | | (93,736) | | | (41,000) | | |
| Other (expense) income, net | | Other (expense) income, net | | (1,577) | | | 4,472 | | | (3,660) | | | 254 | | |
Loss on extinguishment of debt | Loss on extinguishment of debt | | — | | | — | | | (4,233) | | | — | | | Loss on extinguishment of debt | | (1,415) | | | — | | | (4,288) | | | (4,233) | | |
Other income, net | | 4,472 | | | 2,011 | | | 254 | | | 1,948 | | | |
Gain (loss) on revaluation of embedded derivatives | | 54 | | | (184) | | | 623 | | | (1,644) | | | |
(Loss) gain on revaluation of embedded derivatives | | (Loss) gain on revaluation of embedded derivatives | | (114) | | | 54 | | | (1,213) | | | 623 | | |
Loss before income taxes | Loss before income taxes | | (60,056) | | | (56,504) | | | (263,416) | | | (144,269) | | | Loss before income taxes | | (167,432) | | | (60,056) | | | (310,971) | | | (263,416) | | |
Income tax provision | Income tax provision | | 336 | | | 158 | | | 888 | | | 595 | | | Income tax provision | | 646 | | | 336 | | | 1,083 | | | 888 | | |
Net loss | Net loss | | (60,392) | | | (56,662) | | | (264,304) | | | (144,864) | | | Net loss | | (168,078) | | | (60,392) | | | (312,054) | | | (264,304) | | |
Less: Net loss attributable to noncontrolling interest | | (3,315) | | | (4,309) | | | (9,768) | | | (13,733) | | | |
Net loss attributable to Class A and Class B common stockholders | | $ | (57,077) | | | $ | (52,353) | | | $ | (254,536) | | | $ | (131,131) | | | |
Less: Net (loss) income attributable to redeemable noncontrolling interest | | — | | | 17 | | | (300) | | | (9) | | | |
Less: Net gain (loss) attributable to noncontrolling interest | | Less: Net gain (loss) attributable to noncontrolling interest | | 921 | | | (3,315) | | | (5,427) | | | (9,768) | | |
| Net loss attributable to common stockholders | | Net loss attributable to common stockholders | | (168,999) | | | (57,077) | | | (306,627) | | | (254,536) | | |
Less: Net loss attributable to redeemable noncontrolling interest | | Less: Net loss attributable to redeemable noncontrolling interest | | — | | | — | | | — | | | (300) | | |
Net loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | Net loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | | $ | (57,077) | | | $ | (52,370) | | | $ | (254,236) | | | $ | (131,122) | | | Net loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | | $ | (168,999) | | | $ | (57,077) | | | $ | (306,627) | | | $ | (254,236) | | |
Net loss per share available to Class A and Class B common stockholders, basic and diluted | | $ | (0.31) | | | $ | (0.30) | | | $ | (1.41) | | | $ | (0.76) | | | |
Weighted average shares used to compute net loss per share available to Class A and Class B common stockholders, basic and diluted | | 186,487 | | | 174,269 | | | 180,762 | | | 172,601 | | | |
Net loss per share available to common stockholders, basic and diluted | | Net loss per share available to common stockholders, basic and diluted | | $ | (0.80) | | | $ | (0.31) | | | $ | (1.47) | | | $ | (1.41) | | |
Weighted average shares used to compute net loss per share available to common stockholders, basic and diluted | | Weighted average shares used to compute net loss per share available to common stockholders, basic and diluted | | 210,930 | | | 186,487 | | | 208,798 | | | 180,762 | | |
1 Including related party revenue of $125.7 million and $361.0 million for the three and nine months ended September 30, 2023, respectively, and $12.5 million and $30.2 million for the three and nine months ended September 30, 2022, respectively.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Bloom Energy Corporation
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 | |
| | | | | | | | | | | | | | | | | | | | |
Net loss | Net loss | | $ | (60,392) | | | $ | (56,662) | | | $ | (264,304) | | | $ | (144,864) | | | Net loss | | $ | (168,078) | | | $ | (60,392) | | | $ | (312,054) | | | $ | (264,304) | | |
Other comprehensive loss, net of taxes: | Other comprehensive loss, net of taxes: | | | | | | | | | | Other comprehensive loss, net of taxes: | | | | | | | | | |
| Change in derivative instruments designated and qualifying as cash flow hedges | | — | | | (763) | | | — | | | (4,031) | | | |
Foreign currency translation adjustment | Foreign currency translation adjustment | | (1,027) | | | (299) | | | (1,774) | | | (523) | | | Foreign currency translation adjustment | | (527) | | | (1,027) | | | (1,520) | | | (1,774) | | |
Other comprehensive loss, net of taxes | Other comprehensive loss, net of taxes | | (1,027) | | | (1,062) | | | (1,774) | | | (4,554) | | | Other comprehensive loss, net of taxes | | (527) | | | (1,027) | | | (1,520) | | | (1,774) | | |
Comprehensive loss | Comprehensive loss | | (61,419) | | | (57,724) | | | (266,078) | | | (149,418) | | | Comprehensive loss | | (168,605) | | | (61,419) | | | (313,574) | | | (266,078) | | |
Less: Comprehensive loss attributable to noncontrolling interest | | (3,811) | | | (3,691) | | | (10,361) | | | (9,956) | | | |
Comprehensive loss attributable to Class A and Class B common stockholders | | $ | (57,608) | | | $ | (54,033) | | | $ | (255,717) | | | $ | (139,462) | | | |
Less: Comprehensive (loss) income attributable to redeemable noncontrolling interest | | — | | | 17 | | | (300) | | | (9) | | | |
Comprehensive loss after portion attributable to redeemable noncontrolling interest and noncontrolling interest | | $ | (57,608) | | | $ | (54,050) | | | $ | (255,417) | | | $ | (139,453) | | | |
Less: Comprehensive gain (loss) attributable to noncontrolling interest | | Less: Comprehensive gain (loss) attributable to noncontrolling interest | | 719 | | | (3,811) | | | (5,820) | | | (10,361) | | |
| Comprehensive loss attributable to common stockholders | | Comprehensive loss attributable to common stockholders | | $ | (169,324) | | | $ | (57,608) | | | $ | (307,754) | | | $ | (255,717) | | |
Less: Comprehensive loss attributable to redeemable noncontrolling interest | | Less: Comprehensive loss attributable to redeemable noncontrolling interest | | — | | | — | | | — | | | (300) | | |
Comprehensive loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | | Comprehensive loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | | $ | (169,324) | | | $ | (57,608) | | | $ | (307,754) | | | $ | (255,417) | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Bloom Energy Corporation
Condensed Consolidated Statements of Changes in Stockholders'Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended September 30, 2022 |
| | | | | | | Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total equity (deficit) attributable to Class A and Class B common stockholders | | Noncontrolling Interest | | Total Stockholders' Equity (Deficit) |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at June 30, 2022 | | | | | | | | | 178,913,797 | | | $ | 18 | | | $ | 3,284,261 | | | $ | (1,000) | | | $ | (3,460,234) | | | $ | (176,955) | | | $ | 32,034 | | | $ | (144,921) | |
Issuance of restricted stock awards | | | | | | | | | 539,074 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 339,055 | | | — | | | 5,619 | | | — | | | — | | | 5,619 | | | — | | | 5,619 | |
Exercise of stock options | | | | | | | | | 225,759 | | | — | | | 2,233 | | | — | | | — | | | 2,233 | | | — | | | 2,233 | |
Stock-based compensation | | | | | | | | | — | | | — | | | 23,893 | | | — | | | — | | | 23,893 | | | — | | | 23,893 | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,557) | | | (1,557) | |
Contributions from noncontrolling interest | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,815 | | | 2,815 | |
Public share offering (Note 1) | | | | | | | | | 14,950,000 | | | 1 | | | 371,526 | | | — | | | — | | | 371,527 | | | — | | | 371,527 | |
Forward to purchase Class A Common Stock (Note 5) | | | | | | | | | — | | | — | | | 4,183 | | | — | | | — | | | 4,183 | | | — | | | 4,183 | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (531) | | | — | | | (531) | | | (496) | | | (1,027) | |
Net loss1 | | | | | | | | | — | | | — | | | — | | | — | | | (57,077) | | | (57,077) | | | (3,315) | | | (60,392) | |
Balances at September 30, 2022 | | | | | | | | | 194,967,685 | | | $ | 19 | | | $ | 3,691,715 | | | $ | (1,531) | | | $ | (3,517,311) | | | $ | 172,892 | | | $ | 29,481 | | | $ | 202,373 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended September 30, 2023 |
| | | | | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Equity Attributable to Common Stockholders | | Noncontrolling Interest | | Total Stockholders’ Equity |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at June 30, 2023 | | | | | | | | | 209,181,382 | | | $ | 20 | | | $ | 4,011,900 | | | $ | (2,053) | | | $ | (3,702,111) | | | $ | 307,756 | | | $ | 38,479 | | | 346,235 | |
Issuance of restricted stock awards | | | | | | | | | 637,728 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 426,170 | | | — | | | 5,607 | | | — | | | — | | | 5,607 | | | — | | | 5,607 | |
Exercise of stock options | | | | | | | | | 123,889 | | | — | | | 1,138 | | | — | | | — | | | 1,138 | | | — | | | 1,138 | |
Stock-based compensation expense | | | | | | | | | — | | | — | | | 19,469 | | | — | | | — | | | 19,469 | | | — | | | 19,469 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Buyout of noncontrolling interest (Note 10) | | | | | | | | | — | | | — | | | 11,482 | | | — | | | — | | | 11,482 | | | (18,346) | | | (6,864) | |
Conversion of Series B redeemable convertible preferred stock (Note 16) | | | | | | | | | 13,491,701 | | | 1 | | | 310,484 | | | — | | | — | | | 310,485 | | | — | | | 310,485 | |
Distributions and payments to noncontrolling interest | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,265) | | | (2,265) | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (325) | | | — | | | (325) | | | (202) | | | (527) | |
Net (loss) gain | | | | | | | | | — | | | — | | | — | | | — | | | (168,999) | | | (168,999) | | | 921 | | | (168,078) | |
Balances at September 30, 2023 | | | | | | | | | 223,860,870 | | | $ | 21 | | | $ | 4,360,080 | | | $ | (2,378) | | | $ | (3,871,110) | | | $ | 486,613 | | | $ | 18,587 | | | $ | 505,200 | |
1There is no net loss attributable to redeemable noncontrolling interest.
Note: There was no redeemable noncontrolling interest as of June 30, 2022 and September 30, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended September 30, 2021 |
| | | | | | | Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total deficit attributable to Class A and Class B common stockholders | | Noncontrolling Interest | | Total Stockholders' Equity |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at June 30, 2021 | | | | | | | | | 173,402,160 | | | $ | 17 | | | $ | 3,155,917 | | | $ | (124) | | | $ | (3,177,381) | | | $ | (21,571) | | | $ | 51,185 | | | $ | 29,614 | |
Issuance of restricted stock awards | | | | | | | | | 581,363 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 967,797 | | | — | | | 5,319 | | | — | | | — | | | 5,319 | | | — | | | 5,319 | |
Exercise of stock options | | | | | | | | | 126,741 | | | 1 | | | 1,122 | | | — | | | — | | | 1,123 | | | — | | | 1,123 | |
Stock-based compensation | | | | | | | | | — | | | — | | | 20,743 | | | — | | | — | | | 20,743 | | | — | | | 20,743 | |
Change in effective portion of interest rate swap agreement | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 763 | | | 763 | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (540) | | | (540) | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (154) | | | — | | | (154) | | | (145) | | | (299) | |
Net loss2 | | | | | | | | | — | | | — | | | — | | | — | | | (52,370) | | | (52,370) | | | (4,309) | | | (56,679) | |
Balances at September 30, 2021 | | | | | | | | | 175,078,061 | | | $ | 18 | | | $ | 3,183,101 | | | $ | (278) | | | $ | (3,229,751) | | | $ | (46,910) | | | $ | 46,954 | | | $ | 44 | |
2Excludes $17 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $334 - distributions to redeemable noncontrolling interests of $20 + net income attributable to redeemable noncontrolling interest of $17 = ending redeemable noncontrolling interest of $331. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended September 30, 2022 |
| | | | | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Equity (Deficit) Attributable to Common Stockholders | | Noncontrolling Interest | | Total Stockholders’ Equity (Deficit) |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at June 30, 2022 | | | | | | | | | 178,913,797 | | | $ | 18 | | | $ | 3,284,261 | | | $ | (1,000) | | | $ | (3,460,234) | | | $ | (176,955) | | | $ | 32,034 | | | $ | (144,921) | |
Issuance of restricted stock awards | | | | | | | | | 539,074 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 339,055 | | | — | | | 5,619 | | | — | | | — | | | 5,619 | | | — | | | 5,619 | |
Exercise of stock options | | | | | | | | | 225,759 | | | — | | | 2,233 | | | — | | | — | | | 2,233 | | | — | | | 2,233 | |
Stock-based compensation | | | | | | | | | — | | | — | | | 23,893 | | | — | | | — | | | 23,893 | | | — | | | 23,893 | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,557) | | | (1,557) | |
Contributions from noncontrolling interest | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,815 | | | 2,815 | |
Public share offering | | | | | | | | | 14,950,000 | | | 1 | | | 371,526 | | | — | | | — | | | 371,527 | | | — | | | 371,527 | |
Forward to purchase Class A Common Stock | | | | | | | | | — | | | — | | | 4,183 | | | — | | | — | | | 4,183 | | | — | | | 4,183 | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (531) | | | — | | | (531) | | | (496) | | | (1,027) | |
Net loss | | | | | | | | | — | | | — | | | — | | | — | | | (57,077) | | | (57,077) | | | (3,315) | | | (60,392) | |
Balances at September 30, 2022 | | | | | | | | | 194,967,685 | | | $ | 19 | | | $ | 3,691,715 | | | $ | (1,531) | | | $ | (3,517,311) | | | $ | 172,892 | | | $ | 29,481 | | | $ | 202,373 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Nine Months Ended September 30, 2022 |
| | | | | | | Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total equity (deficit) attributable to Class A and Class B common stockholders | | Noncontrolling Interest | | Total Stockholders' Equity (Deficit) |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at December 31, 2021 | | | | | | | | | 176,460,407 | | | $ | 18 | | | $ | 3,219,081 | | | $ | (350) | | | $ | (3,263,075) | | | $ | (44,326) | | | $ | 42,499 | | | $ | (1,827) | |
Issuance of restricted stock awards | | | | | | | | | 2,328,713 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 759,744 | | | — | | | 11,600 | | | — | | | — | | | 11,600 | | | — | | | 11,600 | |
Exercise of stock options | | | | | | | | | 468,821 | | | — | | | 3,550 | | | — | | | — | | | 3,550 | | | — | | | 3,550 | |
Stock-based compensation expense | | | | | | | | | — | | | — | | | 82,275 | | | — | | | — | | | 82,275 | | | — | | | 82,275 | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | (500) | | | — | | | — | | | (500) | | | (5,472) | | | (5,972) | |
Contributions from noncontrolling interest | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,815 | | | 2,815 | |
Public share offering (Note 1) | | | | | | | | | 14,950,000 | | | 1 | | | 371,526 | | | — | | | — | | | 371,527 | | | — | | | 371,527 | |
Forward to purchase Class A Common Stock (Note 5) | | | | | | | | | — | | | — | | | 4,183 | | | — | | | — | | | 4,183 | | | — | | | 4,183 | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (1,181) | | | — | | | (1,181) | | | (593) | | | (1,774) | |
Net loss3 | | | | | | | | | — | | | — | | | — | | | — | | | (254,236) | | | (254,236) | | | (9,768) | | | (264,004) | |
Balances at September 30, 2022 | | | | | | | | | 194,967,685 | | | $ | 19 | | | $ | 3,691,715 | | | $ | (1,531) | | | $ | (3,517,311) | | | $ | 172,892 | | | $ | 29,481 | | | $ | 202,373 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Nine Months Ended September 30, 2023 |
| | | | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Equity Attributable to Common Stockholders | | Noncontrolling Interest | | Total Stockholders’ Equity |
| | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at December 31, 2022 | | | | | | | | 205,664,690 | | | $ | 20 | | | $ | 3,906,491 | | | $ | (1,251) | | | $ | (3,564,483) | | | $ | 340,777 | | | $ | 38,039 | | | $ | 378,816 | |
Issuance of restricted stock awards | | | | | | | | 3,496,491 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | 875,695 | | | — | | | 13,363 | | | — | | | — | | | 13,363 | | | — | | | 13,363 | |
Exercise of stock options | | | | | | | | 332,293 | | | — | | | 2,640 | | | — | | | — | | | 2,640 | | | — | | | 2,640 | |
Stock-based compensation | | | | | | | | — | | | — | | | 77,755 | | | — | | | — | | | 77,755 | | | — | | | 77,755 | |
Derecognition of the pre-modification forward contract fair value (Note 16) | | | | | | | | — | | | — | | | 76,242 | | | — | | | — | | | 76,242 | | | — | | | 76,242 | |
Equity component of Series B redeemable convertible preferred stock (Note 16) | | | | | | | | — | | | — | | | 16,145 | | | — | | | — | | | 16,145 | | | — | | | 16,145 | |
Contributions from noncontrolling interest | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,979 | | | 6,979 | |
Purchase of capped call related to convertible notes (Note 7) | | | | | | | | — | | | — | | | (54,522) | | | — | | | — | | | (54,522) | | | — | | | (54,522) | |
Buyout of noncontrolling interest (Note 10) | | | | | | | | — | | | — | | | 11,482 | | | — | | | — | | | 11,482 | | | (18,346) | | | (6,864) | |
Conversion of Series B redeemable convertible preferred stock (Note 16) | | | | | | | | 13,491,701 | | | 1 | | | 310,484 | | | — | | | — | | | 310,485 | | | — | | | 310,485 | |
Distributions and payments to noncontrolling interest | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,265) | | | (2,265) | |
Foreign currency translation adjustment | | | | | | | | — | | | — | | | — | | | (1,127) | | | — | | | (1,127) | | | (393) | | | (1,520) | |
Net loss | | | | | | | | — | | | — | | | — | | | — | | | (306,627) | | | (306,627) | | | (5,427) | | | (312,054) | |
Balances at September 30, 2023 | | | | | | | | 223,860,870 | | | 21 | | | $ | 4,360,080 | | | $ | (2,378) | | | $ | (3,871,110) | | | $ | 486,613 | | | $ | 18,587 | | | $ | 505,200 | |
3
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Nine Months Ended September 30, 2022 | | | | |
| | | | | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Equity (Deficit) Attributable to Common Stockholders | | Noncontrolling Interest | | Total Stockholders’ Equity (Deficit) | | | | |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | | | | | |
Balances at December 31, 2021 | | | | | | | | | 176,460,407 | | | $ | 18 | | | $ | 3,219,081 | | | $ | (350) | | | $ | (3,263,075) | | | $ | (44,326) | | | $ | 42,499 | | | $ | (1,827) | | | | | |
Issuance of restricted stock awards | | | | | | | | | 2,328,713 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | |
ESPP purchase | | | | | | | | | 759,744 | | | — | | | 11,600 | | | — | | | — | | | 11,600 | | | — | | | 11,600 | | | | | |
Exercise of stock options | | | | | | | | | 468,821 | | | — | | | 3,550 | | | — | | | — | | | 3,550 | | | — | | | 3,550 | | | | | |
Stock-based compensation | | | | | | | | | — | | | — | | | 82,275 | | | — | | | — | | | 82,275 | | | — | | | 82,275 | | | | | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | (500) | | | — | | | — | | | (500) | | | (5,472) | | | (5,972) | | | | | |
Contributions from noncontrolling interest | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,815 | | | 2,815 | | | | | |
Public share offering | | | | | | | | | 14,950,000 | | | 1 | | | 371,526 | | | — | | | — | | | 371,527 | | | — | | | 371,527 | | | | | |
Forward to purchase Class A Common Stock | | | | | | | | | — | | | — | | | 4,183 | | | — | | | — | | | 4,183 | | | — | | | 4,183 | | | | | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (1,181) | | | — | | | (1,181) | | | (593) | | | (1,774) | | | | | |
Net loss1 | | | | | | | | | — | | | — | | | — | | | — | | | (254,236) | | | (254,236) | | | (9,768) | | | (264,004) | | | | | |
Balances at September 30, 2022 | | | | | | | | | 194,967,685 | | | $ | 19 | | | $ | 3,691,715 | | | $ | (1,531) | | | $ | (3,517,311) | | | $ | 172,892 | | | $ | 29,481 | | | $ | 202,373 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
1Excludes $300 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $300 - netNet loss attributable to redeemable noncontrolling interest of $300 = ending redeemable noncontrolling interest of Nil.nil.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Nine Months Ended September 30, 2021 |
| | | | | | | Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total (deficit) equity attributable to Class A and Class B common stockholders | | Noncontrolling Interest | | Total Stockholders' Equity |
| | | | | | | | | Shares | | Amount | | | | | | | | | | | | |
Balances at December 31, 2020 | | | | | | | | | 168,002,726 | | | $ | 17 | | | $ | 3,182,753 | | | $ | (9) | | | $ | (3,103,937) | | | $ | 78,824 | | | $ | 62,195 | | | $ | 141,019 | |
Cumulative effect upon adoption of Accounting Standards Update 2020-06 | | | | | | | | | — | | | — | | | (126,799) | | | — | | | 5,308 | | | (121,491) | | | — | | | (121,491) | |
Issuance of restricted stock awards | | | | | | | | | 2,533,027 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
ESPP purchase | | | | | | | | | 1,945,305 | | | — | | | 10,045 | | | — | | | — | | | 10,045 | | | — | | | 10,045 | |
Exercise of stock options | | | | | | | | | 2,597,003 | | | 1 | | | 62,064 | | | — | | | — | | | 62,065 | | | — | | | 62,065 | |
Stock-based compensation expense | | | | | | | | | — | | | — | | | 55,038 | | | — | | | — | | | 55,038 | | | — | | | 55,038 | |
Change in effective portion of interest rate swap agreement | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,031 | | | 4,031 | |
Distributions and payments to noncontrolling interests | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,285) | | | (5,285) | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | (269) | | | — | | | (269) | | | (254) | | | (523) | |
Net loss4 | | | | | | | | | — | | | — | | | — | | | — | | | (131,122) | | | (131,122) | | | (13,733) | | | (144,855) | |
Balances at September 30, 2021 | | | | | | | | | 175,078,061 | | | $ | 18 | | | $ | 3,183,101 | | | $ | (278) | | | $ | (3,229,751) | | | $ | (46,910) | | | $ | 46,954 | | | $ | 44 | |
4Excludes $9 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $377 - distributions to redeemable noncontrolling interest of $37 - net loss attributable to redeemable noncontrolling interest of $9 = ending redeemable noncontrolling interest of $331.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Bloom Energy Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | | | 2023 | | 2022 | |
Cash flows from operating activities: | Cash flows from operating activities: | | | | | | Cash flows from operating activities: | | | | | |
Net loss | Net loss | | $ | (264,304) | | | $ | (144,864) | | | Net loss | | $ | (312,054) | | | $ | (264,304) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
Depreciation and amortization | Depreciation and amortization | | 46,182 | | | 40,079 | | | Depreciation and amortization | | 50,283 | | | 46,182 | | |
Non-cash lease expense | Non-cash lease expense | | 18,153 | | | 7,161 | | | Non-cash lease expense | | 24,540 | | | 18,153 | | |
Gain on sale of property, plant and equipment | | (523) | | | — | | | |
| Write-off of assets related to PPA IIIa | | 44,800 | | | — | | | |
Loss (gain) on disposal of property, plant and equipment | | Loss (gain) on disposal of property, plant and equipment | | 177 | | | (523) | | |
| Revaluation of derivative liabilities | | (9,640) | | | 486 | | | |
| Revaluation of derivative contracts | | Revaluation of derivative contracts | | 1,213 | | | (9,640) | | |
Impairment of assets related to PPA V and PPA IIIa | | Impairment of assets related to PPA V and PPA IIIa | | 130,111 | | | 44,800 | | |
Derecognition of loan commitment asset related to SK ecoplant Second Tranche Closing (Note 16) | | Derecognition of loan commitment asset related to SK ecoplant Second Tranche Closing (Note 16) | | 52,792 | | | — | | |
| Stock-based compensation | Stock-based compensation | | 81,460 | | | 57,309 | | | Stock-based compensation | | 77,160 | | | 81,460 | | |
| Gain on remeasurement of investment | | — | | | (1,966) | | | |
| Loss on extinguishment of debt | | 4,233 | | | — | | | |
| | Amortization of warrants and debt issuance costs | Amortization of warrants and debt issuance costs | | 2,355 | | | 2,824 | | | Amortization of warrants and debt issuance costs | | 3,300 | | | 2,355 | | |
Loss on extinguishment of debt | | Loss on extinguishment of debt | | 4,288 | | | 4,233 | | |
Unrealized foreign currency exchange loss | Unrealized foreign currency exchange loss | | 3,086 | | | 184 | | | Unrealized foreign currency exchange loss | | 3,029 | | | 3,086 | | |
Other | Other | | 3,487 | | | — | | | Other | | — | | | 3,487 | | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | | Changes in operating assets and liabilities: | | |
Accounts receivable | | 15,758 | | | 34,236 | | | |
Contract assets | | (567) | | | (24,418) | | | |
Accounts receivable1 | | Accounts receivable1 | | (83,851) | | | 15,758 | | |
Contract assets2 | | Contract assets2 | | (97,148) | | | (567) | | |
Inventories | Inventories | | (110,797) | | | (39,953) | | | Inventories | | (206,315) | | | (110,797) | | |
Deferred cost of revenue | | (8,856) | | | 7,307 | | | |
Deferred cost of revenue3 | | Deferred cost of revenue3 | | (15,914) | | | (8,856) | | |
Customer financing receivable | Customer financing receivable | | 2,510 | | | 4,022 | | | Customer financing receivable | | — | | | 2,510 | | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | | (15,766) | | | 236 | | | Prepaid expenses and other current assets | | (20,849) | | | (15,766) | | |
Other long-term assets | Other long-term assets | | (730) | | | (374) | | | Other long-term assets | | 13,634 | | | (730) | | |
Operating lease right-of-use assets and operating lease liabilities | Operating lease right-of-use assets and operating lease liabilities | | 2,162 | | | (7,593) | | | Operating lease right-of-use assets and operating lease liabilities | | (23,879) | | | 2,162 | | |
Finance lease liabilities | Finance lease liabilities | | 499 | | | — | | | Finance lease liabilities | | 907 | | | 499 | | |
Accounts payable | Accounts payable | | 38,642 | | | 37,795 | | | Accounts payable | | (5,695) | | | 38,642 | | |
Accrued warranty | Accrued warranty | | 1,597 | | | (2,357) | | | Accrued warranty | | (795) | | | 1,597 | | |
Accrued expenses and other current liabilities | | 502 | | | (26,178) | | | |
Deferred revenue and customer deposits | | (12,716) | | | (53,181) | | | |
Accrued expenses and other current liabilities4 | | Accrued expenses and other current liabilities4 | | (30,937) | | | 502 | | |
Deferred revenue and customer deposits5 | | Deferred revenue and customer deposits5 | | (57,041) | | | (12,716) | | |
Other long-term liabilities | Other long-term liabilities | | (9,980) | | | 1,289 | | | Other long-term liabilities | | (1,320) | | | (9,980) | | |
Net cash used in operating activities | Net cash used in operating activities | | (168,453) | | | (107,956) | | | Net cash used in operating activities | | (494,364) | | | (168,453) | | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | | | Cash flows from investing activities: | | | | | |
Purchase of property, plant and equipment | Purchase of property, plant and equipment | | (80,907) | | | (44,625) | | | Purchase of property, plant and equipment | | (67,485) | | | (80,907) | | |
Net cash acquired from step acquisition | | — | | | 3,114 | | | |
Proceeds from sale of property, plant and equipment | | Proceeds from sale of property, plant and equipment | | 3 | | | — | | |
| Net cash used in investing activities | Net cash used in investing activities | | (80,907) | | | (41,511) | | | Net cash used in investing activities | | (67,482) | | | (80,907) | | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | | | Cash flows from financing activities: | | | | | |
| Repayment of debt of PPA IIIa | | (30,212) | | | — | | | |
Repayment of debt | | (17,262) | | | (11,017) | | | |
| Proceeds from issuance of debt | | Proceeds from issuance of debt | | 633,983 | | | — | | |
Payment of debt issuance costs | | Payment of debt issuance costs | | (19,539) | | | — | | |
Repayment of debt of PPA V and PPA IIIa | | Repayment of debt of PPA V and PPA IIIa | | (118,538) | | | (30,212) | | |
Debt make-whole payment related to PPA IIIa debt | Debt make-whole payment related to PPA IIIa debt | | (2,413) | | | — | | | Debt make-whole payment related to PPA IIIa debt | | — | | | (2,413) | | |
| Repayment of recourse debt | | Repayment of recourse debt | | (72,852) | | | (17,262) | | |
Proceeds from financing obligations | Proceeds from financing obligations | | — | | | 7,534 | | | Proceeds from financing obligations | | 2,702 | | | — | | |
Repayment of financing obligations | Repayment of financing obligations | | (28,821) | | | (10,174) | | | Repayment of financing obligations | | (13,475) | | | (28,821) | | |
Contributions from noncontrolling interests | | 2,815 | | | — | | | |
Distributions to redeemable noncontrolling interests | | — | | | (37) | | | |
Distributions and payments to noncontrolling interests | Distributions and payments to noncontrolling interests | | (5,972) | | | (5,285) | | | Distributions and payments to noncontrolling interests | | (2,265) | | | (5,972) | | |
Proceeds from issuance of common stock | Proceeds from issuance of common stock | | 15,150 | | | 72,109 | | | Proceeds from issuance of common stock | | 16,003 | | | 15,150 | | |
| Proceeds from public share offering (Note 1) | | 385,396 | | | — | | | |
Public share offering costs (Note 1) | | (13,407) | | | — | | | |
Proceeds from public share offering | | Proceeds from public share offering | | — | | | 385,396 | | |
Public share offering costs | | Public share offering costs | | — | | | (13,407) | | |
Buyout of noncontrolling interest (Note 10) | | Buyout of noncontrolling interest (Note 10) | | (6,864) | | | — | | |
Proceeds from issuance of Series B redeemable convertible preferred stock | | Proceeds from issuance of Series B redeemable convertible preferred stock | | 310,957 | | | — | | |
Contributions from noncontrolling interest | | Contributions from noncontrolling interest | | 6,979 | | | 2,815 | | |
Purchase of capped call related to convertible notes (Note 7) | | Purchase of capped call related to convertible notes (Note 7) | | (54,522) | | | — | | |
Other | Other | | (63) | | | — | | | Other | | (408) | | | (63) | | |
Net cash provided by financing activities | Net cash provided by financing activities | | 305,211 | | | 53,130 | | | Net cash provided by financing activities | | 682,161 | | | 305,211 | | |
Effect of exchange rate changes on cash, cash equivalent and restricted cash | Effect of exchange rate changes on cash, cash equivalent and restricted cash | | (1,643) | | | (472) | | | Effect of exchange rate changes on cash, cash equivalent and restricted cash | | (985) | | | (1,643) | | |
Net decrease in cash, cash equivalents and restricted cash | | 54,208 | | | (96,809) | | | |
Net increase in cash, cash equivalents and restricted cash | | Net increase in cash, cash equivalents and restricted cash | | 119,330 | | | 54,208 | | |
Cash, cash equivalents and restricted cash: | Cash, cash equivalents and restricted cash: | | | Cash, cash equivalents and restricted cash: | | |
Beginning of period | Beginning of period | | 615,114 | | | 416,710 | | | Beginning of period | | 518,366 | | | 615,114 | | |
End of period | End of period | | $ | 669,322 | | | $ | 319,901 | | | End of period | | $ | 637,696 | | | $ | 669,322 | | |
| Supplemental disclosure of cash flow information: | Supplemental disclosure of cash flow information: | | | Supplemental disclosure of cash flow information: | | |
Cash paid during the period for interest | Cash paid during the period for interest | | $ | 39,664 | | | $ | 42,598 | | | Cash paid during the period for interest | | $ | 32,741 | | | $ | 39,664 | | |
Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | | Cash paid for amounts included in the measurement of lease liabilities: | | |
Operating cash flows from operating leases | Operating cash flows from operating leases | | 11,759 | | | 10,332 | | | Operating cash flows from operating leases | | 23,684 | | | 11,759 | | |
Operating cash flows from finance leases | Operating cash flows from finance leases | | 788 | | | 643 | | | Operating cash flows from finance leases | | 804 | | | 788 | | |
Cash paid during the period for income taxes | Cash paid during the period for income taxes | | 1,296 | | | 372 | | | Cash paid during the period for income taxes | | 1,332 | | | 1,296 | | |
Non-cash investing and financing activities: | Non-cash investing and financing activities: | | | Non-cash investing and financing activities: | | |
| Transfer of customer financing receivable to property, plant and equipment, net | Transfer of customer financing receivable to property, plant and equipment, net | | 42,758 | | | — | | | Transfer of customer financing receivable to property, plant and equipment, net | | $ | — | | | $ | 42,758 | | |
Increase in recourse debt, non-current upon adoption of ASU 2020-06, net | | — | | | 121,491 | | | |
Forward to purchase Class A Common Stock (Note 5) | | 4,183 | | | — | | | |
Forward to purchase Class A Common Stock | | Forward to purchase Class A Common Stock | | — | | | 4,183 | | |
Liabilities recorded for property, plant and equipment, net | Liabilities recorded for property, plant and equipment, net | | 13,373 | | | 6,188 | | | Liabilities recorded for property, plant and equipment, net | | 5,702 | | | 13,373 | | |
| Recognition of operating lease right-of-use asset during the year-to-date period | Recognition of operating lease right-of-use asset during the year-to-date period | | 17,623 | | | 43,660 | | | Recognition of operating lease right-of-use asset during the year-to-date period | | 14,157 | | | 17,623 | | |
Recognition of finance lease right-of-use asset during the year-to-date period | Recognition of finance lease right-of-use asset during the year-to-date period | | — | | | 1,961 | | | Recognition of finance lease right-of-use asset during the year-to-date period | | 907 | | | — | | |
Derecognition of the pre-modification forward contract fair value (Note 16) | | Derecognition of the pre-modification forward contract fair value (Note 16) | | 76,242 | | | — | | |
Equity component of Series B redeemable convertible preferred stock (Note 16) | | Equity component of Series B redeemable convertible preferred stock (Note 16) | | 16,145 | | | — | | |
Conversion of Series B redeemable convertible preferred stock (Note 16) | | Conversion of Series B redeemable convertible preferred stock (Note 16) | | 310,484 | | | — | | |
|
1 Including changes in related party balances of $243.6 million and $8.2 million for the nine months ended September 30, 2023 and 2022, respectively.
2 Including change in related party balances of $3.4 million for the nine months ended September 30, 2023. There were no associated related party balances for the nine months ended September 30, 2022.
3 Including change in related party balances of $23.4 million for the nine months ended September 30, 2023. There were no associated related party balances for the nine months ended September 30, 2022.
4 Including change in related party balances of $5.7 million for the nine months ended September 30, 2023. There were no associated related party balances for the nine months ended September 30, 2022.
5 Including change in related party balances of $11.1 million for the nine months ended September 30, 2023. There were no associated related party balances for the nine months ended September 30, 2022.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Bloom Energy Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
The unaudited interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.
The unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2021 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2022.
Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
1. Nature of Business, Liquidity and Basis of Presentation
Nature of Business
For information on the nature of our business, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Nature of Business section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
We have not experienced any supply chain disruptions as a result of the invasion by the Russian Federation in Ukraine on February 24, 2022.
Liquidity
We have generally incurred operating losses and negative cash flows from operations since our inception. With the series of new debt offerings, debt extensionsextinguishments, and conversions to equityequity that we completed during 20202022 and 2021,the first three quarters of 2023, we had $287.5$840.5 million of total outstanding recourse debt as of September 30, 2022, $274.7 million of2023, which iswas classified as long-term debt. Our recourse debt scheduled repayments commenced in June 2022.
On August 10, 2022, pursuant March 20, 2023, we entered into an Amendment (the “Amended SPA”) to the Securities Purchase Agreement (“the SPA”)with SK ecoplant, notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 sharesdated October 23, 2021 (the “Second Tranche Shares”) at a purchase price of $23.05 per share, calculated as a 15% premium to the volume-weighted average closing price of the 20 consecutive trading day period immediately preceding the exercise of the option (see Note 5 - Fair Value). The aggregate purchase price approximates cash proceeds to be received by us of $311.0 million, net of related incremental direct costs of $0.1 million. The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the Hart Scott Rodino (“HSR”) Act of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice.
“
On August 19, 2022, we completed an underwritten public offering (“the Offering”SPA”), and the Investor Agreement, dated December 29, 2021, pursuant to which we issued and sold 13,000,000to SK ecoplant 13,491,701 shares of Series B redeemable convertible preferred stock (the “Series B RCPS”) for cash proceeds of $311.0 million. For additional information, please see Part I, Item 1, Note 16 - SK ecoplant Strategic Investment.
On March 20, 2023, in connection with the Amended SPA we also entered into a Shareholders’ Loan Agreement with SK ecoplant (the “Loan Agreement”), pursuant to which we were entitled to draw down on a loan from SK ecoplant with a maximum principal amount of $311.0 million, if SK ecoplant sent a redemption notice to us under the Amended SPA or otherwise reduced any portion of its holdings of our Class A Common Stock at price of $26.00 per share. As a partcommon stock. On September 23, 2023, all 13,491,701 shares of the Offering, the underwritersSeries B RCPS were provided a 30-day option to purchase an additional 1,950,000automatically converted into shares of our Class A Common Stock atcommon stock. For additional information, please see Part I, Item 1, Note 11 - Related Party Transactions and Note 16 - SK ecoplant Strategic Investment.
On May 16, 2023, we issued 3% Green Convertible Senior Notes (the “3% Green Notes”) in an aggregate principal amount of $632.5 million due June 2028, unless earlier repurchased, redeemed or converted, less the same price, less underwriting discountsinitial purchasers’ discount of $15.8 million and commissions (“the Greenshoe”), which was exercised contemporaneously with the Offering. The aggregateother issuance costs of $4.0 million, resulting in net proceeds received by usof $612.7 million. On June 1, 2023, we used approximately $60.9 million of the net proceeds from this offering to redeem all of the Offering were $371.5 million after deducting underwriting discountsoutstanding principal amount of our 10.25% Senior Secured Notes due March 2027. The redemption price equaled 104% of the principal amount redeemed plus accrued and commissionsunpaid interest. For additional information, please see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements.
On August 24, 2023, as part of $16.5the repowering of PPA V Investment Company and Operating Company (“PPA V”), our Power Purchase Agreement (“PPA”) entity, we paid off the outstanding balance and related accrued interest of $118.5 million and incremental costs directly attributable to the Offering$0.5 million, respectively, of $0.7 million.our 3.04% Senior Secured Notes due June 30, 2031. For additional information, please see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds, and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our product, our ability to secure financing for customer use of our Energy Servers, the timing of installations, and overall economic conditions, including the impact of COVID-19 and inflationary pressure in the USU.S. on our ongoing and
future operations. The rising interest rate environment in the USU.S. has and willmay continue to adversely impact the cost of new capital deployment.
In the opinion of management, the combination of our existing cash and cash equivalents and the expected timing of operating cash flows is expected to be sufficient to meet our operational and capital cash flow requirements and other cash flow needs for the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.
Inflation Reduction Act of 2022 – New and Expanded Production and Tax Credits for Manufacturers and Projects to Support Clean Energy
On August 7, 2022, the United States Senate passedFor information on the Inflation Reduction Act of 2022 (“the IRA”(the “IRA”) under fiscal year 2022 budget reconciliation instructions. Onsigned into law on August 16, 2022, the IRA was signed into law. This new bill is the U.S. federal government’s largest-ever investment to fight climate change. The IRA includes numerous investments in climate protection, including investments in clean energy production and tax credits aimed at reducing carbon emissions by roughly 40% by 2030. By implementing the IRA, the government aims to make anits impact on energy markets so that cleaner options are more affordable to consumers.
The IRA contains several credits and incentive provisions that may be relevant to us:
| | | | | |
Credit | Credit summary |
Section 45 – Production Tax credit (“PTC”) | Provides a 10-year tax credit for a variety of renewable energy technologies to incentivize electricity generation to be sold to a third party. |
Section 48 – Investment Tax Credit (“ITC”) | Provides a tax credit based on capital investment in a variety of renewable and conventional energy technologies to incentivize investment in new energy resources and more efficient use of fuel. |
Section 45X – Advanced Manufacturing Production | Provides a PTC for the production of certain eligible components sold to an unrelated person (exceptions apply). The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. |
Section 48C – Qualified Advanced Energy Project (reenacted) | Provides an ITC through a competitive application process administered through the Department of Energy equal to 6% or 30% of the investment with respect to advanced energy projects. |
Section 45Y – Clean Electricity Production Credit | Provides a 10-year technology-neutral PTC, equal to the kWh of electricity produced by the taxpayer times an applicable amount (based of $0.003/kWh up to $0.015/kWh) for the production of clean electricity produced at a qualifying facility for which the GHG emission rate is not greater than zero and electricity is sold, consumed or stored. |
Section 48E – Clean Electricity Investment Tax Credit | Provides a technology-neutral ITC of between 6% (or 2%) to 30% (or 10%) for qualified capital investments in an electric generating facility or energy storage for which GHG rate is not greater than zero. |
Section 45V – Clean Hydrogen | Provides a PTC of up to $3 per kg of clean hydrogen over a 10-year credit period for the production of clean hydrogen at a qualified facility in the US. |
Section 45Q – Carbon Capture Sequestration | Provides a credit ranging from $12-$17 or $60-$85 per metric ton based on the amount of carbon oxides captured from a qualified facility over a 12-year period. |
We are currently assessing the impact of these provisions on our business, beyond the third quartersee Part II, Item 8, Note 1 - Nature of 2022.
SomeBusiness, Liquidity and Basis of Presentation, Inflation Reduction Act of 2022 section in our existing contracts contemplated price adjustments due to changes to ITC rate at the inception of the contracts. As a result, we recognized $8.7 million product revenue and $1.3 million installation revenueAnnual Report on Form 10-K for the three monthsfiscal year ended September 30, 2022, due to a change in variable considerations for energy servers placed in service during the eligible periods from such existing contracts.December 31, 2022.
Basis of Presentation
We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), and as permitted by those rules, including all disclosures required by generally accepted accounting principles as applied in the United States (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform to the current period presentation.
Principles of Consolidation
For information on the principles of consolidation, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Principles of Consolidation section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
For information on the business combinations, see Part II, Item 8, Note 1 -
Nature of Business, Liquidity and Basis of Presentation, Business Combinations section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.Use of Estimates
For information on the use of accounting estimates, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Use of Estimates section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
Concentration of Risk
Geographic Risk -The The majority of our revenue for the three and nine months ended September 30, 2023 was attributable to operations in the United States and, for the three and nine months ended September 30, 2022, to operations in the Republic of Korea. A major portion of our long-lived assets areis attributable to operations in the United States for all periods presented. In addition to shipments in the US,U.S. and the Republic of Korea, we also ship our Energy Servers to other countries, primarily toJapan and India (the markets of the Republic of Korea, Japan and India, (collectively,collectively referred to as the “Asia Pacific region”). In the three and nine months ended September 30, 2023, total revenue related to shipments to the Asia Pacific region was 35% and 24%, respectively. In the three and nine months ended September 30, 2022, total revenue inrelated to shipments to the Asia Pacific region was 58% and 61%, respectively, of our total revenue. In the three and nine months ended September 30, 2021, total revenue in the Asia Pacific region was 36% and 38%, respectively, of our total revenue.respectively.
Credit Risk - At September 30, 2022 and December 31, 2021, one customer2023, two customers accounted for approximately 23%72% and 60%18% of accounts receivable, respectively.receivable. At December 31, 2022, one customer represented approximately 75% of accounts receivable. To date, we have not experienced any credit losses.
Customer Risk - During the three months ended September 30, 2023, revenue from two customers accounted for approximately 40% and 31% of our total revenue. During the nine months ended September 30, 2023, two customers represented approximately 36% and 24% of our total revenue.
During the three months ended September 30, 2022, two customers represented approximately 54% and 26% of our total revenue, respectively.revenue. During the nine months ended September 30, 2022, two customers represented approximately 48% and 16% of our total revenue, respectively.revenue.
During the three months ended September 30, 2021, one customer represented 35% of our total revenue. During the nine months ended September 30, 2021, revenue from two customers represented 37% and 12% of our total revenue, respectively.
2. Summary of Significant Accounting Policies
Please refer to the accounting policies described in Part II, Item 8, Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
Recent Accounting Pronouncements
There have been no significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.
Accounting Guidance Not Yet Adopted
Contract Assets and Contract Liabilities Acquired in a Business Combination - In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in abusiness combination at fair value. ASU 2021-08 will be effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.Early adoption is permitted. The adoption impact of ASU 2021-08 will depend on the magnitude of any future acquisitions. The standard will not impact acquiredcontract assets or liabilities from business combinations occurring prior to the adoption date.
3. Revenue Recognition
Contract Balances
The following table provides information about accounts receivables, contract assets, customer deposits and deferred revenue from contracts with customers (in thousands):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
| | | | |
Accounts receivable | | $ | 334,495 | | | $ | 250,995 | |
Contract assets | | 143,875 | | | 46,727 | |
Customer deposits | | 66,043 | | | 121,085 | |
Deferred revenue | | 67,613 | | | 94,355 | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
| | | | |
Accounts receivable | | $ | 71,184 | | | $ | 87,788 | |
Contract assets | | 25,768 | | | 25,201 | |
Customer deposits | | 64,412 | | | 64,809 | |
Deferred revenue | | 103,156 | | | 115,476 | |
Contract assets relate to contracts for which revenue is recognized upon transfer of control of performance obligations, but where billing milestones have not been reached. Customer deposits and deferred revenue include payments received from customers or invoiced amounts prior to transfer of controls of performance obligations. At December 31, 2022, customer deposits included $24.6 million related to transactions with SK ecoplant, and refundable fees received from customers. At September 30, 2023 there were no customer deposits related to transactions with SK ecoplant (see Note 16 - SK ecoplant Strategic Investment).Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current in the condensed consolidated balance sheetsheets when both the Company expectsmilestones other than the passage of time, are expected to be complete and the related performance obligations and invoice the customerscustomer is invoiced within one year of the balance sheet date, and as long-term when both the Company expectsabove-mentioned milestones are expected to be complete, and the related performance obligations and invoice the customerscustomer is invoiced more than one year out from the balance sheet date. Contract liabilities are classified as current in the condensed consolidated balance sheetsheets when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year from the balance sheet date.
Contract Assets
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | | | | | | | | |
Beginning balance | Beginning balance | | $ | 33,374 | | | $ | 18,638 | | | $ | 25,201 | | | $ | 3,327 | | Beginning balance | | | $ | 35,182 | | | $ | 33,374 | | | $ | 46,727 | | | $ | 25,201 | |
Transferred to accounts receivable from contract assets recognized at the beginning of the period | Transferred to accounts receivable from contract assets recognized at the beginning of the period | | (21,677) | | | (11,758) | | | (21,304) | | | — | | Transferred to accounts receivable from contract assets recognized at the beginning of the period | | | (8,284) | | | (21,677) | | | (31,968) | | | (21,304) | |
Revenue recognized and not billed as of the end of the period | Revenue recognized and not billed as of the end of the period | | 14,071 | | | 20,865 | | | 21,871 | | | 24,418 | | Revenue recognized and not billed as of the end of the period | | | 116,977 | | | 14,071 | | | 129,116 | | | 21,871 | |
Ending balance | Ending balance | | $ | 25,768 | | | $ | 27,745 | | | $ | 25,768 | | | $ | 27,745 | | Ending balance | | | $ | 143,875 | | | $ | 25,768 | | | $ | 143,875 | | | $ | 25,768 | |
Contract assets as of September 30, 2023 were primarily related to the PPA V Upgrade. For additional information, please see Part I, Item 1, Note 10 - Portfolio Financings.
Deferred Revenue
Deferred revenue activity, including deferred incentive revenue activity, during the three and nine months ended September 30, 20222023 and 20212022 consisted of the following (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | | | | | | | | |
Beginning balance | Beginning balance | | $ | 96,377 | | | $ | 116,255 | | | $ | 115,476 | | | $ | 135,578 | | Beginning balance | | | $ | 85,110 | | | $ | 96,377 | | | $ | 94,355 | | | $ | 115,476 | |
Additions | Additions | | 248,574 | | | 175,423 | | | 597,318 | | | 541,519 | | Additions | | | 243,545 | | | 248,574 | | | 733,891 | | | 597,318 | |
Revenue recognized | Revenue recognized | | (241,795) | | | (179,808) | | | (609,638) | | | (565,227) | | Revenue recognized | | | (261,042) | | | (241,795) | | | (760,633) | | | (609,638) | |
Ending balance | Ending balance | | $ | 103,156 | | | $ | 111,870 | | | $ | 103,156 | | | $ | 111,870 | | Ending balance | | | $ | 67,613 | | | $ | 103,156 | | | $ | 67,613 | | | $ | 103,156 | |
Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the end of the period. Primary component of deferred revenue at the end of the period consists of performance obligations relating to the provision of maintenance services under current contracts and future renewal periods. Some of these obligations provide customers with material rights over a period that we estimate to be largely commensurate with the period of their expected use of the associated Energy Server. As a result, we expect to recognize these amounts as revenue over a period of up to 21 years, predominantly on a relative standalone selling price basis that reflects the cost of providing these services. Deferred revenue also includes performance obligations relating to product acceptance and installation. A significant amount of this deferred revenue is reflected as additions and revenue recognized in the same 12-month period, and a portion of this deferred revenue is expected to be recognized beyond this 12-month period mainly due to deployment schedules.
We do not disclose the value of the unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.Disaggregated Revenue
We disaggregate revenue from contracts with customers into four revenue categories: product, installation, services and electricity (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
| Revenue from contracts with customers: | Revenue from contracts with customers: | | | | Revenue from contracts with customers: | | |
Product revenue | Product revenue | | $ | 213,243 | | | $ | 128,550 | | | $ | 520,415 | | | $ | 413,347 | | | Product revenue | | $ | 304,976 | | | $ | 213,243 | | | $ | 713,427 | | | $ | 520,415 | |
Installation revenue | Installation revenue | | 22,682 | | | 22,172 | | | 48,964 | | | 53,710 | | | Installation revenue | | 21,916 | | | 22,682 | | | 66,762 | | | 48,964 | |
Services revenue | Services revenue | | 37,347 | | | 39,251 | | | 111,012 | | | 111,375 | | | Services revenue | | 47,535 | | | 37,347 | | | 130,496 | | | 111,012 | |
Electricity revenue | Electricity revenue | | 2,875 | | | 804 | | | 8,352 | | | 2,107 | | | Electricity revenue | | 9,012 | | | 2,875 | | | 16,816 | | | 8,352 | |
Total revenue from contract with customers | Total revenue from contract with customers | | 276,147 | | | 190,777 | | | 688,743 | | | 580,539 | | | Total revenue from contract with customers | | 383,439 | | | 276,147 | | | 927,501 | | | 688,743 | |
Revenue from contracts that contain lease: | | | |
Revenue from contracts that contain leases: | | Revenue from contracts that contain leases: | |
Electricity revenue | Electricity revenue | | 16,127 | | | 16,451 | | | 47,806 | | | 49,166 | | | Electricity revenue | | 16,829 | | | 16,127 | | | 49,053 | | | 47,806 | |
Total revenue | Total revenue | | $ | 292,274 | | | $ | 207,228 | | | $ | 736,549 | | | $ | 629,705 | | | Total revenue | | $ | 400,268 | | | $ | 292,274 | | | $ | 976,554 | | | $ | 736,549 | |
4. Financial Instruments
Cash, Cash Equivalents, and Restricted Cash
The carrying values of cash, cash equivalents, and restricted cash approximate fair values and were as follows (in thousands):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
As Held: | | | | |
Cash | | $ | 215,926 | | | $ | 318,080 | |
Money market funds | | 453,396 | | | 297,034 | |
| | $ | 669,322 | | | $ | 615,114 | |
As Reported: | | | | |
Cash and cash equivalents | | $ | 492,120 | | | $ | 396,035 | |
Restricted cash | | 177,202 | | | 219,079 | |
| | $ | 669,322 | | | $ | 615,114 | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
As Held: | | | | |
Cash | | $ | 148,301 | | | $ | 226,463 | |
Money market funds | | 489,395 | | | 291,903 | |
| | $ | 637,696 | | | $ | 518,366 | |
As Reported: | | | | |
Cash and cash equivalents | | $ | 557,384 | | | $ | 348,498 | |
Restricted cash | | 80,312 | | | 169,868 | |
| | $ | 637,696 | | | $ | 518,366 | |
Restricted cash consisted of the following (in thousands):
| | | September 30, | | December 31, | | September 30, | | December 31, | |
| | | 2022 | | 2021 | | | 2023 | | 2022 | |
Current: | Current: | | | | | Current: | | | | | |
Restricted cash | Restricted cash | | $ | 41,124 | | | $ | 89,462 | | Restricted cash | | $ | 42,614 | | | $ | 50,965 | | |
Restricted cash related to PPA Entities1 | | 980 | | | 3,078 | | |
Restricted cash related to PPA V Entity1 | | Restricted cash related to PPA V Entity1 | | — | | | 550 | | |
| | $ | 42,104 | | | $ | 92,540 | | | $ | 42,614 | | | $ | 51,515 | | |
Non-current: | Non-current: | | | | | Non-current: | | | | | |
Restricted cash | Restricted cash | | $ | 117,590 | | | $ | 103,300 | | Restricted cash | | $ | 37,698 | | | $ | 110,353 | | |
Restricted cash related to PPA Entities1 | | 17,508 | | | 23,239 | | |
Restricted cash related to PPA V Entity1 | | Restricted cash related to PPA V Entity1 | | — | | | 8,000 | | |
| | 135,098 | | | 126,539 | | | 37,698 | | | 118,353 | | |
| | $ | 177,202 | | | $ | 219,079 | | | $ | 80,312 | | | $ | 169,868 | | |
1 We have VIEsAs of December 31, 2022, we had a variable interest entity (“VIE”) related to PPAsour PPA entity, PPA V, that representrepresented a portion of the condensed consolidated balances recorded within the “restricted cash” and other financial statement line items in the condensed consolidated balance sheets (see Note 1110 - Portfolio Financings). In August 2023, we sold the PPA V entity as a result of the PPA V Repowering of Energy Servers (see Note 10 - Portfolio Financings), and as such there were no balances related to PPA V in the condensed consolidated balance sheet as of September 30, 2023. In addition, the restricted cash held in the PPA II and PPA IIIb entities as of September 30, 2022, includes $33.32023 included $28.1 million and $1.1$0.9 million of current restricted cash, respectively, and $35.7$12.3 million and $6.7 million of non-current restricted cash, respectively. The restricted cash held in the PPA II and PPA IIIb entities as of December 31, 2021, includes $41.72022, included $40.6 million and $1.2 million of current restricted cash, respectively, and $57.7$28.5 million and $6.7 million of non-current restricted cash, respectively. These entities are not considered VIEs.
Factoring Arrangements
We sell certain customer trade receivables on a non-recourse basis under factoring arrangements with our designatedcertain financial institution.institutions. These transactions are accounted for as sales and cash proceeds are included in cash used in operating activities. We derecognized $146.3$108.0 million and $116.3$167.6 million of accounts receivable asduring the three and nine months ended September 30, 2023, respectively. We derecognized $146.3 million and $283.3 million of accounts receivable during the three and nine months ended September 30, 2022, and December 31, 2021, respectively, under these factoring arrangements. respectively.
The costs of factoring such accounts receivable on our condensed consolidated statements of operations for the three and nine months ended September 30, 2022,2023 were $2.5$2.0 million and $3.7$2.7 million, respectively. The costs of factoring for the three and nine months ended September 30, 2021,2022 were not material.$2.5 million and $3.7 million, respectively. The costcosts of factoring isare recorded in general and administrative expenses.
5. Fair Value
Our accounting policy for the fair value measurement of cash equivalents and embedded Escalation Protection Plan (“EPP”) derivatives is described in Part II, Item 8 Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below set forth, by level, our financial assets that are accounted for at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):
| | | Fair Value Measured at Reporting Date Using | | Fair Value Measured at Reporting Date Using |
September 30, 2022 | | Level 1 | | Level 2 | | Level 3 | | Total | |
September 30, 2023 | | September 30, 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | Assets | | Assets | |
Cash equivalents: | Cash equivalents: | | Cash equivalents: | |
Money market funds | Money market funds | | $ | 453,396 | | | $ | — | | | $ | — | | | $ | 453,396 | | Money market funds | | $ | 489,395 | | | $ | — | | | $ | — | | | $ | 489,395 | |
| | | $ | 453,396 | | | $ | — | | | $ | — | | | $ | 453,396 | | | $ | 489,395 | | | $ | — | | | $ | — | | | $ | 489,395 | |
Liabilities | Liabilities | | | | | | | | | Liabilities | | | | | | | | |
| Derivatives: | Derivatives: | | Derivatives: | |
| Embedded EPP derivatives | Embedded EPP derivatives | | — | | | — | | | 5,838 | | | 5,838 | | Embedded EPP derivatives | | $ | — | | | $ | — | | | $ | 3,948 | | | $ | 3,948 | |
| | | $ | — | | | $ | — | | | $ | 5,838 | | | $ | 5,838 | | | $ | — | | | $ | — | | | $ | 3,948 | | | $ | 3,948 | |
| | | | Fair Value Measured at Reporting Date Using | | | Fair Value Measured at Reporting Date Using |
December 31, 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
December 31, 2022 | | December 31, 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | Assets | | Assets | |
Cash equivalents: | Cash equivalents: | | Cash equivalents: | |
Money market funds | Money market funds | | $ | 297,034 | | | $ | — | | | $ | — | | | $ | 297,034 | | Money market funds | | $ | 291,903 | | | $ | — | | | $ | — | | | $ | 291,903 | |
| | | $ | 297,034 | | | $ | — | | | $ | — | | | $ | 297,034 | | | $ | 291,903 | | | $ | — | | | $ | — | | | $ | 291,903 | |
Liabilities | Liabilities | | | | | | | | | Liabilities | | | | | | | | |
| Derivatives: | Derivatives: | | Derivatives: | |
Option to acquire a variable number of shares of Class A Common Stock | | $ | — | | | $ | 13,200 | | | $ | — | | | $ | 13,200 | | |
| | Embedded EPP derivatives | Embedded EPP derivatives | | — | | | — | | | 6,461 | | | 6,461 | | Embedded EPP derivatives | | $ | — | | | $ | — | | | $ | 5,895 | | | $ | 5,895 | |
| | | $ | — | | | $ | 13,200 | | | $ | 6,461 | | | $ | 19,661 | | | $ | — | | | $ | — | | | $ | 5,895 | | | $ | 5,895 | |
SK ecoplant Notice to Exercise the Option to Acquire a Variable Number of Shares of Class A Common Stock
On August 10, 2022, pursuant to the SPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 shares at a purchase price of $23.05 per share. Upon receipt of SK’s notice the purchase priceMoney Market Funds - Money market funds are valued using quoted market prices for identical securities and the number of shares of Class A Common Stock that SK will purchase under the Option are fixed. The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the HSR Act of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice.
The Option was fair valued as of the notice date at $4.2 million. Upon the receipt of the notice from SK ecoplant the Option met the criteria of equity award and wastherefore classified as a forward contract as part of additional paid-in capital. The fair value of the Option was reflectedLevel 1 financial assets.
Embedded Escalation Protection Plan Derivative Liability in accrued expenses and other current liabilities in our condensed consolidated balance sheet as of December 31, 2021.
Embedded EPP Derivative Liability
For the three months ended September 30, 2022 and 2021, we recorded- We estimate the fair value of the embedded EPP derivatives in certain sales contracts using a Monte Carlo simulation model, which considers various potential electricity price curves over the sales contracts’ terms. We use historical grid prices and recognized an unrealized gainavailable forecasts of $0.1 million and an unrealized loss of $0.2 million, respectively, in gain (loss) on revaluation of embeddedfuture electricity prices to estimate future electricity prices. We have classified these derivatives on our condensed consolidated statements of operations.as a Level 3 financial liability.
For the nine months ended September 30, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized gain of $0.6 million and an unrealized loss of $1.6 million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statements of operations.
The changes in the Level 3 financial liabilities during the nine months ended September 30, 2022,2023 were as follows (in thousands): | | | | | | | | | | | | | | | | |
| | | | | | | | Embedded EPP Derivative Liability | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities at December 31, 20212022 | | | | | | | | $ | 6,461 5,895 | | | |
EPP liability settlement | | | | | | | | (3,160) | | | |
Changes in fair value | | | | | | | | (623)1,213 | | | |
Liabilities at September 30, 20222023 | | | | | | | | $ | 5,8383,948 | | | |
In June 2023, per an EPP agreement with one of our customers, we paid $3.2 million, which was recorded as a reduction to our balance of embedded EPP derivative liability as of September 30, 2023.
Financial Assets and Liabilities and Other Items Not Measured at Fair Value on a Recurring Basis
Customer Receivables and Debt Instruments - The fair value for customer financing receivables is based on a discounted cash flow model, whereby the fair value approximates the present value of the receivables (Level 3). The senior secured notes term loans and convertible notes are based on rates currently offered for instruments with similar maturities and terms (Level 3)2). The following table presents the estimated fair values and carrying values of customer receivables and debt instruments (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Net Carrying Value | | Fair Value | | Net Carrying Value | | Fair Value |
| | | | | | | | |
Customer receivables | | | | | | | | |
Customer financing receivable | | $ | — | | | $ | — | | | $ | 45,269 | | | $ | 38,334 | |
Debt instruments | | | | | | | | |
Recourse: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
10.25% Senior Secured Notes due March 2027 | | 63,194 | | | 59,939 | | | 68,968 | | | 72,573 | |
2.5% Green Convertible Senior Notes due August 2025 | | 224,340 | | | 319,822 | | | 222,863 | | | 356,822 | |
Non-recourse: | | | | | | | | |
| | | | | | | | |
7.5% Term Loan due September 2028 (Note 7) | | — | | | — | | | 29,006 | | | 35,669 | |
| | | | | | | | |
6.07% Senior Secured Notes due March 2030 | | 68,899 | | | 70,085 | | | 73,262 | | | 83,251 | |
3.04% Senior Secured Notes due June 2031 | | 125,999 | | | 115,294 | | | 132,631 | | | 137,983 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | Net Carrying Value | | Fair Value | | Net Carrying Value | | Fair Value |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Debt instruments | | | | | | | | |
Recourse: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
3% Green Convertible Senior Notes due June 2028 | | $ | 614,183 | | | 613,298 | | | $ | — | | | — | |
2.5% Green Convertible Senior Notes due August 2025 | | 226,309 | | | 249,665 | | | 224,832 | | | 309,488 | |
| | | | | | | | |
10.25% Senior Secured Notes due March 2027 | | — | | | — | | | 60,960 | | | 60,472 | |
Non-recourse: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
3.04% Senior Secured Notes due June 2031 | | — | | | — | | | 125,787 | | | 117,028 | |
4.6% Term Loan due March 2026 | | $ | 1,483 | | | 1,345 | | | $ | — | | | — | |
| | | | | | | | |
6. Balance Sheet Components
Inventories
The components of inventory consistconsisted of the following (in thousands):
| | | September 30, | | December 31, | | September 30, | | December 31, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
| Raw materials | Raw materials | | $ | 156,163 | | | $ | 80,809 | | Raw materials | | $ | 238,716 | | | $ | 165,446 | |
Finished goods | Finished goods | | 61,376 | | | 30,668 | | Finished goods | | 183,078 | | | 58,288 | |
Work-in-progress | Work-in-progress | | 37,356 | | | 31,893 | | Work-in-progress | | 53,855 | | | 44,660 | |
| | $ | 254,895 | | | $ | 143,370 | | | $ | 475,649 | | | $ | 268,394 | |
The inventory reserves were $17.6$17.8 million and $13.9$17.2 million as of September 30, 20222023 and December 31, 2021,2022, respectively.
As of September 30, 2023, the inventory balance was reduced by $2.2 million primarily due to the release of a portion of the grant liability, which was recorded as capitalized payroll expenses in the closing inventory balance. For additional information, please see Part I, Item 1, Note 13 - Commitments and Contingencies, Delaware Economic Development Authority section.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consistconsisted of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
| | | | |
Receivables from employees | | $ | 7,949 | | | $ | 5,463 | |
Prepaid hardware and software maintenance | | 5,079 | | | 3,494 | |
Prepaid managed services | | 4,291 | | | 2,480 | |
Tax receivables | | 3,259 | | | 1,518 | |
Prepaid workers compensation | | 3,114 | | | 5,330 | |
Deposits made | | 1,425 | | | 817 | |
Prepaid deferred commissions | | 794 | | | 724 | |
State incentive receivable | | 214 | | | 427 | |
Other prepaid expenses and other current assets | | 20,364 | | | 10,408 | |
| | $ | 46,489 | | | $ | 30,661 | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
| | | | |
Receivables from employees | | $ | 10,314 | | | $ | 6,553 | |
Deferred expenses (Note 16)
| | 9,909 | | | — | |
Prepaid managed services | | 5,868 | | | 4,405 | |
Prepaid hardware and software maintenance | | 5,243 | | | 4,290 | |
Tax receivables | | 4,428 | | | 3,676 | |
Prepaid workers compensation | | 3,993 | | | 5,536 | |
Advance income tax provision | | 2,349 | | | 783 | |
Prepaid rent | | 2,060 | | | 965 | |
Interest receivable | | 1,854 | | | 556 | |
Deposits made | | 1,683 | | | 1,409 | |
Prepaid deferred commissions | | 911 | | | 1,002 | |
Other prepaid expenses and other current assets | | 17,631 | | | 14,468 | |
| | $ | 66,243 | | | $ | 43,643 | |
Property, Plant and Equipment, Net
Property, plant and equipment, net consistsconsisted of the following (in thousands):
| | | September 30, | | December 31, | | September 30, | | December 31, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | | | | | | | | |
Energy Servers | Energy Servers | | $ | 669,606 | | | $ | 674,799 | | Energy Servers | | $ | 313,866 | | | $ | 538,912 | |
Machinery and equipment | Machinery and equipment | | 132,965 | | | 110,600 | | Machinery and equipment | | 165,814 | | | 145,555 | |
Leasehold improvements | | Leasehold improvements | | 107,209 | | | 104,528 | |
Construction-in-progress | Construction-in-progress | | 91,301 | | | 43,544 | | Construction-in-progress | | 105,787 | | | 72,174 | |
Leasehold improvements | | 68,369 | | | 52,936 | | |
Building | | 49,240 | | | 48,934 | | |
Buildings | | Buildings | | 49,424 | | | 49,240 | |
Computers, software and hardware | Computers, software and hardware | | 24,100 | | | 21,276 | | Computers, software and hardware | | 26,455 | | | 24,608 | |
Furniture and fixtures | Furniture and fixtures | | 9,123 | | | 8,607 | | Furniture and fixtures | | 9,842 | | | 9,581 | |
| | 1,044,704 | | | 960,696 | | | 778,397 | | | 944,598 | |
Less: accumulated depreciation | Less: accumulated depreciation | | (397,936) | | | (356,590) | | Less: accumulated depreciation | | (287,862) | | | (344,184) | |
| | $ | 646,768 | | | $ | 604,106 | | | $ | 490,535 | | | $ | 600,414 | |
Depreciation expense related to property, plant and equipment for the three and nine months ended September 30, 2023 was $14.6 million and $50.3 million, respectively. Depreciation expense related to property, plant and equipment for the three and nine months ended September 30, 2022 was $15.5 million and $46.2 million, respectively. Depreciation expense related to
Property, plant and equipment under operating leases by PPA V was $226.0 million and accumulated depreciation for these assets was $92.7 million as of December 31, 2022. There was no property, plant and equipment under operating leases by PPA V as of September 30, 2023. Depreciation expense for property, plant and equipment under operating leases by PPA V (sold in August 2023) and PPA IV (sold in November 2022) was $3.7 million and $10.9 million for the three and nine months ended September 30, 2021 was $13.3 million and $40.1 million, respectively.
Property, plant and equipment under operating leases by the PPA Entities was $362.0 million and $368.0 million and accumulated depreciation for these assets was $153.8 million and $139.4 million as of September 30, 2022 and December 31, 2021,2023, respectively. Depreciation expense for these assets was $5.8 million and $17.3 million for the three and nine months ended September 30, 2022, respectively. Depreciation expense for these assets was $5.9 million and $17.6 million for the three and nine months ended September 30, 2021, respectively.
PPA IIIaV Upgrade
In June 2022,August 2023, we started a project (the “PPA V Upgrade”, the “PPA V Repowering”) to replace 9.837.1 megawatts of second-generation Energy Servers (the “old Energy Servers”) at PPA IIIa Investment Company and Operating Company (“PPA IIIa”)V with current generation Energy Servers (the “new Energy Servers”) (the “PPA IIIa Upgrade”, the “PPA IIIa Repowering”). The replacement was ongoing as of September 30, 2022.2023. See Note 1110 - Portfolio FinancingFinancings for additional information.
Change in Estimate
In June 2022, due to the replacement of old Energy Servers as part of the PPA IIIa Repowering, we revised the expected useful life of the old Energy Servers. As a result, the expected useful life of old Energy Servers decreased from 15 years to approximately 0.5 years. We recognized accelerated depreciation of $0.2 million in electricity cost of revenue on the revised carrying amount of the old Energy Servers after impairment loss in our condensed consolidated statements of operations. There is no effect from this change in accounting estimate on future periods.
Other Long-Term Assets
Other long-term assets consistconsisted of the following (in thousands):
| | | September 30, | | December 31, | | September 30, | | December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | | | | | | | | | |
Deferred commissions | | Deferred commissions | | $ | 8,901 | | | $ | 8,320 | |
Long-term lease receivable | Long-term lease receivable | | $ | 8,131 | | | $ | 7,953 | | Long-term lease receivable | | 7,604 | | | 8,076 | |
Prepaid insurance | | 7,969 | | | 9,534 | | |
Deferred commissions | | 7,229 | | | 7,569 | | |
Deposits made | Deposits made | | 2,694 | | | 1,923 | | Deposits made | | 2,926 | | | 2,672 | |
Deferred expenses (Note 16)
| | Deferred expenses (Note 16)
| | 1,980 | | | — | |
Prepaid managed services | Prepaid managed services | | 2,533 | | | 3,010 | | Prepaid managed services | | 1,896 | | | 2,373 | |
Deferred tax asset | Deferred tax asset | | 885 | | | 954 | | Deferred tax asset | | 1,384 | | | 1,151 | |
Investments in subsidiaries | | — | | | 1,819 | | |
Prepaid insurance | | Prepaid insurance | | — | | | 4,047 | |
| Prepaid and other long-term assets | Prepaid and other long-term assets | | 8,875 | | | 8,311 | | Prepaid and other long-term assets | | 8,517 | | | 13,566 | |
| | $ | 38,316 | | | $ | 41,073 | | | $ | 33,208 | | | $ | 40,205 | |
Accrued Warranty
Accrued warranty liabilities consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
| | | | |
Product performance | | $ | 15,622 | | | $ | 16,901 | |
Product warranty | | 915 | | | 431 | |
| | | | |
| | $ | 16,537 | | | $ | 17,332 | |
Changes in the product warranty and product performance liabilities were as follows (in thousands):
| | | | | |
| |
| |
| |
Balances at December 31, 2022 | $ | 17,332 | |
Accrued warranty, net | 23,565 | |
Warranty expenditures during the nine-month period | (24,360) | |
Balances at September 30, 2023 | $ | 16,537 | |
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consistconsisted of the following (in thousands):
| | | September 30, | | December 31, | | September 30, | | December 31, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | | | | | | | | |
Compensation and benefits | Compensation and benefits | | $ | 30,002 | | | $ | 38,222 | | Compensation and benefits | | $ | 43,590 | | | $ | 48,156 | |
General invoice and purchase order accruals | | General invoice and purchase order accruals | | 34,452 | | | 44,010 | |
Interest payable | | Interest payable | | 7,919 | | | 3,128 | |
Sales-related liabilities | Sales-related liabilities | | 10,374 | | | 6,040 | | Sales-related liabilities | | 7,666 | | | 7,147 | |
Delaware grant | | 9,495 | | | — | | |
Accrued installation | Accrued installation | | 6,032 | | | 13,968 | | Accrued installation | | 6,094 | | | 7,905 | |
Accrued legal expenses | Accrued legal expenses | | 5,513 | | | 1,765 | | Accrued legal expenses | | 3,666 | | | 4,403 | |
Provision for income tax | | Provision for income tax | | 2,600 | | | 1,140 | |
Sales tax liabilities | | Sales tax liabilities | | 2,517 | | | 6,172 | |
VAT interim liability | | VAT interim liability | | 2,194 | | | 418 | |
Accrued consulting expenses | | Accrued consulting expenses | | 1,869 | | | 1,390 | |
Accrued restructuring costs (Note 12) | | Accrued restructuring costs (Note 12) | | 1,172 | | | — | |
Finance lease liabilities | | Finance lease liabilities | | 1,142 | | | 1,024 | |
PPA IV upgrade financing obligations | | PPA IV upgrade financing obligations | | 276 | | | 6,076 | |
Delaware grant (Note 13) | | Delaware grant (Note 13) | | — | | | 9,495 | |
Current portion of derivative liabilities | Current portion of derivative liabilities | | 3,053 | | | 6,059 | | Current portion of derivative liabilities | | — | | | 2,596 | |
Accrued consulting expenses | | 1,423 | | | 1,731 | | |
Sales tax liabilities | | 1,359 | | | 1,491 | | |
Interest payable | | 719 | | | 2,159 | | |
| Option to acquire a variable number of shares of Class A Common Stock (Note 5) | | — | | | 13,200 | | |
Other | Other | | 34,040 | | | 29,503 | | Other | | 1,323 | | | 1,123 | |
| | $ | 102,010 | | | $ | 114,138 | | | $ | 116,480 | | | $ | 144,183 | |
Preferred Stock
As of September 30, 2023, we had 20,000,000 shares of preferred stock authorized. 13,491,701 of these shares were designated as Series B RCPS and were converted to Class A common stock as of September 23, 2023, as a result of the SK ecoplant Second Tranche Closing. As of December 31, 2022, we had 20,000,000 shares of preferred stock authorized. 10,000,000 of these shares were designated as Series A redeemable convertible preferred stock and were converted to Class A common stock as of November 8, 2022, as a result of the SK ecoplant Initial Investment. For additional information, please see Part I, Item 1, Note 16 - SK ecoplant Strategic Investment.
The preferred stock had $0.0001 par value. There were no shares of preferred stock issued and outstanding as of September 30, 2023 and December 31, 2022.
Conversion of Class B Common Stock
On July 27, 2023, in accordance with our Restated Certificate of Incorporation, each share of our Class B common stock entitled to ten votes per share automatically converted into one share of our Class A common stock entitled to one vote per share.
7. Outstanding Loans and Security Agreements
The following is a summary of our debt as of September 30, 20222023 (in thousands, except percentage data):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unpaid Principal Balance | | Net Carrying Value | | | | Interest Rate | | Maturity Dates | | Entity | | Recourse |
| | Current | | Long- Term | | Total | |
| | | | | | | | | | | | | | | | | | |
10.25% Senior Secured Notes due March 2027 | | $ | 63,966 | | | $ | 12,792 | | | $ | 50,402 | | | $ | 63,194 | | | | | 10.25% | | March 2027 | | Company | | Yes |
2.5% Green Convertible Senior Notes due August 2025 | | 230,000 | | | — | | | 224,340 | | | 224,340 | | | | | 2.5% | | August 2025 | | Company | | Yes |
Total recourse debt | | 293,966 | | | 12,792 | | | 274,742 | | | 287,534 | | | | | | | | | | | |
3.04% Senior Secured Notes due June 30, 2031 | | 127,736 | | | 10,332 | | | 115,667 | | | 125,999 | | | | | 3.04% | | June 2031 | | PPA V | | No |
6.07% Senior Secured Notes due March 2030 | | 70,492 | | | 5,611 | | | 64,288 | | | 69,899 | | | | | 6.07% | | March 2030 | | PPA IV | | No |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total non-recourse debt | | 198,228 | | | 15,943 | | | 179,955 | | | 195,898 | | | | | | | | | | | |
Total debt | | $ | 492,194 | | | $ | 28,735 | | | $ | 454,697 | | | $ | 483,432 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unpaid Principal Balance | | Net Carrying Value | | | | Interest Rate | | Maturity Dates | | Entity |
| | Current | | Long- Term | | Total | |
| | | | | | | | | | | | | | | | |
3% Green Convertible Senior Notes due June 2028 | | 632,500 | | | — | | | 614,183 | | | 614,183 | | | | | 3.0% | | June 2028 | | Company |
2.5% Green Convertible Senior Notes due August 2025 | | 230,000 | | | — | | | 226,309 | | | 226,309 | | | | | 2.5% | | August 2025 | | Company |
Total recourse debt | | 862,500 | | | — | | | 840,492 | | | 840,492 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
4.6% Term Loan due March 2026 | | 1,483 | | | — | | | 1,483 | | | 1,483 | | | | | 4.6% | | March 2026 | | Korean Joint Venture |
Total non-recourse debt | | 1,483 | | | — | | | 1,483 | | | 1,483 | | | | | | | | | |
Total debt | | $ | 863,983 | | | $ | — | | | $ | 841,975 | | | $ | 841,975 | | | | | | | | | |
The following is a summary of our debt as of December 31, 20212022 (in thousands, except percentage data):
| | | | Unpaid Principal Balance | | Net Carrying Value | | | Interest Rate | | Maturity Dates | | Entity | | Recourse | | | Unpaid Principal Balance | | Net Carrying Value | | | Interest Rate | | Maturity Dates | | Entity |
| | | Current | | Long- Term | | Total | | Interest Rate | | Unpaid Principal Balance | | Long- Term | | Total | | Interest Rate | | Maturity Dates | |
| 10.25% Senior Secured Notes due March 2027 | 10.25% Senior Secured Notes due March 2027 | | $ | 70,000 | | | $ | 8,348 | | | $ | 60,620 | | | $ | 68,968 | | | | 10.25% | | March 2027 | | Company | | Yes | 10.25% Senior Secured Notes due March 2027 | | $ | 61,653 | | | $ | 12,716 | | | $ | 48,244 | | | $ | 60,960 | | | | 10.25% | | March 2027 | | Company |
2.5% Green Convertible Senior Notes due August 2025 | 2.5% Green Convertible Senior Notes due August 2025 | | 230,000 | | | — | | | 222,863 | | | 222,863 | | | | 2.5% | | August 2025 | | Company | | Yes | 2.5% Green Convertible Senior Notes due August 2025 | | 230,000 | | | — | | | 224,832 | | | 224,832 | | | | 2.5% | | August 2025 | | Company |
Total recourse debt | Total recourse debt | | 300,000 | | | 8,348 | | | 283,483 | | | 291,831 | | | | | Total recourse debt | | 291,653 | | | 12,716 | | | 273,076 | | | 285,792 | | | | |
3.04% Senior Secured Notes due June 30, 2031 | 3.04% Senior Secured Notes due June 30, 2031 | | 134,644 | | | 9,376 | | | 123,255 | | | 132,631 | | | | 3.04% | | June 2031 | | PPA V | | No | 3.04% Senior Secured Notes due June 30, 2031 | | 127,430 | | | 13,307 | | | 112,480 | | | 125,787 | | | | 3.04% | | June 2031 | | PPA V |
7.5% Term Loan due September 2028 | | 31,070 | | | 3,436 | | | 25,570 | | | 29,006 | | | | 7.5% | | September 2028 | | PPA IIIa | | No | |
6.07% Senior Secured Notes due March 2030 | | 73,955 | | | 4,671 | | | 68,591 | | | 73,262 | | | | 6.07% | | March 2030 | | PPA IV | | No | |
| | Total non-recourse debt | Total non-recourse debt | | 239,669 | | | 17,483 | | | 217,416 | | | 234,899 | | | | | Total non-recourse debt | | 127,430 | | | 13,307 | | | 112,480 | | | 125,787 | | | | |
Total debt | Total debt | | $ | 539,669 | | | $ | 25,831 | | | $ | 500,899 | | | $ | 526,730 | | | | | Total debt | | $ | 419,083 | | | $ | 26,023 | | | $ | 385,556 | | | $ | 411,579 | | | | |
Recourse debt refers to debt that we have an obligation to pay. Non-recourse debt refers to debt that is recourse to only our subsidiaries. The differences between the unpaid principal balances and the net carrying values apply to deferred financing costs. We and all of our subsidiaries were in compliance with all financial covenants as of September 30, 20222023 and December 31, 2021.2022.
Recourse Debt Facilities
3% Green Convertible Senior Notes due June 2028 - On May 16, 2023, we issued the 3% Green Notes in an aggregate principal amount of $632.5 million due on June 1, 2028, unless earlier repurchased, redeemed or converted, less an initial purchasers’ discount of $15.8 million and other issuance costs of $4.0 million (together, the “Transaction Costs”), resulting in net proceeds of $612.7 million. The 3% Green Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of May 16, 2023, between us and U.S. Bank Trust Company, National Association, as Trustee, in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”).
Pursuant to the purchase agreement among the Company and the representatives of the initial purchasers of the 3% Green Notes, the Company granted the initial purchasers an option to purchase up to an additional $82.5 million aggregate principal amount of the 3% Green Notes (the “Greenshoe Option”). The 3% Green Notes issued on May 16, 2023, included $82.5 million aggregate principal amount pursuant to the full exercise by the initial purchasers of the Greenshoe Option.
The 3% Green Notes are senior, unsecured obligations accruing interest at a rate of 3% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2023.
We may not redeem the 3% Green Notes prior to June 5, 2026, subject to a partial redemption limitation. We may elect to redeem, at face value, all or any portion of the 3% Green Notes at any time, and from time to time, on or after June 5, 2026 and on or before the forty-sixth scheduled trading day immediately before the maturity date, provided the share price for our Class A common stock exceeds 130% of the conversion price at redemption.
Before March 1, 2028, the noteholders have the right to convert their 3% Green Notes only upon the occurrence of certain events, including satisfaction of a condition relating to the closing price of our common stock (the “Closing Price Condition”) or the trading price of the 3% Green Notes (the “Trading Price Condition”), a redemption event, or other specified corporate events. If the Closing Price Condition is met on at least 20 (whether or not consecutive) of the last 30 consecutive trading days in any calendar quarter, and only during such calendar quarter, the noteholders may convert their 3% Green Notes at any time during the immediately following quarter, commencing after the calendar quarter ending on September 30, 2023, subject to partial redemption limitation. Subject to the Trading Price Condition, the noteholders may convert their 3% Green Notes during the five business days immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 3% Green Notes, as determined following a request by a holder of the 3% Green Notes, for each day of that period is less than 98% of the product of the closing price of our common stock and the then applicable conversion rate. From and after March 1, 2028, the noteholders may convert their 3% Green Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. Should the noteholders elect to convert their 3% Green Notes, we may elect to settle the conversion by paying or delivering, as applicable, cash, shares of our Class A common stock, $0.0001 par value per share, or a combination thereof, at our election.
The initial conversion rate is 53.0427 shares of Class A common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $18.85 per share of Class A common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. Also, we may increase the conversion rate at any time if our Board of Directors determines it is in the best interests of the Company or to avoid or diminish income tax to holders of common stock. In addition, if certain corporate events that constitute a Make-Whole Fundamental Change, as defined below, occur, then the conversion rate applicable to the conversion of the 3% Green Notes may, in certain circumstances, be increased by up to 22.5430 shares of Class A common stock per $1,000 principal amount of notes for a specified period of time. At September 30, 2023, the maximum number of shares into which the 3% Green Notes could have been potentially converted if the conversion features were triggered was 47,807,955 shares of Class A common stock.
According to the Indenture, a Make-Whole Fundamental Change means (i) a Fundamental Change, that includes certain change-of-control events relating to us, certain business combination transactions involving us and certain delisting events with respect to our Class A common stock, or (ii) the sending of a redemption notice with respect to the 3% Green Notes.
The 3% Green Notes contain certain customary provisions relating to the occurrence of Events of Default, as defined in the Indenture. If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 3% Green Notes then outstanding will immediately become due and payable without any further action or notice by any person. However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the 3% Green Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the 3% Green Notes.
The Transaction Costs were recorded as debt issuance costs and presented a reduction to the 3% Green Notes on our condensed consolidated balance sheets and are amortized to interest expense at an effective interest rate of 3.8%.
Total interest expense recognized related to the 3% Green Notes for the three and nine months ended September 30, 2023 was $5.7 million and $8.7 million, respectively, and was comprised of contractual interest expense of $4.7 million and $7.2 million, respectively, and amortization of the initial purchasers’ discount and other issuance costs of $1.0 million and $1.5 million, respectively. We have not recognized any special interest expense related to the 3% Green Notes to date. The amount of unamortized debt issuance costs as of September 30, 2023, was $18.3 million.
Although the 3% Green Notes contain embedded conversion features, we account for the 3% Green Notes in its entirety as a liability. As of September 30, 2023, the net carrying value of the 3% Green Notes was classified as a long-term liability in our condensed consolidated balance sheets.
Capped Calls - On May 11, 2023, in connection with the pricing of the 3% Green Notes, and on May 15, 2023, in connection with initial purchasers’ exercise of the Greenshoe Option, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain counterparties (the “Option Counterparties”). The Capped Calls cover, subject to customary anti-dilution adjustments substantially similar to those applicable to the 3% Green Notes, the aggregate number of shares of our Class A common stock that initially underlie the 3% Green Notes, and are expected generally to reduce potential dilution to holders of our common stock upon any conversion of the 3% Green Notes and at our election (subject to certain
conditions) offset any cash payments we would be required to make in excess of the principal amount of converted 3% Green Notes.
The Capped Calls expire on June 1, 2028 and are exercisable only at maturity, but may be early terminated in various circumstances, including if the 3% Green Notes are early converted or repurchased. The default settlement method for the Capped Calls is net share settlement. However, we may elect to settle the Capped Calls in cash.
The Capped Calls have an initial strike price of approximately $18.85 per share of Class A common stock, subject to certain adjustments. The strike price of $18.85 corresponds to the initial conversion price of the 3% Green Notes. The number of shares underlying the Capped Calls is 33,549,508 shares of Class A common stock. The cap price of the Capped Calls is initially $26.46 per share of Class A common stock, which represents a premium of 100% over the last reported sale price of our common stock on May 11, 2023.
The Capped Calls are freestanding financial instruments. We used a portion of the proceeds from the issuance of the 3% Green Notes to pay for the Capped Calls’ premium. As the Capped Calls meet certain accounting criteria, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $54.5 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital on our condensed consolidated balance sheets and will not be remeasured.
Please refer to Part II, Item 8, Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 2021,2022, for discussion of our 10.25% Senior Secured Notes due March 2027 and 2.5% Green Convertible Senior Notes due August 2025.
Interest expense10.25% Senior Secured Notes due March 2027 - The outstanding unpaid principal balance of $57.6 million on the 10.25% Senior Secured Notes due March 2027 was called and retired at 104% during the nine months ended September 30, 2023. The 4% premium of $2.3 million and unpaid accrued interest of $1.0 million were included in the final payment to the noteholders. We recognized loss on extinguishment of debt of $2.9 million as a result of redemption of the 10.25% Senior Secured Notes.
The current and non-current balance of the outstanding unpaid principal of the 10.25% Senior Secured Notes was $12.7 million and $48.9 million as of December 31, 2022, respectively.
Interest on the 10.25% Senior Secured Notes for the nine months ended September 30, 2023 was $2.7 million, including $0.1 million amortization of issuance costs. Interest on the 10.25% Senior Secured Notes for the three and nine months ended September 30, 2022 was $1.9 million and $3.8 million, respectively, including amortization of issuance costs of $0.1 million and $0.2 million, respectively.
Interest on the 2.5% Green Notes for the three and nine months ended September 30, 2023 was $1.9 million and $5.8 million, respectively, including amortization of issuance costs of $0.5 million and $1.5 million, respectively. Interest on the 2.5% Green Notes for the three and nine months ended September 30, 2022 was $1.9 million and $5.8 million, respectively, including amortization of issuance costs of $0.5 million and $1.5 million, respectively. Interest expense on the Green Notes for the three and nine months ended September 30, 2021, was $1.9 million and $5.8 million, respectively, including amortization of issuance costs of $0.5 million and $1.5 million, respectively.
Non-recourse Debt Facilities
Please refer to Part II, Item 8, Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 20212022 for discussion of our non-recourse debt.
Both note purchase and credit agreements require us to maintain a debt service reserve, the balances of which are presented below (in millions):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
| | | | |
3.04% Senior Secured Notes due June 30, 2031 | | $ | 8.0 | | | $ | 8.0 | |
7.5% Term Loan due September 2028 | | — | | | 3.6 | |
6.07% Senior Secured Notes due March 2030 | | 9.5 | | | 9.1 | |
These debt service balances are included as part of long-term restricted cash in the condensed consolidated balance sheets. Both notes and the loan are secured by assets of respective PPAs.
7.5% Term Loan3.04% Senior Secured Notes due September 2028June 2031 - On June 14, 2022,August 24, 2023, as part of the PPA IIIaV Upgrade, we paid off the outstanding balance and related accrued interest of $30.2$118.5 million and $0.4$0.5 million, respectively, of our 3.04% Senior Secured Notes due June 2031, and recognized a loss on extinguishment of debt of $4.2 million.$1.4 million (for additional information, please see Note 10 - Portfolio Financings). The debt service reserve of $3.6$8.6 million was reclassified from restricted cash to cash and cash equivalents at the time of extinguishment of debt.
Repayment Schedule and Interest Expense
The following table presents details of our outstanding loan principal repayment schedule as of September 30, 20222023 (in thousands):
| Remainder of 2022 | $ | 6,755 | | |
2023 | 28,503 | | |
Remainder of 2023 | | Remainder of 2023 | $ | — | |
2024 | 2024 | 31,872 | | 2024 | — | |
2025 | 2025 | 265,494 | | 2025 | 230,000 | |
2026 | 2026 | 39,078 | | 2026 | 1,483 | |
2027 | | 2027 | — | |
Thereafter | Thereafter | 120,492 | | Thereafter | 632,500 | |
| | $ | 492,194 | | | $ | 863,983 | |
Interest expense of $13.1$68.0 million and $14.5$93.7 million for the three and nine months ended September 30, 2022 and 2021,2023, respectively, was recorded in interest expense on the condensed consolidated statements of operations. Interest expense of $41.0 million and $43.8 million for the three and nine months ended September 30, 20222023 included $52.8 million as a result of the SK ecoplant Second Tranche Closing. For additional information, please see Part I, Item 1, Note 16 - SK ecoplant Strategic Investment. Interest expense of $13.1 million and 2021,$41.0 million for the three and nine months ended September 30, 2022, respectively, was recorded in interest expense on the condensed consolidated statements of operations.
8. Derivative Financial InstrumentsLeases
Cash Flow HedgesFacilities, Energy Servers, and Vehicles
As of December 31, 2021, we had settled our interest rate swaps, which had been designated as cash flow hedges. There were no cash flow hedges as of September 30, 2022. The changes in fair value of the interest rate swaps designated as cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings were as follows duringFor the three and nine months ended September 30, 20222023, rent expense for all occupied facilities was $5.7 million and 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | |
Beginning balance | | $ | — | | | $ | 12,651 | | | $ | — | | | $ | 15,989 | | | | | |
Loss (gain) recognized in other comprehensive loss | | — | | | (264) | | | — | | | (2,548) | | | | | |
Amounts reclassified from other comprehensive loss to earnings | | — | | | (499) | | | — | | | (1,483) | | | | | |
Net loss (gain) recognized in other comprehensive loss | | — | | | (763) | | | — | | | (4,031) | | | | | |
Gain recognized in earnings | | — | | | (35) | | | — | | | (105) | | | | | |
Ending balance | | $ | — | | | $ | 11,853 | | | $ | — | | | $ | 11,853 | | | | | |
| | | | | | | | | | | | |
Embedded EPP Derivatives in Sales Contracts
For information on embedded EPP Derivatives in sales contracts, see Part II, Item 8, Note 8 - Derivative Financial Instruments in our Annual Report on form 10-K for the fiscal year ended December 31, 2021.
9. Leases
Facilities, Energy Servers, and Vehicles
$17.0 million, respectively. For the three and nine months ended September 30, 2022, rent expense for all occupied facilities was $5.0 million and $14.2 million, respectively. For the three and nine months ended September 30, 2021, rent expense for all occupied facilities was $4.4 million and $11.4 million, respectively.
Operating and financefinancing lease right-of-use assets and lease liabilities for facilities, Energy Servers, and vehicles as of September 30, 20222023 and December 31, 20212022 were as follows (in thousands):
| | | | | | | | | | | | | | | September 30, | | December 31, |
| | September 30, | | December 31, | | 2023 | | 2022 |
| | 2022 | | 2021 | | | | |
Operating Leases: | Operating Leases: | | | | | Operating Leases: | |
Operating lease right-of-use assets, net 1, 2 | Operating lease right-of-use assets, net 1, 2 | | $ | 114,053 | | | $ | 106,660 | | Operating lease right-of-use assets, net 1, 2 | | $ | 127,973 | | | $ | 126,955 | |
| Current operating lease liabilities | Current operating lease liabilities | | (12,671) | | | (13,101) | | Current operating lease liabilities | | (16,666) | | | (16,227) | |
Non-current operating lease liabilities | Non-current operating lease liabilities | | (122,412) | | | (106,187) | | Non-current operating lease liabilities | | (133,602) | | | (132,363) | |
Total operating lease liabilities | Total operating lease liabilities | | $ | (135,083) | | | $ | (119,288) | | Total operating lease liabilities | | $ | (150,268) | | | $ | (148,590) | |
| Finance Leases: | Finance Leases: | | Finance Leases: | |
Finance lease right-of-use assets, net 2, 3, 4 | Finance lease right-of-use assets, net 2, 3, 4 | | $ | 2,692 | | $ | 2,944 | Finance lease right-of-use assets, net 2, 3, 4 | | $ | 2,899 | | | $ | 2,824 | |
| Current finance lease liabilities | | (988) | | | (863) | | |
Non-current finance lease liabilities | | (1,899) | | | (2,157) | | |
Current finance lease liabilities5 | | Current finance lease liabilities5 | | (1,142) | | | (1,024) | |
Non-current finance lease liabilities6 | | Non-current finance lease liabilities6 | | (1,956) | | | (1,971) | |
Total finance lease liabilities | Total finance lease liabilities | | $ | (2,887) | | | $ | (3,020) | | Total finance lease liabilities | | $ | (3,098) | | | $ | (2,995) | |
Total lease liabilities | Total lease liabilities | | $ | (137,970) | | | $ | (122,308) | | Total lease liabilities | | $ | (153,366) | | | $ | (151,585) | |
1 These assets primarily include leases for facilities, Energy Servers, and vehicles.
2 Net of accumulated amortization.
3 These assets primarily include leases for vehicles.
4 Included in property, plant and equipment, net in the condensed consolidated balance sheet.sheets.
5 Included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.
6 Included in other long-term liabilities in the condensed consolidated balance sheets.
The components of our facilities, Energy Servers, and vehicles'vehicles’ lease costs for the three and nine months ended September 30, 20222023 and 20212022 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Operating lease costs | | $ | 6,097 | | | $ | 3,925 | | | $ | 17,962 | | | $ | 10,620 | |
Finance lease costs: | | | | | | | | |
Amortization of finance lease right-of-use assets | | 230 | | | 214 | | | 750 | | | 1,096 | |
Interest expense for finance lease liabilities | | 53 | | | 51 | | | 160 | | | 296 | |
Total finance lease costs | | 283 | | | 265 | | | 910 | | | 1,392 | |
Short-term lease costs | | 538 | | | 625 | | | 699 | | | 951 | |
Total lease costs | | $ | 6,918 | | | $ | 4,815 | | | $ | 19,571 | | | $ | 12,963 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | | |
Operating lease costs | | | | | | $ | 8,408 | | | $ | 6,097 | | | $ | 24,373 | | | $ | 17,962 | |
Financing lease costs: | | | | | | | | | | | | |
Amortization of right-of-use assets | | | | | | 294 | | | 230 | | | 689 | | | 750 | |
Interest on lease liabilities | | | | | | 72 | | | 53 | | | 203 | | | 160 | |
Total financing lease costs | | | | | | 366 | | | 283 | | | 892 | | | 910 | |
Short-term lease costs | | | | | | 384 | | | 538 | | | 1,561 | | | 699 | |
Total lease costs | | | | | | $ | 9,158 | | | $ | 6,918 | | | $ | 26,826 | | | $ | 19,571 | |
Weighted average remaining lease terms and discount rates for our facilities, Energy Servers and vehicles as of September 30, 20222023 and December 31, 20212022 were as follows:
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
Weighted average remaining lease term: | | | | |
Operating leases | | 9.1 years | | 8.9 years |
Finance leases | | 3.1 years | | 3.5 years |
Weighted average discount rate: | | | | |
Operating leases | | 10.0 | % | | 9.6 | % |
Finance leases | | 7.6 | % | | 7.6 | % |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
| | | | |
Weighted average remaining lease term: | | | | |
Operating leases | | 7.9 years | | 8.6 years |
Finance leases | | 3.4 years | | 3.3 years |
Weighted average discount rate: | | | | |
Operating leases | | 10.4 | % | | 10.3 | % |
Finance leases | | 9.3 | % | | 6.9 | % |
Future lease payments under lease agreements for our facilities, Energy Servers and vehicles as of September 30, 20222023 were as follows (in thousands):
| | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
Remainder of 2022 | | $ | 6,365 | | | $ | 281 | |
2023 | | 24,688 | | | 1,121 | |
2024 | | 23,028 | | | 948 | |
2025 | | 23,504 | | | 461 | |
2026 | | 23,332 | | | 222 | |
Thereafter | | 54,170 | | | 73 | |
Total minimum lease payments | | 155,087 | | | 3,106 | |
Less: amounts representing interest or imputed interest | | (20,004) | | | (219) | |
Present value of lease liabilities | | $ | 135,083 | | | $ | 2,887 | |
| | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
| | | | |
Remainder of 2023 | | $ | 8,513 | | | $ | 357 | |
2024 | | 29,803 | | | 1,289 | |
2025 | | 29,863 | | | 839 | |
2026 | | 29,769 | | | 598 | |
2027 | | 28,500 | | | 412 | |
Thereafter | | 99,736 | | | 98 | |
Total minimum lease payments | | 226,184 | | | 3,593 | |
Less: amounts representing interest or imputed interest | | (75,916) | | | (495) | |
Present value of lease liabilities | | $ | 150,268 | | | $ | 3,098 | |
Managed Services and Portfolio Financings Through PPA Entities
Managed Services - We recognized $15.8 million of product revenue, $4.8 million of installation revenue, $2.7 million of financing obligations, and $9.3 million of right-of-use assets and lease liabilities from successful sale and leaseback transactions for the nine months ended September 30, 2023. There were no successful sale and leaseback transactions for the three months ended September 30, 2023.
We recognized $0.9 million of product revenue, $0.6 million of installation revenue, $0.3 million of financing obligations, and $0.6 million of right-of-use assets and lease liabilities from successful sale and leaseback transactions for the three and nine months ended September 30, 2022.
The recognized lease expense from successful sale and leaseback transactions for the three and nine months ended September 30, 2023 was $2.6 million and $7.0 million, respectively. The recognized lease expense from successful sale and leaseback transactions for the three and nine months ended September 30, 2022 was $1.3 million and $3.9 million, respectively.
At September 30, 2022,2023, future lease payments under the Managed Services Agreements financing obligations were as follows (in thousands):
| | | Financing Obligations | | | Financing Obligations | |
Remainder of 2022 | | $ | 10,889 | | | |
2023 | | 44,124 | | | |
| Remainder of 2023 | | Remainder of 2023 | | $ | 11,466 | | |
2024 | 2024 | | 42,051 | | | 2024 | | 43,368 | | |
2025 | 2025 | | 41,025 | | | 2025 | | 42,358 | | |
2026 | 2026 | | 36,426 | | | 2026 | | 37,778 | | |
2027 | | 2027 | | 21,441 | | |
Thereafter | Thereafter | | 55,508 | | | Thereafter | | 37,237 | | |
Total minimum lease payments | Total minimum lease payments | | 230,023 | | | Total minimum lease payments | | 193,648 | | |
Less: imputed interest | Less: imputed interest | | (128,150) | | | Less: imputed interest | | (103,046) | | |
Present value of net minimum lease payments | Present value of net minimum lease payments | | 101,873 | | | Present value of net minimum lease payments | | 90,602 | | |
Less: current financing obligations | Less: current financing obligations | | (16,682) | | | Less: current financing obligations | | (39,093) | | |
Long-term financing obligations | Long-term financing obligations | | $ | 85,191 | | | Long-term financing obligations | | $ | 51,509 | | |
The long-term financing obligations, as reflected in our condensed consolidated balance sheets, were $443.7$410.4 million and $461.9$442.1 million as of September 30, 20222023 and December 31, 2021,2022, respectively. TheWe expect the difference between these obligations and the principal obligations in the table above willto be offset against the carrying value of the related Energy Servers at the end of the lease and the remainder recognized as a gain at that point.
Portfolio Financings through PPA Entities
The components of our aggregate net investment in sales-type leases- Customer arrangements entered into prior to January 1, 2020 under our Portfolio Financings through PPA entities consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
Lease payment receivables, net1 | | $ | — | | | $ | 44,378 | |
Estimated residual value of leased assets (unguaranteed) | | — | | | 890 | |
Net investment in sales-type leases | | — | | | 45,268 | |
Less: current portion | | — | | | (5,784) | |
Non-current portion of net investment in sales-type leases | | $ | — | | | $ | 39,484 | |
1 Net of current estimated credit losses of approximately $0.1 million as of December 31, 2021.
As of September 30, 2022, there was no net investment in sales-type leases as a result of PPA IIIa Repowering. Please refer to Note 11 - Portfolio Financing for details.
As of September 30, 2022, future estimated operating minimum lease payments we expect to receive from Portfolio Financing arrangements through a PPA Entitiesentity that qualified as leases were accounted for as follows (in thousands):
| | | | | | | | | | |
| | | | Operating Leases |
Remainder of 2022 | | | | $ | 9,582 | |
2023 | | | | 37,608 | |
2024 | | | | 40,067 | |
2025 | | | | 42,589 | |
2026 | | | | 43,761 | |
Thereafter | | | | 197,868 | |
Total minimum lease payments | | | | $ | 371,475 | |
either sales-type leases or operating leases. Since January 1, 2020, we have not entered into any new PPAs with customers under such arrangements.
In August 2023, we sold our PPA entity, PPA V. For additional information, please see Part I, Item 1, Note 10 - Portfolio Financings.
10.
9. Stock-Based Compensation Expense and Employee Benefit Plans
Stock-Based Compensation Expense
The following table summarizes the components of stock-based compensation expense in the condensed consolidated statements of operations (in thousands):
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 | |
| Cost of revenue | Cost of revenue | | $ | 4,982 | | | $ | 2,945 | | | $ | 13,609 | | | $ | 9,749 | | | Cost of revenue | | $ | 5,581 | | | $ | 4,982 | | | $ | 14,809 | | | $ | 13,609 | | |
Research and development | Research and development | | 4,818 | | | 5,678 | | | 25,113 | | | 15,876 | | | Research and development | | 5,585 | | | 4,818 | | | 21,673 | | | 25,113 | | |
Sales and marketing | Sales and marketing | | 3,948 | | | 4,391 | | | 13,528 | | | 12,486 | | | Sales and marketing | | 3,015 | | | 3,948 | | | 15,089 | | | 13,528 | | |
General and administrative | General and administrative | | 10,283 | | | 7,952 | | | 30,688 | | | 19,198 | | | General and administrative | | 7,383 | | | 10,283 | | | 28,025 | | | 30,688 | | |
| | $ | 24,031 | | | $ | 20,966 | | | $ | 82,938 | | | $ | 57,309 | | | | $ | 21,564 | | | $ | 24,031 | | | $ | 79,596 | | | $ | 82,938 | | |
Stock Option Activity
The following table summarizes the stock option activity under our stock plans during the reporting period:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding Options |
| | Number of Shares | | Weighted Average Exercise Price | | Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
| | | | | | | | |
| | | | | | | | (in thousands) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Balances at December 31, 2021 | | 10,737,295 | | | $ | 21.23 | | | 5.2 | | $ | 60,304 | |
| | | | | | | | |
Exercised | | (468,821) | | | 7.52 | | | | | |
Forfeited | | (42,742) | | | 6.97 | | | | | |
Expired | | (1,229,091) | | | 30.38 | | | | | |
Balances at September 30, 2022 | | 8,996,641 | | | 20.77 | | | 4.8 | | 45,054 | |
Vested and expected to vest at September 30, 2022 | | 8,985,005 | | | 20.78 | | | 4.8 | | 44,901 | |
Exercisable at September 30, 2022 | | 8,598,209 | | | $ | 21.46 | | | 4.7 | | 39,364 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding Options |
| | Number of Shares | | Weighted Average Exercise Price | | Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
| | (in thousands, except weighted average exercise price and remaining contractual life) |
Balances at December 31, 2022 | | 8,748,309 | | | $ | 20.70 | | | 4.6 | | $ | 40,532 | |
| | | | | | | | |
Exercised | | (332,293) | | | 7.94 | | | | | |
| | | | | | | | |
Expired | | (541,302) | | | 26.95 | | | | | |
Balances at September 30, 2023 | | 7,874,714 | | | 20.81 | | | 3.8 | | 17,890 | |
Vested and expected to vest at September 30, 2023 | | 7,873,962 | | | 20.81 | | | 3.8 | | 17,885 | |
Exercisable at September 30, 2023 | | 7,844,713 | | | $ | 20.86 | | | 3.8 | | $ | 17,707 | |
Stock Options - DuringFor the three and nine months ended September 30, 2023, we recognized $0.1 million and $0.3 million of stock-based compensation costs for stock options, respectively. For the three and nine months ended September 30, 2022, we recognized $1.2 million and $6.7 million of stock-based compensation expense for stock options, respectively. During the three and nine months ended September 30, 2021, we recognized $2.7 million and $10.0 million of stock-based compensation expense for stock options, respectively.
We did not grant options in the three and nine months ended September 30, 20222023 and 2021.2022.
As of September 30, 20222023 and December 31, 2021,2022, we had unrecognized compensation expensecosts related to unvested stock options of $0.8$0.1 million and $6.2$0.4 million, respectively. This expensecost is expected to be recognized over the remaining weighted-average period of 0.5 years and 0.9 years, respectively. Cash received from stock options exercised totaled $3.6$1.1 million and $62.1$2.6 million for the three and nine months ended September 30, 20222023, respectively. Cash received from stock options exercised totaled $2.2 million and 2021,$3.6 million for the three and nine months ended September 30, 2022, respectively.
Stock Award Activity
A summary of our stock awards activity and related information is as follows:
| | | Number of Awards Outstanding | | Weighted Average Grant Date Fair Value | | Number of Awards Outstanding | | Weighted Average Grant Date Fair Value |
| | Unvested Balance at December 31, 2021 | | 8,367,664 | | | $ | 20.52 | | |
Unvested Balance at December 31, 2022 | | Unvested Balance at December 31, 2022 | | 9,549,035 | | | $ | 19.99 | |
Granted | Granted | | 4,945,001 | | | 19.69 | | Granted | | 4,814,465 | | | 18.37 | |
Vested | Vested | | (2,328,713) | | | 17.59 | | Vested | | (3,496,491) | | | 18.87 | |
Forfeited | Forfeited | | (900,629) | | | 21.76 | | Forfeited | | (1,428,026) | | | 21.44 | |
Unvested Balance at September 30, 2022 | | 10,083,323 | | | 19.99 | | |
Unvested Balance at September 30, 2023 | | Unvested Balance at September 30, 2023 | | 9,438,983 | | | $ | 19.36 | |
Stock Awards - The estimated fair value of restricted stock units (“RSUs”) and performanceperformance-based stock units (“PSUs”) is based on the fair value of our Class A common stock on the date of grant. DuringFor the three and nine months ended September 30, 2023, we recognized $19.3 million and $65.0 million of stock-based compensation costs for stock awards, respectively. For the three and nine months ended September 30, 2022, we recognized $18.4 million and $64.4 million of stock-based compensation expense for stock awards, respectively. During the three and nine months ended September 30, 2021, we recognized $15.8 million and $40.6 million of stock-based compensation expense for stock awards, respectively.
As of September 30, 20222023 and December 31, 2021,2022, we had $155.2$129.3 million and $114.9$135.7 million of unrecognized stock-based compensation expense related to unvested stock awards, expected to be recognized over a weighted average period of 2.12.0 years and 2.31.9 years, respectively.
Executive Awards
On February 15, 2023 and July 11, 2023, the Company granted RSU and PSU awards (the “2023 Executive Awards”) to certain executive staff pursuant to the 2018 Equity Incentive Plan. The RSUs have time-based vesting schedules, started vesting on February 15, 2023 and shall vest over a three year period. The PSUs which started vesting on February 15, 2023 have either a three-year or one-year cliff vesting period, and the PSUs which started vesting on July 11, 2023, cliff vest on February 15, 2024. The PSUs will vest based on a combination of time and achievement against performance metrics targets assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2023 Executive Awards are recognized over the service period as we evaluate the probability of the achievement of the performance conditions.
The following table presents the stock activity for the nine months ended September 30, 2022, and the total number of shares available for grant under our stock plans as of September 30, 2022:plans:
| | | | | | | | |
| | Plan Shares Available for Grant |
| | |
Balances at December 31, 20212022 | | 24,146,78428,340,641 | |
Added to plan | | 8,384,4608,948,255 | |
Granted | | (4,981,732)(4,734,700) | |
| | |
Cancelled/Forfeitedforfeited | | 2,062,1771,899,563 | |
Expired | | (1,196,565)(504,347) | |
Balances at September 30, 20222023 | | 28,415,12433,949,412 | |
2018 Employee Stock Purchase Plan (“2018 ESPP”)
For the three and nine months ended September 30, 2023, we recognized $0.1 million and $12.5 million of stock-based compensation costs for the 2018 ESPP, respectively. For the three and nine months ended September 30, 2022, we recognized $4.3 million and $11.2 million of stock-based compensation costs for the 2018 ESPP, respectively.
We issued 426,170 and 875,695 shares in the three and nine months ended September 30, 2023, respectively. We issued 339,055 and 759,744 shares in the three and nine months ended September 30, 2022, respectively.
During the nine months ended September 30, 20222023 and 2021, we recognized $11.2 million and $4.5 million of stock-based compensation expense for the 2018 Employee Stock Purchase Plan, respectively. We issued 759,744 and 1,945,305 shares in the nine months ended September 30, 2022, and 2021, respectively. During the nine months ended September 30, 2022 and 2021, we added an additional 2,239,563 and 12,055,792 shares, respectively, and 1,902,572 shares, respectively. Therethere were 13,840,716 shares15,204,584 and 2,544,66813,840,716 shares available for issuance as of September 30, 20222023 and 2021,December 31, 2022, respectively.
As of September 30, 20222023 and December 31, 2021,2022, we had $10.4$12.1 million and $9.8$12.0 million of unrecognized stock-based compensation expense,costs, respectively, expected to be recognized over a weighted average period of 1.1 years and 0.50.6 years, respectively.
11.10. Portfolio Financings
Overview
We have developed various financing options that enable customers'customers’ use of the Energy Servers through third-party ownership financing arrangements. For additional information on these financing options, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
PPA IIIaV Repowering of Energy Servers
PPA IIIaV was established in 20122015 and we, through a special purpose subsidiary (the “Project Company”), had previously entered into certain agreements for the purpose of developing, financing, owning, operating, maintaining and managing a portfolio of 9.837.1 megawatts of Energy Servers.
On March 31, 2022,August 10, 2023, we acquired all of Solar TC Corp’s (“Intel”) interest in PPA V, as set forth in the Purchase and Sale Agreement (the “PPA V Buyout”). The aggregate purchase price of the transaction amounted to $6.9 million. After the acquisition, PPA V became wholly owned by us.
The change in our ownership interest in PPA V was accounted for as an equity transaction in accordance with ASC 810 Consolidation. The carrying amount of the noncontrolling interest was eliminated to reflect the change in our ownership interest in PPA V, and the difference between the fair value of the consideration paid and the carrying amount of the noncontrolling interest immediately prior to the PPA V Buyout of $11.5 million was recognized as additional paid-in capital in our condensed consolidated statements of stockholders’ equity (deficit).
On August 24, 2023, we entered into athe Membership Interest Purchase Agreement where we bought out the equity interest of the third-party investor, wherein(the “MIPA”) with Generate C&I Warehouse, LLC (the “Financier”). Following the PPA IIIa became wholly owned by us (the “Buyout”).
Following theV Buyout and prior to June 14, 2022,signing the MIPA, we repaid all of the outstanding debt of the Project Company of $30.6$119.0 million, including accrued interest of $0.5 million, and recognized a loss on extinguishment of debt in an amount of $4.2$1.4 million, which includesrepresented in its entirety by the write-offderecognition of the related debt discount related to warrants of $1.8 million and a make-whole payment of $2.4 million associated with the debt extinguishment. Refer toissuance costs. For additional information, please see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements, Non-recourse Debt Facilitiessection.
On June 14, 2022,August 25, 2023, we sold our 100% interest in the Project Company to Generate C&I Warehouse, LLC (“Generate”)the Financier through a Membership Interest Purchase Agreement (“MIPA”).the MIPA. Simultaneously, we entered into an agreement with the Project Company to upgrade the old 9.837.1 megawatts of old Energy Servers (the “old Energy Servers”) by replacing them with a newer generation ofthe new Energy Servers (“new Energy Servers”) and providingto provide related installation services, which was financed by Generatethe Financier (the “EPC Agreement”). The old Energy Servers will be removed prior to installing the new Energy Servers, whereby upon completion of installation the old Energy Servers will be returned to Bloom. We also amended and restated our operations and maintenance agreement with the Project Company to cover all new Energy Servers and old Energy Servers prior to their upgrade (“the O&M Agreement”). The operations and maintenance fees under the O&M Agreement are paid on a fixed dollar per kilowatt basis.
Certain power purchase agreements within the PPA IIIa portfolio were classified as sales-type leases under ASC 840, while some were classified as operating leases. The Company elected the practical expedient package with the adoption of ASC 842, which allowed the Company to carry forward the lease classification upon adoption of ASC 842 on January 1, 2020. The leases were modified prior to the sale of the PPA IIIa to Generate. Such modified leases were reassessed and determined to not be leases under ASC 842 because customers have no control over the identified assets. Accordingly, on the date of modification, the customer financing receivables were derecognized and recognized as property, plant, and equipment (“PPA IIIa PP&E”).
Due to our repurchase option on the old Energy Servers, the Company concluded there was no transfer of control of the old Energy Servers upon sale of the membership interest to Generate.the Financier. Accordingly, the Companywe continued to recognize the old Energy Servers, despite the legal ownership of such assets having been transferred under the MIPA. Upon reclassification of the lease assets to PP&E, the CompanyWe assessed the recorded assets for impairment. The carrying amount of the PPA IIIa PP&EV property. plant and equipment was determined to be not recoverable as the net undiscounted cash flows are less than the carrying amounts for PPA IIIa PP&E.V property. plant and equipment. Therefore, we recognized the asset impairment charge as electricity cost, consistent with our depreciation expense classification for property, plant and equipment under leases.
The PPA IIIaV Upgrade was in progress as of September 30, 20222023 and resulted in the following summarized impacts on our condensed consolidated balance sheet as of September 30, 2022:2023: (i) cash and cash equivalents increaseddecreased by $17.7$62.4 million mainlyprimarily due to $54.7a $119.0 million cash receiptsrepayment of outstanding debt and related accrued interest, partially offset by $60.3 million from the sale of the new Energy Servers to the Project Company, offset by $30.6 million for the repayment of outstanding debt, (ii) both customer financing receivables, current and non-current, and property plant and equipment, net decreased by $5.9$124.0 million $36.9 million and $2.2 million, respectively, due to the impairment of $44.8the old Energy Servers of $123.7 million and accelerated depreciation of $0.2$0.3 million of the existing old Energy Servers (we revised the expected useful life of the old Energy Servers from 157.5 years to approximately 0.50.3 years which resulted in recognized accelerated depreciation of $0.2$0.3 million recorded in electricity cost of revenue (see Note 6))revenue), (iii) contract assets increased by $5.0$116.5 million and inventories decreased by $70.0 million, (iv) inventoriesdeferred revenue and deferred cost of revenuecustomer deposits, current and long-term, increased by $12.4 million, (v) restricted cash, current and long-term, decreased by $24.1$8.7 million, (vi) accounts receivable, net decreased by $3.3 million, (vii) other long-term assets decreased by $1.6 million, (viii) prepaid expenses and other current assets decreased by $1.9 million, (ix) financing obligations increased by $0.3 million, and (v)(x) accrued expenses and other current liabilities increaseddecreased by $4.7$0.5 million.
Impacts on our condensed consolidated statements of operations for the three and nine months ended September 30, 20222023 are summarized as follows: (i) net product and installation revenue recognized of $12.7increased by $151.6 million and $2.1 million and $49.6 million and $3.2$9.5 million, respectively, as a
result of the sale of the new Energy Servers; (ii) electricity revenue increased by $1.1 million related to the old Energy Servers, (iii) cost of electricity revenue of nil and $45.0increased by $125.5 million, respectively,primarily including the write-offimpairment of the old Energy Servers of nil$123.7 million and $44.8 million, respectively, accelerated depreciation of nil and $0.2$0.3 million respectively, prior to the completion of installation; (iii)(iv) cost of product revenue and cost of installation revenue of $5.7increased by $62.6 million and $1.7 million and $21.6 million and $2.5$7.4 million, respectively, due to the sale of the new Energy Servers; (v) general and (iv) nil and $4.2administrative expenses increased by $6.4 million respectively,due to the impairment of non-recoverable production insurance; (vi) loss on extinguishment of debt.debt increased by $1.4 million, (vii) interest expense increased by $0.3 million, and (viii) net loss attributable to noncontrolling interest decreased by $1.0 million.
Impacts on our condensed consolidated statements of cash flows for the nine months ended September 30, 20222023 are summarized as follows: net cash provided by financing activities decreased by $32.6$118.5 million due to the repayment of debt related to PPA V, and acquisition of $30.2all of interest in PPA V from Intel for $6.9 million and cash feenet of $2.4 million associated with debt extinguishment.distributions to Intel’s noncontrolling interest of $2.3 million.
PPA Entities’Entity’s Aggregate Assets and Liabilities
Generally, the assets of an operating company owned by an investment company can be used to settle only the operating company obligations, and the operating company creditors do not have recourse to us. The following arewere the aggregate carrying values of our VIEs'VIE’s assets and liabilities in our condensed consolidated balance sheets, after eliminations of intercompany transactions and balances, including as of September 30, 2022 each of the PPA EntitiesV Entity in the PPA IV transaction and the PPA V transaction and as of December 31, 2021 each of2022 (in thousands):
| | | | | | | | |
| | |
| | December 31, |
| | 2022 |
Assets | | |
Current assets: | | |
Cash and cash equivalents | | $ | 5,008 | |
Restricted cash | | 550 | |
Accounts receivable | | 2,072 | |
| | |
Prepaid expenses and other current assets | | 1,927 | |
Total current assets | | 9,557 | |
Property, plant and equipment, net | | 133,285 | |
| | |
Restricted cash | | 8,000 | |
Other long-term assets | | 1,869 | |
Total assets | | $ | 152,711 | |
| | |
Liabilities | | |
Current liabilities: | | |
| | |
Accrued expenses and other current liabilities | | $ | 1,037 | |
Deferred revenue and customer deposits | | 662 | |
Non-recourse debt | | 13,307 | |
Total current liabilities | | 15,006 | |
Deferred revenue and customer deposits | | 4,748 | |
Non-recourse debt | | 112,480 | |
| | |
Total liabilities | | $ | 132,234 | |
| | |
Before the PPA Entities in the PPA IIIa transaction, the PPA IV transaction andsale on August 24, 2023, we consolidated the PPA V transaction (in thousands):
| | | | | | | | | | | | | | |
| | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 1,265 | | | $ | 1,541 | |
Restricted cash | | 980 | | | 3,078 | |
Accounts receivable | | 3,170 | | | 5,112 | |
Customer financing receivable | | — | | | 5,784 | |
Prepaid expenses and other current assets | | 2,766 | | | 3,071 | |
Total current assets | | 8,181 | | | 18,586 | |
Property, plant and equipment, net | | 208,208 | | | 228,546 | |
Customer financing receivable | | — | | | 39,484 | |
Restricted cash | | 17,508 | | | 23,239 | |
Other long-term assets | | 1,994 | | | 2,362 | |
Total assets | | $ | 235,891 | | | $ | 312,217 | |
| | | | |
Liabilities | | | | |
Current liabilities: | | | | |
| | | | |
Accrued expenses and other current liabilities | | $ | 111 | | | $ | 194 | |
Deferred revenue and customer deposits | | 662 | | | 662 | |
Non-recourse debt | | 15,943 | | | 17,483 | |
Total current liabilities | | 16,716 | | | 18,339 | |
Deferred revenue and customer deposits | | 4,915 | | | 5,410 | |
Non-recourse debt | | 179,955 | | | 217,417 | |
| | | | |
Total liabilities | | $ | 201,586 | | | $ | 241,166 | |
| | | | |
We consolidated each PPA Entity as VIEsa VIE in the PPA IV transaction and the PPA V transaction, as we remain the minority shareholder in each of these transactions but havehad determined that we arewere the primary beneficiary of these VIEs. Thesethis VIE. The PPA Entities containV Entity contained debt that iswas non-recourse to us and ownowned Energy Server assets for which we dodid not have title.
12.11. Related Party Transactions
On September 23, 2023, all 13,491,701 shares of the Series B RCPS (the “Second Tranche Shares”) were automatically converted into shares of our Class A common stock. For more information on the Second Tranche Closing, see Part I, Item 1, Note 16 - SK ecoplant Strategic Investment. Consequently, SK ecoplant became a principal owner of an aggregate of 23,491,701 shares of our Class A common stock, including (i) 10,000,000 shares held with sole voting and investment power (as a result of the conversion of 10,000,000 shares of our Series A redeemable convertible preferred stock (the “Series A RCPS”) into 10,000,000 shares of our Class A common stock on November 8, 2022) and (ii) 13,491,701 shares held with shared voting and investing power with Econovation LLC, of which SK ecoplant is the sole member, as the assignee of the Second Tranche Shares. SK ecoplant is considered to be a related party as of September 23, 2023, and became entitled to nominate a member to the Board of Directors of Bloom. As of September 30, 2023, SK ecoplant’s beneficial ownership of our Class A common stock represents 10.5% of our outstanding Class A common stock.
ThereOther than noted above, there have been no changes in our related party relationshipstransactions during the three and nine months ended September 30, 2022.2023. For information on our related parties,party transactions, see Part II, Item 8, Note 12 - Related Party Transactionsin our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
Our operations includeincluded the following related party transactions (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| | | | | | | | | | |
Total revenue from related parties | | $ | 12,532 | | | $ | 3,333 | | | $ | 30,231 | | | $ | 8,227 | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | | | | | | |
| | | | | | | | | | | | | | | |
Total revenue from related parties1 | | $ | 125,676 | | | $ | 12,532 | | | $ | 360,981 | | | $ | 30,231 | | | | | | | | |
1Includes revenue from SK ecoplant for the three and nine months ended September 30, 2023, which became a related party on September 23, 2023, however we had transactions with SK ecoplant in prior periods (see Part II, Item 8, Note 17 - SK ecoplant Strategic Investment in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and Part I, Item 1, Note 16 - SK ecoplant Strategic Investment).
Below is the summary of outstanding related party balances as of September 30, 20222023 and December 31, 20212022 (in millions)thousands):
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
| | | | |
Accounts receivable | | $ | 12.5 | | | $ | 4.4 | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
| | | | |
Accounts receivable | | $ | 247,897 | | | $ | 4,257 | |
Contract assets | | 3,415 | | | — | |
Deferred cost of revenue, current | | 23,424 | | | — | |
Accrued expenses and other current liabilities | | 5,722 | | | — | |
Deferred revenue and customer deposits, current | | 11,118 | | | — | |
Debt to/from Related Parties
We had no material debt or convertible notes to/from investors considered to be related parties as of September 30, 20222023 and December 31, 2021.2022.
12. Restructuring
In September 2023, as a result of a review of current strategic priorities and resource allocation, we approved a restructuring plan (the “Plan”) intended to realign our operational focus to support our multi-year growth, scale the business, and improve our cost structure and operating margins. The Plan included (i) an optimization of our workforce across multiple functions, (ii) a relocation of our repair and overhaul (“R&O”) department of our manufacturing and warehousing facility in Newark, Delaware, to Mexico, and (iii) a closure of a manufacturing, warehousing, research and development (“R&D”) facility in Sunnyvale, California. We began executing the Plan in September 2023 and expect these efforts to continue in subsequent quarters. The restructuring activities are expected to be completed in the first half of fiscal 2024, subject to local law and consultation requirements, as well as our business needs. We evaluate restructuring charges in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”).
According to the Plan, 74 full-time employees and 48 contractors separated from the Company in September 2023. An additional 71 full-time employees and 8 contractors separated from the Company in October 2023. Both full-time employees and contractors who were impacted by the restructuring were eligible to receive severance benefits.
In the third quarter of fiscal 2023, we incurred $2.2 million in restructuring costs recorded as severance expenses. We expect to incur another $16.4 million in restructuring costs in subsequent quarters, out of which we expect $10.0 million will relate to the closure of our manufacturing, warehousing, and R&D facility in Sunnyvale, California, $3.0 million will relate to severance costs, $2.7 million will relate to relocation costs, and $0.7 million will relate to other one-time employee termination benefits. However, 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.
The following table presents our current and non-current liability as accrued for restructuring charges on our condensed consolidated balance sheets. The table sets forth an analysis of the components of the restructuring charges and payments and other deductions made against the accrual for the three months ended September 30, 2023 (in thousands):
| | | | | | | | | | | | | |
| | Three Months Ended, September 30, 2023 | | | | | | | |
| | Severance | | | | | | | |
| | | | | | | | | |
Balance at June 30, 2023 | | $ | — | | | | | | | | |
Restructuring accruals | | 2,219 | | | | | | | | |
Payments | | (1,047) | | | | | | | | |
Balance at September 30, 2023 | | $ | 1,172 | | | | | | | | |
Severance expense recorded in the third quarter of fiscal 2023 in accordance with ASC 420 was a result of the separation of 74 full-time employees and 48 contractors associated with the Plan. At September 30, 2023, $1.2 million of accrued severance-related costs were included in accrued expenses and other current liabilities in our condensed consolidated balance sheets.
The following table summarizes restructuring costs included in the accompanying condensed consolidated statements of operations (in thousands):
| | | | | | | | | | | | | |
| | Three Months Ended, September 30, 2023 | | | | | | | |
| | | | | | | | | |
Cost of product revenue | | $ | 677 | | | | | | | | |
Cost of service revenue | | 48 | | | | | | | | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 1,387 | | | | | | | | |
General and administrative | | 107 | | | | | | | | |
Total | | $ | 2,219 | | | | | | | | |
13. Commitments and Contingencies
Commitments
Purchase Commitments with Suppliers and Contract Manufacturers - In order to reduce manufacturing lead-times for an adequate supply of inventories, we have agreements with our component suppliers and contract manufacturers to allow long lead-time component inventory procurement based on a rolling production forecast. We are contractually obligated to purchase long lead-time component inventory procured by certain manufacturers in accordance with our forecasts. We can generally give notice of order cancellation at least 90 days prior to the delivery date. However, we occasionally issue purchase orders to our component suppliers and third-party manufacturers that may not be cancellable. As of September 30, 2022, we had a commitment with NetJets to purchase a fractional interest in one of its jets, which is to be used for corporate travel purposes, in the amount of approximately $3.4 million. The jet is expected to be delivered by July of 2023. As of2023 and December 31, 2021,2022, we had no material open purchase orders with our component suppliers and third-party manufacturers that are not cancellable.
Portfolio Financings Performance Guarantees - We guarantee the performance of Energy Servers at certain levels of output and efficiency to our customers over the contractual term. We monitor the need for any accruals arising from such guaranties, which are calculated as the difference between committed and actual power output or between natural gas consumption at warranted efficiency levels and actual consumption, multiplied by the contractual rates with the customer. Amounts payable under these guaranties are accrued in periods when the guaranties are not met and are recorded as service revenue in the condensed consolidated statements of operations. We paid $1.3$4.5 million and $0.2$24.4 million infor the three and nine months ended September 30, 2023, respectively, for such performance guaranteesguarantees. We paid $0.8 million and $10.5 million for the three and nine months ended September 30, 2022, and 2021, respectively.respectively, for such performance guarantees.
Letters of Credit - In 2019, pursuant to the PPA II upgrade of Energy Servers, we agreed to indemnify our financing partner for losses that may be incurred in the event of certain regulatory, legal or legislative developmentdevelopments and established a
cash-collateralized letter of credit facility for this purpose. There were no letters of credit or pledged funds associated with the PPA IIIa Upgrade. As of September 30, 2023 and December 31, 2022, the balance of this cash-collateralized letter of credit was $69.0 million, of which $33.3$40.4 million and $35.7$69.1 million, is recognizedrespectively.
In August 2023, as short-term and long-termpart of the PPA V Upgrade, the debt service reserve of $8.6 million was reclassified from restricted cash respectively. Asto cash and cash equivalents at the time of repayment of the 3.04% Senior Secured Notes due June 2031. For additional information, please see Part I, Item 1, Note 7 – Outstanding Loans and Security Agreements and Note 10 – Portfolio Financings. The restricted cash held in the PPA V entity as of December 31, 2021, the balance of this cash-collateralized letter2022, was $8.6 million.
In addition, we have other outstanding letters of credit was $99.4issued to our customers and other counterparties in the U.S. and international locations under different performance and financial obligations. These letters of credit are collateralized through cash deposited in the controlled bank accounts with the issuing banks, and are classified as restricted cash in our condensed consolidated balance sheets. In September 2023, we canceled certain existing cash-collateralized letters of credit with an approximate value of $60.4 million issued to our customers in the Republic of which $41.7Korea under long-term service agreements (the “LTSAs”), and replaced them with surety bonds on a non-collateralized basis. As of September 30, 2023 and December 31, 2022, the balances of the cash-collateralized letters of credit issued to our customers and other counterparties in the U.S. and international locations were $32.3 million and $57.7$84.3 million, is recognized as short-term and long-term restricted cash, respectively.
Pledged Funds - In 2019, pursuant to the PPA IIIb refinancing and energy servers upgrade program,of Energy Servers, we pledgedestablished a restricted cash fund of $20.0 million, which had been pledged for a seven-year period to secure our operations and maintenance obligations with respect to the totality of our obligations to the financier. We categorized the $20.0 million as restricted cash on our condensed consolidated balance sheet. It was agreed allAll or a portion of such funds would be released if we meet certain credit rating and/or market capitalization milestones prior to the end of the pledge period. If we do not meet the required criteria within the first five-year period, the funds would still be released to us over the following two years as long as the energy serversEnergy Servers continue to perform in compliance with our warranty obligations. As of September 30, 20222023 and December 31, 2021,2022, the balance of the long-term restricted cash fund was $6.7$7.6 million and $6.7 million.$7.9 million, respectively.
Contingencies
Indemnification Agreements - We enter into standard indemnification agreements with our customers and certain other business partners in the ordinary course of business. Our exposure under these agreements is unknown because it involves future claims that may be made against us but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.
Delaware Economic Development Authority - In March 2012, we entered into an agreement with the Delaware Economic Development Authority (the “Authority”) to provide a grant of $16.5 million to us as an incentive to establish a new manufacturing facility in Delaware and to provide employment for full time workers at the facility over a certain period of time. The approved grant consisted of two components - a performance grant of $12.0 million that was received in 2012-2013 and was tied to total compensation paid to full time workers and a supplier incentive grant of $4.5 million that we would have received if we had employed 900 full time employees by pre-established dates. We forfeited the entire $4.5 million supplier incentive component of the grant. We forfeited and repaid two portions of the performance grant based on our achievement of one out of three milestones for the total compensation paid to full time workers, as follows:
■$108 million in total compensation over the four-year period ended September 30, 2017, which we did not meet, requiring us to repay $1.5 million of the grant,
■$144 million in total compensation over the four-year period ended September 30, 2021, which we did not meet, requiring us to repay $1.0 million of the grant, and
■$72 million in total compensation over the two-year period ended September 30, 2023, which we met, so no repayment was required.
We account for grants by analogizing to the grant accounting model under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”). As of September 30,December 31, 2022, the grant became current and we have recorded $9.5 million of grant related liability in accrued expenses and other current liabilities for future repaymentsrepayment of thisthe grant. As of December 31, 2021,September 30, 2023, we have recordedconcluded there was reasonable assurance that we had met the grant requirements, and as such, the grant related liability of $9.5 million was recognized in other long-term liabilities(a) the condensed consolidated statements of operations as a reduction in (i) cost of product revenue of $3.1 million, (ii) cost of service revenue of $2.9 million, (iii) general and administrative expenses of $0.6 million, (iv) research and development expenses of $0.5 million, and (v) sales and marketing expenses of $0.2 million for potentialthe three months ended September 30, 2023, and in (b) the condensed consolidated balance sheets as of September 30, 2023 as a reduction of inventories of $2.2 million, which is represented by capitalized payroll expenses and will be realized in the condensed consolidated statements of operations in future repaymentsperiods upon sale of this grant.these inventories.
Investment Tax Credits -For information on ITCs, see Part II, Item 8, Note 13 - Commitments and Contingencies on our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Please also refer to Note 1 - Nature of Business, Liquidity and Basis of Presentation Our Energy Servers are eligible for discussion offederal investment tax credits implemented by(“ITCs”) that accrued to qualified property under Internal Revenue Code Section 48 when placed into service. However, the IRA.ITC program has operational criteria that extend for five years. If the energy property is disposed of or otherwise ceases to be qualified investment credit property before the close of the five-year recapture period is fulfilled, it could result in a partial reduction of the incentives.
Legal Matters - We are involved in various legal proceedings that arise in the ordinary course of business. We review all legal matters at least quarterly and assess whether an accrual for loss contingencies needs to be recorded. We record an accrual for loss contingencies when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal matters are subject to uncertainties and are inherently unpredictable, so the actual liability in any such matters may be materially different from our estimates. If an unfavorable resolution were to occur, there exists the possibility of a material adverse impact on our condensed consolidated financial condition,balance sheets, results of operations or cash flows for the period in which the resolution occurs or onin future periods.
In March 2019, the Lincolnshire Police Pension Fund filed a class action complaint in the Superior Court of the State of California, County of Santa Clara, against us, certain members of our senior management, certain of our directors and the underwriters in our July 25, 2018 IPO alleging violations under Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), for alleged misleading statements or omissions in our Registration Statement on Form S-1 filed with the SEC in connection with the IPO. Two related class action cases were subsequently filed in the Santa Clara County Superior Court against the same defendants containing the same allegations; Rodriquez vs Bloom Energy et al. was filed on April 22, 2019 and Evans vs Bloom Energy et al. was filed on May 7, 2019. These cases have been consolidated. Plaintiffs'Plaintiffs’ consolidated amended complaint was filed with the court on September 12, 2019. On October 4, 2019, defendants moved to stay the lawsuit pending the federal district court action discussed below. On December 7, 2019, the Superior Court issued an order staying the action through resolution of the parallel federal litigation mentioned below. We believe the complaint to be without merit and in contravention of our forum selection clause in our Restated Certificate of Incorporation and we intend to defend this action vigorously. We are unable to estimate any range of reasonably possible losses.
In May 2019, Elissa Roberts filed a class action complaint in the federal district court for the Northern District of California against us, certain members of our senior management team, and certain of our directors alleging violations under SectionSections 11 and 15 of the Securities Act for alleged misleading statements or omissions in our Registration Statement on Form S-1 filed with the SEC in connection with the IPO. On September 3, 2019, the court appointed a lead plaintiff and lead plaintiffs’ counsel. On November 4, 2019, plaintiffs filed an amended complaint adding the underwriters in the IPO and our auditor as defendants for the Section 11 claim, as well as adding claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against us, and certain members of our senior management team. The amended complaint alleged a class period for all claims from the time of our IPO until September 16, 2019. On April 21, 2020, plaintiffs filed a second amended complaint, which continued to make the same claims and added allegations pertaining to the restatement and, as to claims under the Exchange Act, extended the putative class period through February 12, 2020. On July 1, 2020, we and the other defendants filed a motionmotions to dismiss the second amended complaint. On September 29, 2021, the court entered an order dismissing with leave to amend (1) five of seven statements or groups of statements alleged to violate Sections 11 and 15 of the Securities Act and (2) all allegations under the Exchange Act. All allegations against our auditors were also dismissed. Plaintiffs elected not to amend the complaint and instead on October 22, 2021 filed a motion for entry of final judgment in favor of our auditors so that plaintiffs could appeal the dismissal of those claims. The court denied that motion on December 1, 2021 and in response plaintiffs have filed a motion asking the court to certify an interlocutory appeal as to the accounting claims. The court denied plaintiff’splaintiffs’ motion on April 14, 2022. Separately, theThe claims for violation of Sections 11 and 15 of the Securities Act that were not dismissed by the court are inentered the discovery phase. A case schedule has been set, with a trial scheduled for December 2023. We believe
On January 6, 2023, Bloom and the plaintiffs’ entered into an agreement in principle to settle the claims against Bloom, its executives and directors, and the IPO underwriters for a payment of $3 million, which we expect to be without meritfunded entirely by our insurers. If the settlement becomes effective, we expect it to result in a dismissal with prejudice of all claims against us, our executives and we intend to defend thisdirectors, and the underwriters. The settlement does not constitute an acknowledgement of liability or wrongdoing. On June 30, 2023, Bloom and the plaintiff’s executed a definitive settlement agreement containing the foregoing terms and customary terms for class action vigorously.
We are unable to predict the outcome of this litigation at this timesettlements, and accordingly are not able to estimate any range of reasonably possible losses.
In September 2019, we received a books and records demand from purported stockholder Dennis Jacob (“Jacob Demand”). The Jacob Demand cites allegations from the September 17, 2019 report prepared by admitted short seller Hindenburg Research. In November 2019, we received a substantially similar books and records demand fromon the same law firm on behalf of purported stockholder Michael Bolouri (“Bolouri Demand” and, togetherdate, filed the settlement agreement with the Jacob Demand, the “Demands”). On January 13, 2020, Messrs. Jacob and Bolouri filed a complaint in the Delaware Court of Chancerycourt to enforce the Demands in the matter styled Jacob, et al. v. Bloom Energy Corp., C.A. No. 2020-0023-JRS. On March 9, 2020, Messrs. Jacob and Bolouri filed an amended complaint in the Delaware Court of Chancery to add allegations regarding the restatement.seek its approval. The court held a one-day trial on December 7, 2020. On February 25, 2021, the Delaware Court of Chanceryjudge issued a decision rejectingpreliminary approval of the Bolouri Demand but granting in part the Jacob Demand allowing limited access to certain books and records pertaining to the allegations made in the Hindenburg Research Report. On March 29, 2021, the Court of Chancery entered a Final Order and Judgment regarding the required production of documents. On April 28, 2021, we produced documents to Mr. Jacob responsive to the Final Order and Judgment. We are unable to estimate any range of reasonably possible losses.settlement on October 31, 2023.
In June 2021, we filed a petition for writ of mandate and a complaint for declaratory and injunctive relief in the Santa Clara Superior Court against the City of Santa Clara for failure to issue building permits for two of our customer installations and asking the court to require the City of Santa Clara to process and issue the building permits. In October 2021, we filed an amended petition and complaint that asserts additional constitutional and tort claims based on the City’s failure to timely issue
the Energy Server permits. Discovery has commenced and we are aggressively pursuing all claims. On February 4, 2022, the City of Santa Clara filed a Demurrerdemurrer seeking to dismiss all of the Company’s claims. The trial judge rejected the Demurrerdemurrer on all claims except one, and allowed Bloom leave to amend that claim. The We filed the second amended petition was filed on July 1,5, 2022. The City of Santa Clara demurred only to onethe amended cause of action seeking damages for tortious conduct;conduct. The trial judge granted that demurrer and struck the hearing is scheduled fortort claim on October 27, 2022.2022; the writ of mandate and constitutional claims were allowed to proceed. The next Status Conference withparties are currently briefing the judge is scheduled for September December 115, 2022. If we are unablewrit of mandate claims which seek immediate issuance of the building permits. On April 21, 2023, the parties executed a settlement agreement which allows our two pending customer installations to secureproceed under building permits for these customerand requires the City to amend its zoning code so that future installations in a timely fashion, our customers will terminate their contracts with us and select another energy provider. In addition, if we are no longer able to install ourof Bloom Energy Servers in Santa Clara underrequire only building permits, we may not be able to secure future customer bookings for installation in the City of Santa Clara.permits.
In February 2022, Plansee SE/Global Tungsten & Powders Corp. (“Plansee/GTP”), a former supplier, filed a request for expedited arbitration with the World Intellectual Property Organization Arbitration and Mediation Center in Geneva Switzerland (“WIPO”), for various claims allegedly in relation to an Intellectual Property and Confidential Disclosure Agreement between Plansee/GTP and Bloom Energy Corporation. Plansee/GTP’s statement of claims includes allegations of infringement of U.S. Patent Nos. 8,802,328, 8,753,785 and 9,434,003. On April 3, 2022, we filed a complaint against Plansee/GTP in the Eastern District of Texas to address the dispute between Plansee/GTP and Bloom Energy Corporation in a proper forum before a U.S. Federal District Court. Our complaint seeks the correction of inventorship of U.S. Patent Nos. 8,802,328, 8,753,785 and 9,434,003 (the “Patents-in-Suit”); declaratory judgment of invalidity, unenforceability, and non-infringement of the Patents-in-Suit; and declaratory judgment of no misappropriation. Further, our complaint seeks to recover damages hawsewe have suffered in relation to Plansee/GTP’s business dealings that, as alleged, constitute acts of unfair competition, tortious interference contract, breach of contract, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and violations of the Clayton Antitrust Act. On June 9, 2022, Plansee/GTP filed a motion to dismiss the complaint filed in the Eastern District of Texas and compel arbitration (or alternatively to stay). We filed our opposition on June 30, 2022, Plansee/GTP’sGTP filed its reply on July 14, 2022 and we filed our sur-reply on July 22, 2022. We awaitOn February 9, 2023, Magistrate Judge Payne issued a ruling onreport and recommendation to stay the matterdistrict court action pending an arbitrability determination by the arbitrator for each claim.
On February 23, 2023, we filed an amended complaint adding additional causes of action and filed objections to the Magistrate’s report and recommendation. On April 26, 2023, Judge Gilstrap overruled our objections to the Magistrate’s report and recommendation and stayed the district court action pending arbitrability determinations by the arbitrator in the interim, discovery has commencedWIPO proceeding. The arbitration had been held in Federalabeyance awaiting the District Court.Court’s decision. A hearing by the arbitrator in WIPO on arbitrability took place on June 27, 2023. Further proceedings in the arbitration are confidential pursuant to the WIPO rules. Given that the cases are stillWIPO arbitration had been held in theirabeyance, the arbitration is in an early stages, westage. We are unable to predict the ultimate outcome of the arbitration and district court action at this time, and accordingly are not able to estimate a range of reasonably possible losses.time.
14. Income Taxes
For the three and nine months ended September 30, 2023, we recorded an income tax provisions of $0.6 million and $1.1 million, respectively, on pre-tax losses of $167.4 million and $311.0 million for effective tax rates of (0.4)% and (0.3)%, respectively. For the three and nine months ended September 30, 2022, we recorded an income tax provisionsbenefit and income tax provision of $0.3 million and $0.9 million, respectively, on pre-tax losses of $60.1 million and $263.4 million for effective tax rates of (0.6)% and (0.3)%, respectively. For the three and nine months ended September 30, 2021, we recorded income tax provisions of $0.2 million and $0.6 million on pre-tax losses of $56.5 million and $144.3 million for effective tax rates of (0.3)% and (0.4)%, respectively.
The effective tax rate for the three and nine months ended September 30, 2023 and 2022 and 2021 iswas lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.
U.S. tax law changes
On August 16, 2022, the United States government enacted the Inflation Reduction Act of 2022 (“IRA”). The IRA establishes a new corporate alternative minimum tax based on financial statement income adjusted for certain items. The new minimum tax is effective for tax years beginning after December 31, 2022. The enactment of the IRA did not have a material impact to the Company’s financial statements for the three and nine months ended September 30, 2022 and 2021, but we are currently assessing the impact of the production and tax credit-related IRA provisions on our business for future quarters.
15. Net Loss per Share Available to Common Stockholders
Please refer to the condensed consolidated statements of operations for computation of our net loss per share available to common stockholders, basic and diluted.
The following common stock equivalents (in thousands) were excluded from the computation of our net loss per share available to common stockholders, diluted, for the three and nine months presented as their inclusion would have been antidilutiveantidilutive:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| | | | | | | | | | |
Convertible notes | | 47,736 | | | 14,187 | | | 31,146 | | | 14,187 | | | |
Redeemable convertible preferred stock | | 12,319 | | | 10,000 | | | 13,096 | | | 10,000 | | | |
Stock options and awards | | 3,352 | | | 6,445 | | | 4,880 | | | 5,503 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | 63,407 | | | 30,632 | | | 49,122 | | | 29,690 | | | |
16. SK ecoplant Strategic Investment
In October 2021, we expanded our existing relationship with SK ecoplant. As part of this arrangement, we amended the previous Preferred Distribution Agreement (“PDA”) and Joint Venture Agreement (“JVA”) with SK ecoplant. The restated PDA establishes SK ecoplant’s purchase commitments for our Energy Servers for the three year period on a take or pay basis as well as the basis for determining the prices at which the Energy Servers and related components will be sold. The restated JVA increases the scope of assembly done by the joint venture facility in the Republic of Korea, which was established in 2019, for the procurement of local parts for our Energy Servers and the assembly of certain portions of the Energy Servers for the South Korean market. The joint venture is a VIE of Bloom and we consolidate it in our financial statements as we are the primary beneficiary and therefore have the power to direct activities which are most significant to the joint venture.
On September 15, 2023, we entered into the Amended and Restated JVA and the Share Purchase Agreement (together, the “Amended JV Agreements”) with SK ecoplant which changed the share of our voting rights in the Korean joint venture to 40% and increases the scope of assembly done by the joint venture facility in the Republic of Korea to full assembly. Neither the Amended JV Agreements, nor the fact that SK ecoplant is considered to be our related party after the conversion of Series B RCPS into shares of our Class A common stock (for additional information, please see Part I, Item 1, Note 11 - Related Party Transactions) changed our status as the primary beneficiary of the Korean joint venture. Therefore, we continue to consolidate this VIE in our financial statements as of September 30, 2023.
The following are the aggregate carrying values of the Korean joint venture’s assets and liabilities in our condensed consolidated balance sheets, after eliminations of intercompany transactions and balances, as of September 30, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
Convertible notes | | 14,187 | | | 14,187 | | | 14,187 | | | 14,187 | | | |
Redeemable convertible preferred stock | | 10,000 | | | — | | | 10,000 | | | — | | | |
Stock options and awards | | 6,445 | | | 5,415 | | | 5,503 | | | 6,998 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | 30,632 | | | 19,602 | | | 29,690 | | | 21,185 | | | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, |
| | 2023 | | 2022 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 1,012 | | | $ | 2,591 | |
Accounts receivable | | 20,483 | | | 4,257 | |
Inventories | | 10,617 | | | 13,412 | |
Prepaid expenses and other current assets | | 1,574 | | | 2,645 | |
Total current assets | | 33,686 | | | 22,905 | |
Property and equipment, net | | 1,705 | | | 1,141 | |
Operating lease right-of-use assets | | 2,249 | | | 2,390 | |
Other long-term assets | | 44 | | | 47 | |
Total assets | | $ | 37,684 | | | $ | 26,483 | |
Liabilities | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 4,828 | | | $ | 5,607 | |
Accrued expenses and other current liabilities | | 3,324 | | | 1,355 | |
Deferred revenue and customer deposits | | — | | | 2 | |
Operating lease liabilities | | 409 | | | 393 | |
Total current liabilities | | 8,561 | | | 7,357 | |
Operating lease liabilities | | 1,665 | | | 2,000 | |
Non-recourse debt | | 1,483 | | | — | |
Total liabilities | | $ | 11,709 | | | $ | 9,357 | |
In October 2021, we also entered into a new Commercial Cooperation Agreement (the “CCA”) regarding initiatives pertaining to the hydrogen market and general market expansion for our products.
The Initial Investment
In October 2021, we entered into the SPA pursuant to which we agreed to sell and issue to SK ecoplant 10,000,000 shares of Series A RCPS, par value $0.0001 per share, at a purchase price of $25.50 per share for an aggregate purchase price of $255.0 million. On December 29, 2021, the closing of the sale of the Series A RCPS was completed and we issued the 10,000,000 shares of the Series A RCPS (the “Initial Investment”). In addition to the Initial Investment, the SPA provided SK ecoplant with an option to acquire a variable number of shares of Class A Common Stock (the “Option”). According to the SPA, SK ecoplant was entitled to exercise the Option through August 31, 2023, and the transaction must have been completed by November 30, 2023.
The sale of Series A RCPS was recorded at its fair value of $218.0 million on the date of issuance. Accordingly, we allocated the excess of the cash proceeds received of $255.0 million plus the change in fair value of the Series A RCPS between October 23, 2021, and December 29, 2021, of $9.7 million, over the fair value of the Series A RCPS on December 29, 2021, and the fair value of the Option on October 23, 2021, to the PDA. This excess amounted to $37.0 million and was recorded in deferred revenue and customer deposits. Accordingly, during the three and nine months ended September 30, 2022, we recognized product revenue of $3.2 million and $7.9 million, respectively, in connection with this arrangement. No product revenue was recognized during the three and nine months ended September 30, 2023 in connection with this arrangement. As of December 31, 2022, the unrecognized amount of $24.6 million included $10.0 million in current deferred revenue and customer deposits and $14.6 million in non-current deferred revenue and customer deposits on the condensed consolidated balance sheets. As of September 30, 2023, the unrecognized amount of deferred revenue and customer deposits was reduced to zero as a result of the Second Tranche Closing (see details below in section “The Second Tranche Closing”).
PDA, JVA, CCA and the SPA entered into with SK ecoplant concurrently were evaluated as a combined contract in accordance with ASC 606 Revenue from Contracts with Customers and, to the extent applicable for separated components,
under the guidance of Topic 815 Derivatives and Hedging and applicable subsections and ASC 480 Distinguishing Liabilities from Equity.
We concluded that the Option was a freestanding financial instrument that should have been separately recorded at fair value on the date the SPA was executed.
On August 10, 2022, pursuant to the notice received fromSPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, (seepursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 shares at a purchase price of $23.05 per share (the “Second Tranche Closing”). As of December 31, 2022, this option was accounted for as the equity-classified forward contract.
For further information, see Part II, Item 8, Note 5), there were an additional17 - SK ecoplant Strategic Investment in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The Second Tranche Closing
On March 20, 2023, SK ecoplant entered into the Amended SPA with us, pursuant to which on March 23, 2023, we issued and sold to SK ecoplant 13,491,701 shares of non-voting Series B RCPS, par value $0.0001 per share, at a purchase price of $23.05 per share for cash proceeds of $311.0 million, excluding issuance cost of $0.5 million.
The Amended SPA triggered the modification of the equity-classified forward contract on Class A common stock, equivalents that were excludedwhich resulted in the derecognition of the pre-modification fair value of the forward contract given to SK ecoplant of $76.2 million. The derecognition of the pre-modification fair value was recorded in additional paid-in capital in our condensed consolidated balance sheets as of September 30, 2023.
The Series B RCPS was accounted for as a stock award with liability and equity components. The liability component of the Series B RCPS was recognized at the redemption value of $311.0 million, less issuance costs of $0.5 million, and the equity component of the Series B RCPS was recognized at its fair value of $16.1 million on March 20, 2023 and recorded in current liabilities and additional paid-in capital, respectively, in our condensed consolidated balance sheets as of September 30, 2023.
On March 20, 2023, in connection with the Amended SPA we also entered into the Loan Agreement, pursuant to which we had the option to draw on a loan from SK ecoplant with a maximum principal amount of $311.0 million, a maturity of five years and an interest rate of 4.6%, should SK ecoplant have sent a redemption notice to us under the Amended SPA.
The Amended SPA and the Loan Agreement provided us with cash proceeds of $311.0 million and a loan commitment asset of $52.8 million from SK ecoplant for total consideration of $363.8 million. In return, SK ecoplant received consideration of $403.3 million, consisting of the release from the table above.obligation to close on the original transaction fair valued at $76.2 million, the obligation from us to issue the Series B RCPS at redemption value of $311.0 million, and the option to convert the Series B RCPS to Class A common stock, which had an estimated fair value of $16.1 million. The excess consideration provided by us amounted to $39.5 million, which resulted in a reduction of our deferred revenue and customer deposits by $24.6 million related to the Initial Investment, as of September 30, 2023. The net excess consideration of $14.9 million was recognized as $8.2 million in prepaid expenses and other current assets and $6.7 million was classified as other long-term assets in our condensed consolidated balance sheets as of March 31, 2023. The deferred expense is recognized as contra-revenue over the take or pay period based on an estimate of the revenue we expect to receive under the remaining term of the PDA. During the three and nine months ended September 30, 2023, the deferred expense recognized as contra-revenue was $3.0 million. As a result, as of September 30, 2023, we recognized the net excess consideration of $11.9 million, of which $9.9 million was classified as prepaid expenses and other current assets and $2.0 million was classified as other long-term assets, in our condensed consolidated balance sheet.
On September 23, 2023, all 13,491,701 shares of the Series B RCPS were automatically converted into shares of our Class A common stock pursuant to the Certificate of Designation, dated as of March 20, 2023, setting forth the rights, preferences, privileges, and restrictions of the Series B RCPS, as amended by the Certificate of Amendment to the Certificate of Designation, dated as of April 18, 2023. As a result of the conversion: (i) the liability component of the Series B RCPS of $310.5 million was reclassified to additional paid-in capital, less par value of the issued 13,491,701 shares of our Class A common stock, and (ii) the loan commitment asset was recorded at its fair value of $52.8 million, of which $5.3 million was
classified as current and $47.5 million was classified as non-current in our condensed consolidated balance sheets, and was expensed immediately and recognized in interest expense in our condensed consolidated statements of operations.
Upon conversion of all Series B RCPS into shares of our Class A common stock, SK ecoplant is considered to be a related party. For additional information, please see Part I, Item 1, Note 11 - Related Party Transactions.
16.17. Subsequent Events
There have been no material subsequent events that occurred during the period subsequent to the date of these condensed consolidated financial statements that would require adjustment to our disclosure in the condensed consolidated financial statements as presented.
ITEM 2 - MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by management. For example, forward-looking statements include, but are not limited to, our expectations regarding our products, services, business strategies, impact of COVID-19, our expanded strategic partnership with SK ecoplant, operations, supply chain (including any direct or indirect effects from the Russia-Ukraine conflictwar or geopolitical developments in China), new markets, government incentive programs, impact of the IRAInflation Reduction Act of 2022 (the “IRA”) on our business, growth of the hydrogen market and the sufficiency of our cash and our liquidity. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact are forward-looking statements. Forward-looking statements can alsomay be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “designs,” “plans,” “predicts,” “targets,” “forecasts,” “will,” “would,” “could,” “can,” “may” and similar terms. These statements are based on the beliefs and assumptions of our management based on information currently available to management at the time they are made. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results, outcomes and the timing of certain events to differ materially from future results or outcomes expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and thosefactors discussed in the section titled “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, in the section titled “Risk Factors” included in Part II, Item 1A of thisour Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 and in our other filings with the Securities and Exchange Commission including(the “SEC”). You should review these risk factors for a more complete understanding of the risks associated with an investment in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 25, 2022.securities. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of such statements. You should review these risk factors for a more complete understandingthis report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the risks associated with an investmentplans, intentions or expectations disclosed in our securities.forward-looking statements, and you should not place undue reliance on our forward-looking statements. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Description of Bloom Energy
Our mission is to make clean, reliable energy affordable for everyone in the world. We created the first large-scale, commercially viable solid oxide fuel-cell based power generation platform that empowers businesses, essential services, critical infrastructure and communities to responsibly take charge of their energy.
Our technology, invented in the United States, is one of the most advanced electricity and hydrogen producing technologies on the market today. Our fuel-flexible Bloom Energy Servers can use biogas, hydrogen, natural gas, or a blend of fuels to create resilient, sustainable and cost-predictable power at significantly higher efficiencies than traditional, combustion-based resources. In addition, our same solid oxide platform that powers our fuel cells can be used to create hydrogen, which is increasingly recognized as a critically important tool necessary for the full decarbonization of the energy economy. Our enterprise customers include some of the largest multinational corporations in the world. We also have strong relationships with some of the largest utility companies in the United States and the Republic of Korea.
At Bloom Energy, we look forward to a net-zero future. Our technology is designed to help enable this future in order to deliverby delivering reliable, low-carbon electricity in a world facing unacceptable levels of power disruptions. Our resilient platform has kept electricity available for our customers through hurricanes, earthquakes, typhoons, forest fires, extreme heat and grid failures. Unlike traditional combustion power generation, our platform is community-friendly and designed to significantly reduce emissions of criteria air pollutants. We have made tremendous progress makingtowards renewable fuel production a reality through our biogas, hydrogen and electrolyzer programs, and we believe that we are well-positioned as a core platform and fixture in the new energy paradigm to help organizations and communities achieve their net-zero objectives.
We market and sell our Energy Servers directly andprimarily through indirect channels to our customers bothdirect sales organization in the United States, and abroad. In order to appeal to the largest variety of customers,we also have direct and indirect sales channels internationally. Recognizing that deploying our solutions requires a significant financial commitment, we have developed a number of financing options to enable customers' usesupport sales of our Energy Servers to customers who lack the financial capability to purchase our Energy Servers directly, and who may prefer to finance the acquisition using third-party financing or to contract for our services on a pay-as-you-go model, made available through third-party ownership financing arrangements. For information about our different financing options, see Part II, Item 7model.
, Management's Discussion and Analysis of Financial Condition and Results of Operations - Purchase and Financing Options in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Our typical target commercial or industrial customer has historically been either an investment-grade entity or a customer with investment-grade attributes such as size, assets and revenue, liquidity, geographically diverse operations and general financial stability. We have also expanded our product and financing options to the below-investment-grade customer
customers and have also expanded internationally to target customers with deployments on a wholesale grid. Given that our customers are typically large institutions with multi-level decision making processes, we generally experience a lengthy sales process.
Strategic Investment
On October 23, 2021, we entered intoFor information on the SPAstrategic investment with SK ecoplant, in connection with a strategic partnership. Pursuant to the SPA, on December 29, 2021, we sold to SK ecoplant 10 million shares of zero coupon, non-voting redeemable convertible Series A Preferred Stock in us, par value $0.0001 per share (“RCPS”), at a purchase price of $25.50 per share for an aggregate purchase price of $255 million (the “Initial Investment”). According to the SPA, on December 29, 2022, the first anniversary of the original issue date, all outstanding shares of Series A Preferred Stock will automatically be converted into shares of Class A Common Stock.
Please refer tosee Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Liquidity section in our Annual Report on Form 10-K for the Second Tranche Shares Option exercise notice received from fiscal year ended December 31, 2022, and Part I, Item 1, Note 16 - SK ecoplant on August 10, 2022.Strategic Investment
Simultaneous with the execution of the SPA, we and SK ecoplant executed an amendment to the Joint Venture Agreement (“JVA”), an amendment and restatement to our Preferred Distribution Agreement (“PDA Restatement”) and a new Commercial Cooperation Agreement regarding initiatives pertaining to the hydrogen market and general market expansion for the Bloom Energy Server and Bloom Energy Electrolyzer..
Certain Factors Affecting our Performance
Global MacroeconomicEnergy Market Conditions
We generallyThe global energy transition to a zero-carbon environment has created new challenges and opportunities for utilities, suppliers of energy solutions and customers. Shifts and uncertainty in market and regulatory dynamics and corporate and governmental policies are seeing worsening global macroeconomic conditions, including risingcurrently impacting the selling process and extending sales cycles and timelines for the Company’s natural gas-, biogas- and hydrogen-related products. Increasing electricity rates, decreasing energy reliability, and delays in the development of transmission infrastructure and grid interconnection have led to increased customer interest rates, recession fears, foreign exchange rate volatilityin our power solutions, but at the same time natural gas supply and inflationary pressures,pricing concerns due to geopolitical stresses and resulting market changes as well as increasing geopolitical instability. These conditionsfocus on sustainability targets have led to increased caution from customers. The increased use of renewable power generation and weather effects of climate change have exacerbated aging grid fragilities, increased the occurrence of power outages, created grid transmission shortages and lengthened already extensively delayed interconnection cycles. Low- and zero-carbon sources of baseload energy have also been curtailed and even banned in some locations, forcing utilities, states and countries to revisit less clean sources of baseload and intermediate power in an attempt to ensure energy reliability. This supply and demand mismatch globally has threatened energy security reliability, reduced the availability of energy and increased the cost of energy.
Bloom’s power solutions enable customers to address these energy market challenges by offering fuel flexible solutions that are designed to provide cost predictable, resilient, reliable energy in a timely fashion. As customers and utilities navigate the energy transition and evolving landscape, the ability of our power solutions to fit their economic, regulatory and policy needs depends on a number of factors, including natural gas availability and pricing, electrical interconnection needs and availability, redundant back up power requirements, cost requirements and sustainability profile. Even in those situations where the time to power from the utility is years away in light of the need to build out energy transmission infrastructure, these factors still may impact our business in several ways.a customer’s buying decision. For example, although Bloom’s power generation solutions can operate as microgrids, independent from the strengtheninggrid, if a customer desires back up power or a "grid parallel" solution in combination with the Bloom microgrid, required interconnection studies and lengthy interconnection queues remain, eroding the time to power value proposition. According to the Lawrence Berkeley National Lab, U.S. dollar has caused our Energy Serversinterconnection queue delays are growing, with a forty percent year over year increase in 2022. The typical project interconnection process for large scale projects grew to become relatively more expensivefive years in several markets outside2022 compared to three years in 2015 and two years in 2008. In addition, the United States, which, coupled with worsening global macroeconomic conditions, has the potential to adversely impact demand for our products. Our Energy Server Product runs on a variety of fuels, including natural gas. The rising cost of natural gas, increases in gas distribution rates, limited availability of natural gas supply, as well as disruptions to the world gas markets increasehas increased the cost of our productpower solutions for customers and, in certain cases where there is a lack of fuel supply, a complete inability to operate the systems. In the United States, in particular, the lack or slow development of pipeline infrastructure is impacting the timing of customers being able to take advantage of our power solution opportunities. In certain jurisdictions in the United States and Europe, natural gas bans have been enacted that prevent the use of our power solutions unless alternative fuels are available. In addition, there is a growing hesitancy by potential customers to purchase our power solutions to run on natural gas. Increasingly, customers want a zero-carbon solution for power, and, although our power solutions are designed to run on biofuels or hydrogen (in addition to natural gas) and help our customers achieve their sustainability goals, these fuels continue to have very limited availability and, for most customers, are not yet economical. This impetus by customers to use zero-carbon solutions today, combined with the current lack of availability of zero-carbon fuels, is impacting our power solution selling opportunities. In addition, many of our potential data center and industrial customers are pursuing greenfield opportunities where the development cycle is long and laden with permitting requirements and the uncertainty of these factors is leading to a more difficult customer decision-making process and longer sales cycles.
Corporate procurement policy is also undergoing change that creates uncertainty; while some customers are increasingly focused on decarbonizing their own direct energy supply, including aligning the timing of their zero-carbon power generation with their energy consumption, others are shifting to prioritize overall carbon emissions from the energy system, both of which are impacting our sales.
The regulatory environment for energy solutions continues to shift. In South Korea, the government recently moved to a new, government-run bidding process for fuel cell purchases, which has impacted and may continue to impact demand for our power solutions. In the United States, the investment tax credit (ITC) for fuel cells running on a non-zero carbon fuel currently expires at the end of 2024. In Ireland, which is a large data center market, a directive from the Minister of the Department of the Environment, Climate and Communications to restrict grid connections to data centers and other large power users, along with a halt in high-pressure gas installations has delayed our selling activities in Ireland. Delays in adoption of Renewable Fuel Standard regulations in the United States for the use of biogas to generate electricity for electric vehicles, and minimal governmental focus on utilization of biogas outside of its direct use by methane-fueled vehicles, have created uncertainty in prospects for broader biogas availability for industrial uses, including our power solutions. In addition, in most jurisdictions, air permits and various land use permits are required for installation of our solutions over a certain amount of mega-watts, and generally the length of time to obtain these permits increased, while the level of certainty of issuance has decreased and if issued, the cost of compliance requirements is often cost prohibitive. We have experienced a reluctance in certain states to issue permits for gas generation equipment and if issued require a blend of costly renewable fuels or other measures to advance a state’s climate goals. This has impacted our selling activities.
Significant governmental interest, investment and stimulation of clean hydrogen in the U.S., Europe and in many other regions across the globe have not yet had significant impacts on demand for hydrogen. To date, while the number of proposed hydrogen production projects has grown rapidly, only a small fraction have reached final investment decision (FID) stage, and an even smaller fraction have been deployed. In addition, the infrastructure needed to transport hydrogen, whether through pipelines or maritime or land-based tankers, is currently only sufficient for existing uses, and has not begun to be extended for anticipated future uses, with hydrogen blending and other approaches remaining at pilot stages. It remains unclear whether regulators in some jurisdictions will allow hydrogen to be introduced into gas distribution systems, which could effectively preclude or severely limit our ability to transport hydrogen from the point of production to the end customer. To date,point of consumption.
All of these factors have impacted the potential impactselling cycles for our electrolyzer product and power solutions. Our revenue, margins and cash flow in any given year are largely dependent on bookings during the prior year. Historically, the majority of our bookings have occurred in the second half of the year, with a significant portion occurring in the fourth quarter. If a substantial portion of our anticipated bookings for the remainder of 2023 is delayed beyond the end of this year, our revenue, margins and cash flow could be materially adversely impacted in 2024.
Supply Chain Constraints
We continue to see effects from global supply chain tightness due to the current inflationary environment, war in Ukraine and trade tensions between the United States and China. We are not aware of, and do not expect, any direct impact on customerour business or supply chain from the Israel-Gaza Strip armed conflict. While we have not experienced any significant component shortages to date, we are facing pressures from inflation. These dynamics could worsen as a result of continued geopolitical instability. In the event we are unable to mitigate the impacts of delays and/or price increases in raw materials and components, it could delay the manufacturing and installation, and increase the costs of, our Energy Servers, which would adversely impact our cash flows and results of operations, including our revenues and gross margin. We expect these supply chain challenges to continue in the short term.
Customer Financing Constraints
Our ability to obtain financing for our Energy Servers depends partially on the creditworthiness of our customers, and deterioration of our customers’ credit ratings can impact the financing for their use of our Energy Servers. Regional banking and financial institution instability, such as the failure of Silicon Valley Bank in the first quarter of 2023, may make it more difficult for our customers to obtain financing. Rising interest rates have also increased the cost of financing for our customers. As interest rates rise, financiers of our installations demand has been offseta higher rate of return. Rising interest rates could put pressure on our margins in order to meet the higher returns expected by the customer needsfinanciers. We continue to work on obtaining the financing required for resiliencyour 2023 installations, but if we are unable to secure such financing, our revenue, cash flow and time to powerliquidity could be materially impacted. We expect that our Energy Server provides. In addition, these conditions also impact our manufacturingin the United States, the IRA and supply chain, as discussed below. the transferability of tax credits, should make the financing market more robust.
Manufacturing and Labor Market Constraints
We are experiencingAs recently as 2022, we experienced impacts from the ongoing labor shortageshortages and continue to face challenges in hiring for our manufacturing facilities, which is exacerbated by absences for any employees who are recovering from or have been exposed to COVID-19.facilities. While these constraints abated in 2023 and we continue to dedicate resources to supporting our capacity expansion efforts,reduced headcount as part of a restructuring plan adopted in September 2023, we are experiencingmay still experience difficulties with hiring and retention, particularly forand may face additional labor shortages in the future. The restructuring plan included (i) an optimization of our newworkforce across multiple functions, (ii) a relocation of a portion of our repair and overhaul department of our manufacturing and warehousing facility in Fremont,Newark, Delaware, to Mexico, and (iii) a closure of a manufacturing, warehousing, research and development facility in Sunnyvale, California. According to the plan, 74
full-time employees and 48 contractors separated from the Company in September 2023. Additional 71 full-time employees and 8 contractors separated from the Company in October 2023. For additional information, please see Part I, Item I, Note 12 - Restructuring. In addition, the current inflationary environment has led to rising wages and labor rates andcosts as well as increased competition for labor. To date, we have been able to mitigate any impact to production through a contingent workforce and other measures. In the event these constraints return and we are unable to continue to mitigate the impacts of these challenges, it could delay the manufacturing and installation of our Energy Servers or Electrolyzers and we may be unable to meet customer demand, which wouldcould adversely impact our cash flows and results of operations, including revenueour revenues and gross margin. We expect
Installations and Maintenance of Energy Servers
During the hiringfirst three quarters of 2023, our installation projects experienced some delays relating to, among other things, permitting, utility delays and retention challenges arising from the labor shortagesaccess to continue for the foreseeable future.customer facilities. However, these delays did not significantly impact our revenue.
Supply Chain Constraints
We continue to see effects from the global supply chain disruptions and are experiencing supply chain challenges and logistics constraints. While we have not experienced any component shortages to date,If we are facing pressures from longer lead times, shipping and freight delays, and increased costsdelayed in or unable to perform maintenance, our previously installed Energy Servers would likely experience adverse performance impacts, including reduced output and/or efficiency, which could result in warranty and/or guaranty claims by our customers. Further, due to the nature of raw materials. These dynamics could worsen as a result of continued increase in geopolitical instability. In addition, the current inflationary environment and conflict in Ukraine has led to an increase in the price of components and raw materials. In the eventour Energy Servers, if we are unable to mitigatereplace worn parts in accordance with our standard maintenance schedule, we may incur higher costs in the impacts offuture. For the nine months ended September 30, 2023, we experienced no significant delays and/or price increases in raw materials, components and freight, it could delay the manufacturing and installation ofservicing our Energy Servers and increase the cost of our Energy Server, which would adversely impact our cash flows and results of operations, including revenue and gross margin. We expect these supply chain challenges and logistics constraints to continue for the foreseeable future.Servers.
For additional information on our manufacturing and supply chain matters, see Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
COVID-19 Pandemic
We continue to monitor and adjust as appropriate our operations in response to the COVID-19 pandemic. We maintain protocols to minimize the risk of COVID-19 transmission within our facilities, including enhanced cleaning and masking if required by the local authorities, as well as providing testing for all employees. We will continue to follow CDC and local guidelines when notified of possible exposures.For more information regarding the risks posed to our company by the COVID-19 pandemic, refer to Part I, Item 1A, Risk Factors – Risks Related to Our Products and Manufacturing –Our business has been and continues to be adversely affected by the COVID-19 pandemic in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Our Energy Server Product runs on a variety of fuels, including natural gas. The rising cost of natural gas increases the cost of our product to the end customer. To date, the potential impact of this on customer demand has been offset by the customer needs for resiliency and time to power that our Energy Server provides.
Environmental, Social and Governance (“ESG”)
We are committed to a goal of providing consistent returns to our stockholders while maintaining a strong sense of good corporate citizenship that places a high value on the environment, welfare of our employees, the communities in which we operate, the customers we serve, and the world as a whole. We believe that prioritizing, improving, and managing our ESG related risks, opportunities and programs help us to better create long-term value for our investors.
In April 2023, we released our 20212022 Sustainability Report, Solutions for a Decarbonized Future,Advancing the Mission of Decarbonization (the “Report”“Sustainability Report”) during the first quarter of 2022, using generally accepted ESG frameworks and standards, including alignment with Sustainability Accounting Standards Board standards and the Task Force on Climate-related Financial Disclosures recommendations. In addition, the Sustainability Report also utilized certain Global Reporting Initiative standards and was mapped against the United Nations Sustainable Development Goals. We plan to issue the Reporta sustainability report on an annual basis. Certain items within the Report will be updated
Our mission is to investors to the extent they are considered meaningful and reflective of our mission – “To make clean, reliable energy affordable for everyone in the world”.
Weworld. To that end, we strive to empower businesses and communities to responsibly take charge of their energy.energy while addressing both the causes and consequences of climate change. We aim to serve our customers with products that are resilient, providing uninterrupted power with predictable pricing from fixed power prices over the long-term, while addressing sustainability issues by considering and developing an increasingly broad portfolio of solutions relating to causes and consequences of climate change.for decarbonization.
For further details of theThe Sustainability Report please refer to the following website:can be found on our website at 2021-bloom-energy-sustainability-report.pdf (bloomenergy.com)https://www.bloomenergy.com/sustainibility. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
Inflation Reduction Act of 2022 -
For information on the IRA, which was signed into law on August 16, 2022, and its impact on our business, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Inflation Reduction Act of 2022 – New and Expanded Production and Tax Credits for Manufacturers and Projects to Support Clean Energy
On August 16, 2022, President Biden signed into law section in our Annual Report on Form 10-K for the Inflation Reduction Act of 2022 (the “IRA”). The IRA contains provisions which we expect will have a significant impact on the development and financing of clean energy projects in the United States over the next ten years. The IRA includes a number of key changes relevant to clean energy in the United States, among them the extension of the Investment Tax Credit and Production Tax Credit and the addition of expanded tax credits for other technologies and for manufacturing of clean energy equipment as well as terms allowing parties to more easily monetize the tax credits. The IRA also includes some targeted incentives intended to encourage development in low-income communities and the use of domestically produced materials and compliance with certain prevailing wage requirements. The IRA contains a two-tiered credit-amount structure for many applicable tax credits. Specifically, many of the credits have a lower base credit amount that can be increased up to five times if the taxpayer can satisfy applicable prevailing wage or apprenticeship requirements. In general, under the prevailing wage requirements, the IRA requires all laborers, mechanics and workers to be paid the prevailing wage during project construction (and, during the credit term, for repairs and alterations). Separately and subject to certain exceptions, to meet the apprenticeship requirements, qualified apprentices have to perform an applicable percentage of total labor hours for project construction. Further, the IRA establishes certain options to cure the failure to meet either the prevailing wage or apprenticeship requirements.
Please refer to Note 1 - Nature of Business, Liquidity and Basis of Presentation for discussion of credits and incentive provisions implemented by the IRA relevant to us. We are currently assessing the impact of these provisions on our business.fiscal year ended December 31, 2022.
Liquidity and Capital Resources
While we improved ourWe raised cash and supplemented liquidity through financing activities with SK ecoplant in 2021,the first quarter of 2023 and issuing the 3% Green Notes due June 2028 in the second quarter of 2023. At the same time, we increased our working capital spendspend. In the first three quarters of 2023, we built up inventory in preparation for more expected shipments in the first halffourth quarter of 2022. We have entered into new leases2023. This enabled us to maintain sufficientlevel load production and gain manufacturing facilities to meet anticipated demand in 2022 and beyond, including new product line expansion.efficiency. In addition, we also increasedexpanded our working capital spend and resourceswarehouse space in Delaware to enhance our marketing efforts andstore more inventory to expand into new geographies both domestically and internationally.
On August 10, 2022, pursuantmeet the anticipated increase in demand. If this increase in demand does not materialize to the Securities Purchase Agreement (“degree we anticipated, our liquidity condition may be adversely impacted.
On March 20, 2023, we entered into the SPA”)Amended SPA, with SK ecoplant, notified us of its intent to exercise its option the Option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 shares (the “Second Tranche Shares”) at a purchase price of $23.05 per share, calculated as a 15% premium to the volume-weighted average closing price of the 20 consecutive trading day period immediately preceding the exercise of the option. The aggregate purchase price approximates cash proceeds to be received by us of $311.0 million, net of related incremental direct costs of $0.1 million. The payment for the Second Tranche Shares will be due the later of (i) December 6, 2022 and (ii) upon clearance under the HSR Act of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice.
On August 19, 2022, we completed an underwritten public offering, pursuant to which we issued and sold 13,000,000to SK ecoplant 13,491,701 shares of Series B RCPS for cash proceeds of $311.0 million, excluding issuance cost of $0.5 million.
On March 20, 2023, in connection with the Amended SPA, we also entered into the Loan Agreement, pursuant to which we were entitled to draw down on a loan from SK ecoplant with a maximum principal amount of $311.0 million, if SK ecoplant sent a redemption notice to us under the Amended SPA or otherwise had reduced any portion of its current holdings of our Class A Common Stock at a price of $26.00 per share (the “Offering”). As a partcommon stock. On September 23, 2023, all 13,491,701 shares of the Offering, the underwritersSeries B RCPS were provided a 30-day option to purchase an additional 1,950,000 automatically converted into
shares of our Class A Common Stock atcommon stock. For further information on the same price, less underwriting discounts and commissions, which was exercised contemporaneouslystrategic investment with SK ecoplant, see Part I, Item 1, Note 16 - SK ecoplant Strategic Investment.
On May 16, 2023, we issued the Offering. The3% Green Notes with an aggregate principal amount of $632.5 million due June 2028, unless earlier repurchased, redeemed or converted, resulting in net cash proceeds of $613.0 million. On June 1, 2023, we used approximately $60.9 million of the net proceeds received by usfrom this offering to redeem all of the outstanding principal amount of our 10.25% Senior Secured Notes due March 2027. The redemption price equaled 104% of the principal amount redeemed plus accrued and unpaid interest. We also used approximately $54.5 million of the net proceeds from the Offering were $371.5 million, after deducting underwriting discountsoffering to purchase the Capped Calls.
On August 24, 2023, as part of the PPA V Upgrade, we paid off the outstanding balance and commissionsrelated accrued interest of $16.5$118.5 million and incremental costs directly attributable to the Offering$0.5 million, respectively, of $0.7 million.our 3.04% Senior Secured Notes due June 30, 2031.
For further information on issuance of 3% Green Notes, redemption of our 10.25% Senior Secured Notes, and repayment of 3.04% Senior Secured Notes, please see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements.
As of September 30, 2022,2023, we had cash and cash equivalents of $492.1$557.4 million. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds.funds of $489.4 million. We maintain these balances with high credit quality counterparties, continuallyregularly monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
As of September 30, 2022,2023, we had $287.5$840.5 million of total outstanding recourse debt, $195.9$1.5 million of non-recourse debt and $8.9$8.8 million of other long-term liabilities. As of September 30, 2023, all of our debt was classified as long-term liabilities. For a complete description of our outstanding debt, pleaseplease see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements in Part I, Item 1, Financial Statements (unaudited). The combination of our existing cash and cash equivalents and cash flow to be generated by our operations is expected to be sufficient to meet our anticipated cash flow needs for at least the next 12 months. If these sources of cash are insufficient or are not received in a timely manner to satisfy our near-term or future cash needs, we may require additional capital from equity or debt financings to fund our operations, in particular, our manufacturing capacity, product development and market expansion requirements and to timely respond to competitive market pressures or strategic opportunities, or otherwise.among other things. We may, from time to time, engage in a variety of financing transactions for such purposes, including factoring our accounts receivable. WeDuring the three and nine months ended September 30, 2023, we factored $108.0 million and $167.6 million of accounts receivable, respectively. However, we may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financingsfinancing may place limits on our financial and operating flexibility. Although currently we only have fixed-rate convertible notes on the balance sheet, rising interest rates may increase our overall cost of capital, if and when we refinance those notes. If we raise additional funds through further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Our future capital requirements will dependdepends on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our products, our ability to secure financing for customer use of our Energy Servers, the timing of installations and of inventory build in anticipation of future sales and installations, and overall economic conditions including the impact of COVID-19 on our ongoing and future operations.conditions. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through an equity or debt financing. Failure to obtain this financing or financing in future quarters may affect our results of operations, including revenueour revenues and cash flows.
As of September 30, 2022, the current portion of our total debt is $28.7 million, of which $15.9 million is outstanding non-recourse debt.
A summary of our consolidated sources and uses of cash, cash equivalents and restricted cash was as follows (in thousands):
| | | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | | | 2023 | | 2022 | |
Net cash (used in) provided by : | | | | | | |
| Net cash (used in) provided by: | | Net cash (used in) provided by: | | |
Operating activities | Operating activities | | $ | (168,453) | | | $ | (107,956) | | | Operating activities | | $ | (494,364) | | | $ | (168,453) | | |
Investing activities | Investing activities | | (80,907) | | | (41,511) | | | Investing activities | | (67,482) | | | (80,907) | | |
Financing activities | Financing activities | | 305,211 | | | 53,130 | | | Financing activities | | 682,161 | | | 305,211 | | |
|
Net cash provided by (used in) our PPA Entities, which are incorporated into the condensed consolidated statements of cash flows, was as follows (in thousands):
| | | | | | | | | | | | | | | | | Nine Months Ended September 30, | |
| | | Nine Months Ended September 30, | | | | 2023 | | 2022 | |
| | | 2022 | | 2021 | | | | | | |
PPA Entities ¹ | PPA Entities ¹ | | | | PPA Entities ¹ | | | |
Net cash provided by PPA operating activities | Net cash provided by PPA operating activities | | $ | 95,445 | | | $ | 15,751 | | | Net cash provided by PPA operating activities | | $ | 10,036 | | | $ | 95,445 | | |
Net cash used in PPA financing activities | Net cash used in PPA financing activities | | (103,546) | | | (17,641) | | | Net cash used in PPA financing activities | | (23,594) | | | (103,546) | | |
| |
1 The PPA Entities'Entities’ operating and financing cash flows are a subset of our consolidated cash flows and represent the stand-alone cash flows prepared in accordance with U.S. GAAP. Operating activities consist principally of cash used to run the operations of the PPA Entities, the purchase of Energy Servers from us and principal reductions in loan balances. Financing activities consist primarily of changes in debt carried by our PPAs, and payments from and distributions to noncontrolling partnership interests. We believe this presentation of net cash provided by (used in) PPA activities is useful to provide the reader with the impact to consolidated cash flows of the PPA Entities in which we have only a minority interest. In August 2023, we sold our PPA V entity.
Operating Activities
Our operating activities have consisted of net loss adjusted for certain non-cash items plus changes in our operating assets and liabilities, or working capital. Net cash used in operating activities during the nine months ended September 30, 2023 was $494.4 million, an increase of $325.9 million compared to the prior year period. The increase in cash used in operating activities during the nine months ended September 30, 20222023, as compared to the prior year period, was primarily thea result of an increase in our net loss and a decrease in our net working capital of $70.6$489.5 million due to (1) an increase in inventory levels of $206.3 million to support future demand, (2) an increase in contract assets of $97.1 million, which was driven by the nine months ended September 30, 2022PPA V Upgrade, (3) an increase in accounts receivable of $83.9 million which was primarily due to the timing of revenue transactions and corresponding collections, the increase in inventory levels to support future demand, and (4) the timing of payments to vendors.
Investing Activities
Our investing activities have consisted of capital expenditures, that include investmentincluding investments to increase our production capacity. We expect to continue such investing activities as our business grows. Cash used in investing activities of $80.9 million during the nine months ended September 30, 20222023 was $67.5 million, an increase of $13.4 million compared to the prior year period, and was primarily the result ofdue to expenditures on tenant improvements for a newly leased engineering and manufacturing building in Fremont, California.California, opened in July 2022. We expect to continue to make capital expenditures over the next few quarters to prepareexpand production capacity at our new manufacturing facility in Fremont, California, for production, which includes the purchase of new equipment and other tenant improvements. We intend to fund these capital expenditures from cash on hand as well as cash flow to be generated from operations. We may also evaluate and arrange equipment lease financing to fund these capital expenditures.
Financing Activities
Historically, our financing activities have consisted of borrowings and repayments of debt, proceeds and repayments of financing obligations, distributions paid to noncontrolling interests, contributions from noncontrolling interests, and the proceeds from the issuanceissuances of our common stock. Net cash provided by financing activities during the nine months ended September 30, 20222023, was $305.2$682.2 million, an increase of $252.1$377.0 million compared to the prior year period,period. The increase was primarily due to the(1) proceeds from public share offeringthe issuance of $372.0the 3% Green Notes of $613.0 million, andnet of paid debt issuance costs of $19.5 million, (2) proceeds from the issuance of redeemable convertible preferred stock of $310.6 million, net of paid debt issuance costs of $0.4 million, as a result of SK ecoplant Second Tranche Closing, (3) proceeds from the issuance of common stock of $15.2$16.0 million, (4) a contribution from noncontrolling interest of $7.0 million, and (5) proceeds from financing obligations of $2.7 million. This was partially offset by (1) a settlement of the 3.04% Senior Secured Notes due June 30, 2031 of $118.5 million as a result of PPA V Upgrade, (2) repayment debt related to PPA IIIa of $30.2 million and otherrecourse debt of $17.3$72.9 million, and(3) purchases of Capped Calls of $54.5 million, (4) repayment of financing obligations of $28.8$13.5 million, and (5) the acquisition of all interest in PPA V for $6.9 million net of distributions to Intel’s noncontrolling interest of $2.3 million.
We believe we have the sufficient capital to operate our business over the next 12 months, including the completion of the build out of our manufacturing facilities. Our working capital was strengthened with the initial and subsequent investments by SK ecoplant and our public offering. In addition, we may still enter the equity or debt market as needed to support the expansion of our business. Please refer to Part I, Item 1, Note 7 - Outstanding Loans and Security Agreementsin Part 1, Item 1, Financial Statements (unaudited); of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors - Risks Related to Our Liquidity - Our substantial indebtedness, and restrictions imposed by the agreements governing our and our PPA Entities'Entities’ outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs, and We may not be able to generate sufficient cash to meet our debt service obligations or our growth plans section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for more information regarding the terms of and risks associated with our debt.
Purchase and Financing Options
For information about our purchase and financing options, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Purchase and Financing Options sectionin our Annual Report on Form 10-K for the fiscal year ended December 31, 2021for more information regarding the terms of and risks associated with our debt.2022.
Performance Guarantees
As of
Purchase, we had incurred no liabilities due to failure to repair or replace our Energy Servers pursuant to any performance warranties made under operations and Financing Options
maintenance agreements (“O&M Agreements”). For information on purchaseO&M Agreements that are subject to renewal, our future service revenue from such agreements are subject to our obligations to make payments for underperformance against the performance guaranties, which are capped at an aggregate total of approximately $552.0 million (including $424.0 million related to portfolio financing entities and financing options, see$128.0 million related to all other transactions, and include payments for both low output and low efficiency), and our aggregate remaining potential payments related to these underperformance obligations was approximately $481.4 million as of September 30, 2023. For the Purchasing and Financing Options section in Part II, Item 7 - Management's Discussion and Analysisnine months ended September 30, 2023, we made performance guarantee payments of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.$24.4 million.
International Channel Partners
There were no significant changes in our international channel partners during the three and nine months ended September 30, 2022.2023. For information on international channel partners, see the International Channel Partners section in Part II, Item 7 - Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations, International Channel Partners section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
2022.
Key Operating Metrics - Comparison of the Three and Nine Months Ended September 30, 20222023 and 2021
2022
For a description of the key operating metrics we use to evaluate business activity, to measure performance, to develop financial forecasts and to make strategic decisions, see Part II, Item 7, Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations, - Key Operating Metrics section in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Product Acceptances
The product and megawatts accepted in the three and nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | | | | | | | | | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Product accepted | | | | | | | | | | 813 | | | 581 | | | 232 | | | 39.9 | % | | 1,931 | | | 1,427 | | | 504 | | | 35.3 | % |
Megawatts accepted, net | | | | | | | | | | 81 | | | 58 | | | 23 | | | 39.9 | % | | 193 | | | 143 | | | 50 | | | 35.3 | % |
Product accepted increased approximately by 232 systems, or 39.9%, and 504 systems, or 35.3%, for the three and nine months ended September 30, 2023, respectively, as compared to the prior year periods, which is the equivalent of 23 megawatts and 50 megawatts, respectively. Acceptance volume increased as demand increased for the Energy Servers.
The increase in acceptances of 193 megawatts achieved from December 31, 2022 to September 30, 2023 was added to our installed base and, therefore, increased our total megawatts accepted, net, from 973 megawatts to 1,166 megawatts.
Purchase Options
Our customers have several purchase options for our Energy Servers. The portion of acceptances attributable to each purchase option in the three and nine months ended September 30, 20222023 and 20212022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
Direct Purchase | | 99 | % | | 99 | % | | 100 | % | | 99 | % |
Traditional Lease | | 1 | % | | — | % | | — | % | | — | % |
Managed Services | | — | % | | 1 | % | | — | % | | 1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | | |
Direct purchase (including third-party PPAs and international channels) | | | | | | 100 | % | | 99 | % | | 98 | % | | 100 | % |
Traditional lease | | | | | | — | % | | 1 | % | | 2 | % | | — | % |
The portion of total revenue attributable to each purchase option in the three and nine months ended September 30, 20222023 and 20212022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
Direct Purchase | | 91 | % | | 86 | % | | 89 | % | | 88 | % |
Traditional Lease | | 1 | % | | 1 | % | | 1 | % | | 1 | % |
Managed Services | | 5 | % | | 8 | % | | 6 | % | | 6 | % |
Bloom Electrons | | 3 | % | | 5 | % | | 4 | % | | 5 | % |
Product Acceptances
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % |
| | | | | | | | | | | | | | | | |
Product accepted during the period (in 100 kilowatt systems) | | 581 | | | 353 | | | 228 | | | 64.6 | % | | 1,427 | | | 1,144 | | | 283 | | | 24.7 | % |
Product accepted increased approximately 228 systems, or 64.6%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. Acceptance volume increased as demand increased for the Bloom Energy servers.
Product accepted increased approximately 283 systems, or 24.7%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Acceptance volume increased as demand increased for the Bloom Energy servers.
Megawatts accepted, net, increased approximately 208 megawatts, or 30.4%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase in acceptances achieved from September 30, 2021 to September 30, 2022 was added to our installed base and, therefore, increased our megawatts accepted, net, from 682 megawatts to 890 megawatts. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | | |
Direct purchase (including third-party PPAs and international channels) | | | | | | 94 | % | | 91 | % | | 90 | % | | 89 | % |
Traditional lease | | | | | | — | % | | 1 | % | | 1 | % | | 1 | % |
Managed services | | | | | | 4 | % | | 5 | % | | 7 | % | | 6 | % |
Portfolio financings | | | | | | 2 | % | | 3 | % | | 2 | % | | 4 | % |
Costs Related to Our Products
Total product related costs for the three and nine months ended September 30, 20222023 and 20212022 was as follows:
| | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % | | | | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product costs of product accepted in the period | Product costs of product accepted in the period | | $2,344/kW | | $2,434/kW | | $-90/kW | | (3.7) | % | | $2,438/kW | | $2,362/kW | | $76/kW | | 3.2 | % | Product costs of product accepted in the period | | | $2,040/kW | | $2,456/kW | | ($416/kW) | | (16.9) | % | | $2,126/kW | | $2,485/kW | | ($359/kW) | | (14.4) | % |
Period costs of manufacturing related expenses not included in product costs (in thousands) | Period costs of manufacturing related expenses not included in product costs (in thousands) | | $ | 15,496 | | | $ | 7,774 | | | $7,722 | | 99.3 | % | | $ | 38,672 | | | $ | 19,653 | | | $19,019 | | 96.8 | % | Period costs of manufacturing related expenses not included in product costs (in thousands) | | | $ | 17,330 | | | $ | 15,496 | | | $ | 1,834 | | | 11.8 | % | | $ | 47,403 | | | $ | 38,672 | | | $ | 8,731 | | | 22.6 | % |
Installation costs on product accepted in the period | Installation costs on product accepted in the period | | $465/kW | | $726/kW | | $-261/kW | | (36.0) | % | | $398/kW | | $584/kW | | $-186/kW | | (31.8) | % | Installation costs on product accepted in the period | | | $318/kW | | $488/kW | | ($170/kW) | | (34.8) | % | | $402/kW | | $405/kW | | ($3/kW) | | (0.7) | % |
Product costs of product accepted decreased approximately $90by $416 per kilowatt, or 3.7%16.9%, and $359 per kilowatt, or 14.4%, for the three and nine months ended September 30, 20222023, as compared to the three months ended September 30, 2021. Thisprior year periods, respectively. The decrease in cost iscosts was primarily driven by our ongoing cost reductioncontinued efforts to reduce material costs, labor and overhead through improved automation of our manufacturing facilities, our increased facility utilization and our ongoing material cost reduction programs with our vendors.
Product costs of product accepted increased approximately $76 per kilowatt, or 3.2%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase in cost is primarily driven by some of the cost pressures seen in the external inflationary environment with commodity pricing and logistics increasing significantly from one year ago. Our ongoing cost reduction efforts to reduce material costs, labor and overhead through improved automation of our manufacturing facilities, our increased facility utilization and our ongoing materialimplement cost reduction programs with our vendors, continued but were offset by the temporary increases in cost that we experienced.and reduce our labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Period costs of manufacturing related expenses increased approximately $7.7by $1.8 million, or 99.3%11.8%, and $8.7 million, or 22.6%, for the three and nine months ended September 30, 20222023, as compared to the three months ended September 30, 2021.prior year periods, respectively. Our period costs of manufacturing related expenses increased primarily as a result of costs incurred to support capacity expansion efforts, which are expected to be brought online in future periods.
Period costsperiods, partially offset by a $3.1 million release of manufacturing related expenses increased approximately $19.0 million, or 96.8%, for the nine months endeda liability as of September 30, 2022 compared2023 related to a grant from the nine months ended September 30, 2021. OurDelaware Economic Development Authority upon the end of the measurement period costs of manufacturing related expenses increased primarily as a result of costs incurred to support capacity expansion efforts which are expected to be brought onlinestipulated in future periods.the grant agreement.
Installation costs on product accepted decreased approximately $261by $170 per kilowatt, or 36.0%34.8%, and $3 per kilowatt, or 0.7%, for the three and nine months ended September 30, 20222023, as compared to the three months ended September 30, 2021. This decrease in cost is primarily driven by the change in the mix of sites requiring Bloom installation and changes in installation process.prior year periods, respectively. Each customer site is differentunique and installation costs can vary due to a number of factors, including site complexity, size, and location of gas, etc.among other factors. As such, installation on a per kilowatt basis can vary significantly from period-to-period. In addition, some customers handle their own installation for which we have littleperiod to no installation cost.
Installation costs on product accepted decreased approximately $186 per kilowatt, or 31.8%, forperiod. For the ninethree and none months ended September 30, 2022 as compared to the nine months ended September 30, 2021. This2023, this decrease in cost iswas primarily driven by the change in the mix of sites requiring Bloom installation. Each customer site is different and installation costs can vary due to a number of factors, including site complexity, size, location of gas, etc. As such, installation on a per kilowatt basis can vary significantly from period-to-period. In addition, some customers handle their own installation for which we have little to no installation cost.
Results of Operations
A discussion regarding the comparison of our financial condition and results of operations for the three and nine months ended September 30, 20222023 and 20212022 is presented below.
Revenue
| | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % | | | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | (dollars in thousands) | | (dollars in thousands) | | | | (dollars in thousands) |
Product | Product | | $ | 213,243 | | | $ | 128,550 | | | $ | 84,693 | | | 65.9 | % | | $ | 520,415 | | $ | 413,347 | | $ | 107,068 | | 25.9 | % | Product | | $ | 304,976 | | | $ | 213,243 | | | $ | 91,733 | | | 43.0 | % | | $ | 713,427 | | $ | 520,415 | | $ | 193,012 | | | 37.1 | % |
Installation | Installation | | 22,682 | | | 22,172 | | | 510 | | | 2.3 | % | | 48,964 | | 53,710 | | (4,746) | | (8.8) | % | Installation | | 21,916 | | | 22,682 | | | (766) | | | (3.4) | % | | 66,762 | | 48,964 | | 17,798 | | 36.3 | % |
Service | Service | | 37,347 | | | 39,251 | | | (1,904) | | | (4.9) | % | | 111,012 | | 111,375 | | (363) | | (0.3) | % | Service | | 47,535 | | | 37,347 | | | 10,188 | | | 27.3 | % | | 130,496 | | 111,012 | | 19,484 | | 17.6 | % |
Electricity | Electricity | | 19,002 | | | 17,255 | | | 1,747 | | | 10.1 | % | | 56,158 | | 51,273 | | 4,885 | | 9.5 | % | Electricity | | 25,841 | | | 19,002 | | | 6,839 | | | 36.0 | % | | 65,869 | | 56,158 | | 9,711 | | 17.3 | % |
Total revenue | Total revenue | | $ | 292,274 | | | $ | 207,228 | | | $ | 85,046 | | | 41.0 | % | | $ | 736,549 | | $ | 629,705 | | $ | 106,844 | | 17.0 | % | Total revenue | | $ | 400,268 | | | $ | 292,274 | | | $ | 107,994 | | | 36.9 | % | | $ | 976,554 | | $ | 736,549 | | $ | 240,005 | | 32.6 | % |
|
Total Revenue
Total revenue increased by $85.0$108.0 million, or 41.0%36.9%, for the three months ended September 30, 20222023, as compared to the prior year period. This increase was driven by a $84.7$91.7 million increase in product revenue, a $1.7$10.2 million increase in service revenue, and a $6.8 million increase in electricity revenue, a $0.5 million increase in installation revenue,partially offset by a $1.9$0.8 million decrease in serviceinstallation revenue.
Total revenue increased by $106.8$240.0 million, or 17.0%32.6%, for the nine months ended September 30, 2023, as compared to the prior year period. This increase was driven by a $193.0 million increase in product revenue, a $19.5 million increase in service revenue, a $17.8 million increase in installation revenue, and a $9.7 million increase in electricity revenue.
Product Revenue
Product revenue increased by $91.7 million, or 43.0%, for the three months ended September 30, 2023, as compared to the prior year period. Product revenue increased by 39.9%, primarily driven by higher product acceptances and improved product pricing due to increased demand for our products--including the PPA V Upgrade--resulting in revenue from new Energy Servers of $151.6 million. The increase was partially offset by revenue recognized from PPA IIIa (the “PPA IIIa Upgrade”) of $12.7 million for the three months ended September 30, 2022.
Product revenue increased by $193.0 million, or 37.1%, for the nine months ended September 30, 2023, as compared to the prior year period. The product revenue increase was primarily driven by a 35.3% increase in product acceptances due to increased demand for our products and the PPA V Upgrade, resulting in revenue from new Energy Servers of $151.6 million, partially offset by revenue recognized from the PPA IIIa Upgrade of $49.6 million for the nine months ended September 30, 2022.
Installation Revenue
Installation revenue decreased by $0.8 million, or 3.4%, for the three months ended September 30, 2023, as compared to the prior year period. This decrease in installation revenue was primarily driven by the change in the mix of product acceptances requiring installations by us in the three months ended September 30, 2023, and the revenue recognized from the PPA IIIa Upgrade of $2.1 million for the three months ended September 30, 2022, partially offset by the revenue recognized from the PPA V Upgrade of $9.5 million.
Installation revenue increased by $17.8 million, or 36.3%, for the nine months ended September 30, 2023, as compared to the prior year period. This increase in installation revenue was primarily driven by the revenue recognized from the PPA V Upgrade of $9.5 million and the change in the mix of product acceptances requiring installations by us in the nine months ended September 30, 2023, partially offset by revenue recognized from the PPA IIIa Upgrade of $3.2 million for the nine months ended September 30, 2022.
Service Revenue
Service revenue increased by $10.2 million, or 27.3%, for the three months ended September 30, 2023, as compared to the prior year period. This increase was primarily driven by a $107.1181 megawatts of Energy Servers reaching full power in the past year, which contributed to an $11.3 million increase in product revenue and a $4.9 million increase in electricity revenue,from maintenance contracts associated with our fleet of Energy Servers, partially offset by a $4.7 million decrease in installation revenue and a $0.4 million decrease in service revenue.the impact of product performance guarantees of $1.1 million.
Product Revenue
ProductService revenue increased by $84.7$19.5 million, or 65.9%, for the three months ended September 30, 2022 as compared to the prior year period. The product revenue increase was driven primarily by a 64.6% increase in product acceptances resulting from higher demand in existing markets and revenue recognized from the PPA 3a Upgrade of $12.7 million.
Product revenue increased by $107.1 million, or 25.9%17.6%, for the nine months ended September 30, 2022 as compared to the prior year period. The product revenue increase was driven primarily by a 24.7% increase in product acceptances resulting from higher demand in existing markets and revenue recognized from the PPA IIIa Upgrade of $49.6 million. We expect our product revenue to grow in the future as we expand our addressable markets.
Installation Revenue
Installation revenue increased by $0.5 million, or 2.3%, for the three months ended September 30, 20222023, as compared to the prior year period. This increase in installation revenue was primarily driven by the revenue recognized from the PPA IIIa Upgrade181 megawatts of $2.1 million and the change in mix of product acceptances requiring installations by us, as more sites had installation costsEnergy Servers reaching full power in the three months ended September 30, 2022.
Installation revenue decreased by $4.7 million, or 8.8%, for the nine months ended September 30, 2022 as compared to the priorpast year, period. This decrease in installation revenue was driven by the change in mix of product acceptances requiring installations by us, as fewer sites had installation costs in the nine months ended September 30, 2022, offset by the revenue recognized from the PPA IIIa Upgrade of $3.2 million.
Service Revenue
Service revenue decreased by $1.9 million, or 4.9%, for the three months ended September 30, 2022 as compared to the prior year period. This decrease was primarily duewhich contributed to a one-off$31.4 million increase in revenue increasefrom maintenance contracts associated with our fleet of $2.7 million in the three months ended September 30, 2021 andEnergy Servers, partially offset by the impact of product performance guarantees partially offset by the 64.6% increaseof $10.4 million and a $0.7 million decrease in acceptances plus the maintenance contract renewals associated with the increase in our fleet of Energy Servers.
Service revenue decreased by $0.4 million, or 0.3%, for the nine months ended September 30, 2022 as compared to the prior year period. This decrease was primarily due to a one-off revenue increase of $2.7 million in the three months ended September 30, 2021 and the impact of product performance guarantees, partially offset by the 24.7% increase in acceptances plus the maintenance contract renewals associated with the increase in our fleet of Energy Servers. We expect our service revenue to grow in the future.state incentives.
Electricity Revenue
Electricity revenue includes both revenue from contracts with customers and revenue from contracts that contain leases.
Electricity revenue increased by $1.7$6.8 million, or 10.1%36.0%, for the three months ended September 30, 20222023, as compared to the prior year period, primarily due to an increase in electricity revenue of $1.1 million from old Energy Servers as part of the PPA V Upgrade and an increase in installed units as a result of thean increase in Managed Services transactions recorded inbetween the second halfthird quarter of fiscal year 2021.2021 and the third quarter of fiscal 2023.
Electricity revenue increased by $4.9$9.7 million, or 9.5%17.3%, for the nine months ended September 30, 20222023, as compared to the prior year period, primarily due to an increase in electricity revenue of $1.1 million from old Energy Servers as part of the PPA V Upgrade and an increase in installed units as a result of thean increase in Managed Services transactions recorded inbetween the second halfthird quarter of fiscal year 2021.2021 and the third quarter of fiscal 2023.
Cost of Revenue
| | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % | | | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | | (dollars in thousands) | | (dollars in thousands) | | | | | (dollars in thousands) |
Product | Product | | $ | 158,176 | | | $ | 93,704 | | | $ | 64,472 | | | 68.8 | % | | $ | 393,337 | | | $ | 289,889 | | | $ | 103,448 | | | 35.7 | % | Product | | $ | 182,832 | | | $ | 158,176 | | | $ | 24,656 | | | 15.6 | % | | $ | 457,591 | | | $ | 393,337 | | | $ | 64,254 | | | 16.3 | % |
Installation | Installation | | 28,333 | | | 25,616 | | | 2,717 | | | 10.6 | % | | 57,836 | | | 66,756 | | | (8,920) | | | (13.4) | % | Installation | | 25,902 | | | 28,333 | | | (2,431) | | | (8.6) | % | | 77,881 | | | 57,836 | | | 20,045 | | | 34.7 | % |
Service | Service | | 41,792 | | | 39,586 | | | 2,206 | | | 5.6 | % | | 124,646 | | | 111,269 | | | 13,377 | | | 12.0 | % | Service | | 57,370 | | | 41,792 | | | 15,578 | | | 37.3 | % | | 165,877 | | | 124,646 | | | 41,231 | | | 33.1 | % |
Electricity | Electricity | | 13,029 | | | 11,439 | | | 1,590 | | | 13.9 | % | | 83,819 | | | 32,913 | | | 50,906 | | | 154.7 | % | Electricity | | 139,378 | | | 13,029 | | | 126,349 | | | 969.8 | % | | 169,802 | | | 83,819 | | | 85,983 | | | 102.6 | % |
Total cost of revenue | Total cost of revenue | | $ | 241,330 | | | $ | 170,345 | | | $ | 70,985 | | | 41.7 | % | | $ | 659,638 | | | $ | 500,827 | | | $ | 158,811 | | | 31.7 | % | Total cost of revenue | | $ | 405,482 | | | $ | 241,330 | | | $ | 164,152 | | | 68.0 | % | | $ | 871,151 | | | $ | 659,638 | | | $ | 211,513 | | | 32.1 | % |
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Total Cost of Revenue
Total cost of revenue increased by $71.0$164.2 million, or 41.7%68.0%, for the three months ended September 30, 20222023, as compared to the prior year period primarilyperiod. The increase was driven by a $64.5$126.3 million increase in cost of electricity revenue, a $24.7 million increase in cost of product revenue and a $15.6 million increase in cost of service revenue, partially offset by a $2.4 million decrease in cost of installation revenue.
Total cost of revenue increased by $211.5 million, or 32.1%, for the nine months ended September 30, 2023, as compared to the prior year period. The increase was driven by a $86.0 million increase in cost of electricity revenue, a $64.3 million increase in cost of product revenue, a $2.7 million increase in costs of installation revenue, a $2.2$41.2 million increase in cost of service revenue, and a $1.6$20.0 million increase in cost of electricity revenue. The increase was primarily driven by the increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Total cost of revenue increased by $158.8 million, or 31.7%, for the nine months ended September 30, 2022 as compared to the prior year period primarily driven by a $103.4 million increase in cost of product revenue, a $50.9 million increase in cost of electricity revenue, a $13.4 million increase in cost of service revenue, offset by a $8.9 million decrease in costs of installation revenue. The increase was primarily driven by the write-off of old Energy Servers of $44.8 million as a result of the PPA IIIa Upgrade, increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Cost of Product Revenue
Cost of product revenue increased by $64.5$24.7 million, or 68.8%15.6%, for the three months ended September 30, 20222023, as compared to the prior year period. The increase in cost of product revenue increase was in line with the increase in product revenue and wasprimarily driven primarily by a 64.6%39.9% increase in product acceptances, including the effect of $62.6 million from the sale of new Energy Servers as a result of the PPA V Upgrade. This increase was partially offset by (1) a lower cost per unit attributable to our ongoing efforts to reduce material costs, (2) cost reduction programs with our vendors and a reduction in labor and overhead costs due to increased volume, (3) improved processes and automation at our manufacturing facilities, (4) the cost of sales of new Energy Servers of $5.7 million as a result of the PPA IIIa Upgrade increased freight chargesfor the three months ended September 30, 2022, and other supply chain-related pricing pressures and(5) the release of $3.1 million of grant liability recognized against payroll related costs incurred in supportthe third quarter of upcoming capacity expansion efforts. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.fiscal 2023.
Cost of product revenue increased by $103.4$64.3 million, or 35.7%16.3%, for the nine months ended September 30, 20222023, as compared to the prior year period. The increase in cost of product revenue increase was primarily driven primarily by a 24.7%35.3% increase in product acceptances, including the effect of $62.6 million from the sale of new Energy Servers as a result of the PPA V Upgrade. This increase was partially offset by (1) a lower cost per unit attributable to our ongoing efforts to reduce material costs, (2) cost reduction programs with our vendors and a reduction in labor and overhead costs due to increased volume, (3) improved processes and automation at our manufacturing facilities, (4) the cost of sales of new Energy Servers of $21.6 million as a result of the PPA IIIa Upgrade increased freight chargesfor the nine months ended September 30, 2022, and other supply chain-related pricing pressures and(5) the release of $3.1 million of grant liability recognized against payroll related costs incurred in supportthe third quarter of upcoming capacity expansion efforts. This increase was partially offset by our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.fiscal 2023.
Cost of Installation Revenue
Cost of installation revenue increaseddecreased by $2.7$2.4 million, or 10.6%8.6%, for the three months ended September 30, 20222023, as compared to the prior year period. This decrease was driven by the change in the mix of product acceptances requiring Bloom Energy installations, as fewer sites had installation costs in the three months ended September 30, 2023 compared to the prior year period. The decrease was partially offset by the cost of installation revenue of $7.4 million as a result of PPA V Upgrade for the three months ended September 30, 2023.
Cost of installation revenue increased by $20.0 million, or 34.7%, for the nine months ended September 30, 2023, as compared to the prior year period. This increase was driven by the change in the mix of product acceptances requiring Bloom Energy installations, as more sites had installation costs in the threenine months ended September 30, 2022.
Cost2023 compared to the prior year period, and the cost of installation revenue decreased by $8.9of $7.4 million or 13.4%,as a result of the PPA V Upgrade for the nine months ended September 30, 2022 as compared to the prior year period. This decrease was driven by the change in mix of product acceptances requiring Bloom Energy installations, as fewer sites had installation costs in the nine months ended September 30, 2022.2023.
Cost of Service Revenue
Cost of service revenue increased by $2.2$15.6 million, or 5.6%37.3%, for the three months ended September 30, 20222023, as compared to the prior year period. This increase was primarily due to the deployment of field replacement units, partially offset by (1) cost reductions and our actions to proactively manage fleet optimizations.optimizations and (2) a portion of released grant liability of $2.9 million recognized against payroll related costs incurred in the third quarter of fiscal 2023.
Cost of service revenue increased by $13.4$41.2 million, or 12.0%33.1%, for the nine months ended September 30, 20222023, as compared to the prior year period. This increase was primarily due to the deployment of field replacement units, partially offset by (1) cost reductions and our actions to proactively manage fleet optimizations.optimizations and (2) the release of $2.9 million of grant liability recognized against payroll related costs incurred in the third quarter of fiscal 2023.
Cost of Electricity Revenue
Cost of electricity revenue includes both cost of revenue from contracts with customers and cost of revenue from contracts that contain leases.
Cost of electricity revenue increased by $1.6$126.3 million, or 13.9%969.8%, for the three months ended September 30, 20222023, as compared to the prior year period,period. This increase was primarily due to the increase in installed units driven by Managed Services transactions recorded in the second halfimpairment of fiscal year 2021.old Energy Servers of $123.7 million as a result of the PPA V Upgrade.
Cost of electricity revenue increased by $50.9$86.0 million, or 154.7%102.6%, for the nine months ended September 30, 20222023, as compared to the prior year period,period. This increase was primarily due todriven by the write-offimpairment of old Energy Servers of $123.7 million as a result of the PPA V Upgrade, partially offset by the impairment of old Energy Servers of $44.8 million as a result ofdue to the PPA IIIa Upgrade and an increase in installed units driven by Managed Services transactions recorded in the second halfthird quarter of fiscal year 2021.2022.
Gross Profit and Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2023 | | 2022 | | | 2023 | | 2022 | |
| | (dollars in thousands) |
Gross profit (loss): | | | | | | | | | | | | |
Product | | $ | 122,144 | | $ | 55,067 | | $ | 67,077 | | | $ | 255,836 | | $ | 127,078 | | $ | 128,758 |
Installation | | (3,986) | | (5,651) | | 1,665 | | | (11,119) | | (8,872) | | (2,247) |
Service | | (9,835) | | (4,445) | | (5,390) | | | (35,381) | | (13,634) | | (21,747) |
Electricity | | (113,537) | | 5,973 | | (119,510) | | | (103,933) | | (27,661) | | (76,272) |
Total gross profit (loss) | | $ | (5,214) | | $ | 50,944 | | $ | (56,158) | | | $ | 105,403 | | $ | 76,911 | | $ | 28,492 |
| | | | | | | | | | | | |
Gross margin: | | | | | | | | | | | | |
Product | | 40 | % | | 26 | % | | | | 36 | % | | 24 | % | | |
Installation | | (18) | % | | (25) | % | | | | (17) | % | | (18) | % | | |
Service | | (21) | % | | (12) | % | | | | (27) | % | | (12) | % | | |
Electricity | | (439) | % | | 31 | % | | | | (158) | % | | (49) | % | | |
Total gross margin | | (1) | % | | 17 | % | | | | 11 | % | | 10 | % | | |
Gross Profit (Loss) and Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | | 2022 | | 2021 | |
| | (dollars in thousands) |
Gross profit (loss): | | | | | | | | | | | | |
Product | | $ | 55,067 | | $ | 34,846 | | $ | 20,221 | | | $ | 127,078 | | $ | 123,458 | | $ | 3,620 |
Installation | | (5,651) | | (3,444) | | (2,207) | | | (8,872) | | (13,046) | | 4,174 |
Service | | (4,445) | | (335) | | (4,110) | | | (13,634) | | 106 | | (13,740) |
Electricity | | 5,973 | | 5,816 | | 157 | | | (27,661) | | 18,360 | | (46,021) |
Total gross profit (loss) | | $ | 50,944 | | $ | 36,883 | | $ | 14,061 | | | $ | 76,911 | | $ | 128,878 | | $ | (51,967) |
| | | | | | | | | | | | |
Gross margin: | | | | | | | | | | | | |
Product | | 26 | % | | 27 | % | | | | 24 | % | | 30 | % | | |
Installation | | (25) | % | | (16) | % | | | | (18) | % | | (24) | % | | |
Service | | (12) | % | | (1) | % | | | | (12) | % | | — | % | | |
Electricity | | 31 | % | | 34 | % | | | | (49) | % | | 36 | % | | |
Total gross margin | | 17 | % | | 18 | % | | | | 10 | % | | 20 | % | | |
Total Gross Profit
Gross profit improveddecreased by $14.1$56.2 million in the three months ended September 30, 20222023, as compared to the prior year period whichperiod. This change was primarily due to a $119.5 million decrease in electricity gross profit, primarily driven by the $20.2impairment of old Energy Servers of $123.7 million as a result of the PPA V Upgrade, and a $5.4 million decrease in service gross profit, partially offset by a $67.1 million increase in product gross profit, primarily due to a 39.9% increase in product acceptances resulting from higher demand in existing markets and the PPA V Upgrade, and an improvement in installation gross loss by $1.7 million.
Gross profit increased by $28.5 million in the nine months ended September 30, 2023, as compared to the prior year period. This change was mostly due to a $128.8 million increase in product gross profit, primarily driven by an 64.6%a 35.3% increase in product acceptances resulting from higher demand in existing markets and the PPA V Upgrade, partially offset by a $76.3 million decrease in electricity gross profit, primarily as a result of the impairment of old Energy Servers of $123.7 million as part of the PPA V Upgrade, and a $21.7 million and a $2.2 million improvement in service gross loss and installation gross loss, respectively. Other factors contributing to the gross profit improvement were (1) our ongoing cost reduction efforts to reduce material costs, in conjunction with our suppliers and(2) our reduction in labor and overhead costs throughunit cost due to increased volume, and (3) improved processes and automation at our manufacturing facilities.
Product Gross Profit
Product gross profit decreasedincreased by $52.0$67.1 million in the ninethree months ended September 30, 20222023, as compared to the prior year period whichperiod. The increase was primarily driven by (1) a 39.9% increase in product acceptances and improved product pricing due to increased demand for our products and the $46.0 million decreasePPA V Upgrade, resulting in electricitythe gross profit primarily due to the write-offfrom sales of oldnew Energy Servers of $44.8$89.0 million, as a result of the PPA IIIa Upgrade; the $13.7 million decrease in service gross profit due to a 24.7% increase in acceptances plus the maintenance contract renewals associated with the increase in our fleet of Energy Servers. This decrease was partially offset by(2) our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities.
Product Gross Profit
Product gross profit increased by $20.2 million in the three months ended September 30, 2022 as comparedunit cost due to the prior year period. The increase is primarily driven by an 64.6% increase in product acceptances, revenue recognized from the PPA IIIa Upgrade of $12.7 million and our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs through increased volume, improved processes and automation at our manufacturing facilities, and (3) a release of $3.1 million of grant liability recognized against payroll related costs incurred in the third quarter of fiscal 2023. The increase was partially offset by increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which are expected to be brought online in future periods.the gross profit from sales of new Energy Servers of $7.0 million as a result of the PPA IIIa Upgrade for the three months ended September 30, 2022.
Product gross profit increased by $3.6$128.8 million in the nine months ended September 30, 20222023, as compared to the prior year period. The increase iswas primarily driven by (1) a 24.7%35.3% increase in product acceptances revenue recognized fromdue to higher demand for our products and the PPA IIIaV Upgrade, resulting in the gross profit from sales of $49.6 new Energy Servers of $89.0 million, (2) the release of $3.1 million of grant liability recognized against payroll related costs incurred in the third quarter of fiscal 2023, and (3) our ongoing cost reduction efforts to reduce material costs in conjunction with our suppliers and our reduction in labor and overhead costs throughunit cost due to increased volume, improved processes and automation at our manufacturing facilities. ThisThe increase was partially offset by increased freight charges and other supply chain-related pricing pressures and costs incurred to support capacity expansion efforts which will be brought online in future periods.the gross profit from sales of new Energy Servers of $28.0 million as a result of the PPA IIIa Upgrade for the nine months ended September 30, 2022.
Installation Gross Loss
Installation gross loss worsenedimproved by $2.2$1.7 million in the three months ended September 30, 20222023, as compared to the prior year periodperiod. This was primarily driven by (1) the gross profit from installations of new Energy Servers of $2.1 million as a result of the PPA V Upgrade, and (2) the change in site mix and other site related factors such as site complexity, size, local ordinance requirements and location of the utility interconnect.interconnect, partially offset by the gross profit from installations of new Energy Servers of $0.4 million as a result of the PPA IIIa Upgrade for the three months ended September 30, 2022.
Installation gross loss improvedworsened by $4.2$2.2 million in the nine months ended September 30, 20222023, as compared to the prior year periodperiod. This change was primarily driven by (1) the change in site mix and other site related factors such as site complexity, size, local ordinance requirements and location of the utility interconnect.interconnect, (2) the gross profit from installations of new Energy Servers of $0.7 million as a result of the PPA IIIa Upgrade for the nine months ended September 30, 2022, partially offset by the gross profit from installation of new Energy Servers of $2.1 million as a result of the PPA V Upgrade.
Service Gross (Loss) ProfitLoss
Service gross loss worsened by $4.1$5.4 million in the three months ended September 30, 20222023, as compared to the prior year period. This was primarily due to deployments of field replacement units and the impact of product performance guarantees of $1.1 million, partially offset by (1) the release of $2.9 million of grant liability recognized against payroll related costs incurred in the third quarter of fiscal 2023 and (2) cost reductions and our actions to proactively manage fleet optimizations.
Service gross loss worsened by $13.7$21.7 million in the nine months ended September 30, 20222023, as compared to the prior year period. This was primarily due to deployments of field replacement units and the impact of product performance guarantees of $10.4 million, partially offset by (1) the release of $2.9 million of grant liability recognized against payroll related costs incurred in the third quarter of fiscal 2023 and (2) cost reductions and our actions to proactively manage fleet optimizations.
Electricity Gross Profit (Loss) Profit
Electricity gross profit increaseddecreased by $0.2$119.5 million in the three months ended September 30, 20222023, as compared to the prior year period mainlyperiod. This was primarily due to the impairment of old Energy Servers of $123.7 million as a result of the PPA V Upgrade, partially offset by an increase in installed units driven by an increase in Managed Services transactions recorded inbetween the second halfthird quarter of fiscal year 2021.2021 and the third quarter of fiscal year 2023.
Electricity gross profit decreasedloss worsened by $46.0$76.3 million in the nine months ended September 30, 20222023, as compared to the prior year period mainlyperiod. This was primarily due to the write-offimpairment of old Energy Servers from the PPA V Upgrade of $123.7 million, partially offset by (1) an increase in installed units driven by an increase in Managed Services transactions recorded between the third quarter of fiscal year 2021 and the third quarter of fiscal year 2023, and (2) the impairment of old Energy Servers from the PPA IIIa Upgrade of $44.8 million partially offset by the increase in Managed Services transactions recorded in the second halfquarter of fiscal year 2021.2022.
Operating Expenses
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % |
| | (dollars in thousands) | | (dollars in thousands) | | |
Research and development | | $ | 36,146 | | | $ | 27,634 | | | $ | 8,512 | | | 30.8 | % | | $ | 112,286 | | | $ | 76,602 | | | $ | 35,684 | | | 46.6 | % |
Sales and marketing | | 23,275 | | | 20,124 | | | 3,151 | | | 15.7 | % | | 65,084 | | | 62,803 | | | 2,281 | | | 3.6 | % |
General and administrative | | 44,115 | | | 33,014 | | | 11,101 | | | 33.6 | % | | 119,965 | | | 90,470 | | | 29,495 | | | 32.6 | % |
Total operating expenses | | $ | 103,536 | | | $ | 80,772 | | | $ | 22,764 | | | 28.2 | % | | $ | 297,335 | | | $ | 229,875 | | | $ | 67,460 | | | 29.3 | % |
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | (dollars in thousands) |
Research and development | | $ | 35,126 | | | $ | 36,146 | | | $ | (1,020) | | | (2.8) | % | | $ | 122,309 | | | $ | 112,286 | | | $ | 10,023 | | | 8.9 | % |
Sales and marketing | | 20,002 | | | 23,275 | | | (3,273) | | | (14.1) | % | | 73,935 | | | 65,084 | | | 8,851 | | | 13.6 | % |
General and administrative | | 43,366 | | | 44,115 | | | (749) | | | (1.7) | % | | 131,004 | | | 119,965 | | | 11,039 | | | 9.2 | % |
Total operating expenses | | $ | 98,494 | | | $ | 103,536 | | | $ | (5,042) | | | (4.9) | % | | $ | 327,248 | | | $ | 297,335 | | | $ | 29,913 | | | 10.1 | % |
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Total Operating Expenses
Total operating expenses increaseddecreased by $22.8$5.0 million in the three months ended September 30, 20222023, as compared to the prior year period. This decrease was primarily driven by (1) a $7.1 million decrease in employee compensation and benefits primarily due to (i) a separation of 27 full-time employees from the marketing and finance departments as a result of the restructuring, and (ii) a decrease in stock-based compensation expenses of $3.0 million, as well as (2) a decrease in professional services costs, consulting and advisory expenses, and other operating expenses of $2.4 million, $1.0 million, and $2.1 million, respectively. The decrease was partially offset by (1) an increase in office and other expenses of $5.6 million, primarily driven by the impairment of non-recoverable production insurance of $6.4 million as a result of PPA V Upgrade, and (2) an increase in facility costs and depreciation expenses of $2.0 million and $1.6 million, respectively.
Total operating expenses increased by $29.9 million in the nine months ended September 30, 2023, as compared to the prior year period. This increase was primarily attributable to (1) our continued investment in R&D capabilities to support our technology roadmap, (2) our continued investment in our workforce to support our growth, resulting in an increase in employee compensation and benefits expenses of $10.4 million, and (3) our investment in business development, as well as (4) increases in facility costs, office expenses and anconsulting and advisory expenses of $8.4 million, $4.9 million, and $4.0 million, respectively. The increase was partially offset by a decrease in Generalprofessional services costs of $2.9 million and Administrativea decrease in other operating expenses of $3.9 million.
Research and Development
Research and development expenses decreased by $1.0 million in the three months ended September 30, 2023, as compared to the prior year period. This decrease was primarily driven by a $3.7 million decrease in laboratory and related costs, partially offset by increases in employee compensation and benefits, outside services.services, and other research and development costs of $1.7 million, $0.7 million, and $0.6 million, respectively.
Research and development expenses increased by $67.5$10.0 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily attributable to our continued investment in R&D capabilities to support our technology roadmap, our investment in business development, and an increase in General and Administrative outside services.
Research and Development
Research and development expenses increased by $8.5 million in the three months ended September 30, 20222023, as compared to the prior year period. This increase was primarily driven by increasesan increase in employee compensation and benefits of $4.7$5.0 million, to expand our employee basean increase in order to support our technology roadmapoutside services of $1.4 million, an increase in travel expenses of $0.4 million, an increase in depreciation expenses of $0.4 million, and cost reduction initiatives, including our hydrogen, electrolyzer, marine and biogas solutions.
Researchan increase in other research and development costs of $3.2 million, partially offset by a decrease in consulting and advisory expenses of $0.4 million.
Sales and Marketing
Sales and marketing expenses decreased by $3.3 million in the three months ended September 30, 2023, as compared to the prior year period. This decrease was primarily driven by (1) a $4.4 million decrease in employee compensation and benefits primarily due to (i) a separation of 25 full-time employees from the marketing department as a result of the restructuring, and (ii) a decrease in stock-based compensation expenses of $0.9 million, as well as (2) a decrease in travel expenses of $0.3 million, and (3) a decrease in professional services costs of $0.3 million, partially offset by an increase in consulting and advisory expenses of $1.5 million.
Sales and marketing expenses increased by $35.7$8.9 million in the nine months ended September 30, 20222023, as compared to the prior year period. This increase was primarily driven by increasesan increase in consulting and advisory expenses of $4.8 million, an increase in employee compensation and benefits of $13.3$3.5 million, to expand our employee baseand an increase in order to support our technology roadmap, including our hydrogen, electrolyzer, marinetravel expenses of $0.4 million, partially offset by a decrease in facility costs and biogas solutions.
Sales and Marketing
Salesother sales and marketing expenses increasedof $0.2 million and $0.2 million, respectively.
General and Administrative
General and administrative expenses decreased by $3.2$0.7 million in the three months ended September 30, 20222023, as compared to the prior year period. This decrease was primarily driven by (1) a $4.4 million decrease in employee compensation and benefits primarily due to (i) a separation of 2 full-time employees from the finance department as a result of the restructuring, (ii) a decrease in stock-based compensation expenses of $2.9 million, and (iii) a decrease in recruiting costs of $1.0 million, as well as (2) a decrease in consulting and advisory expenses of $2.3 million, (3) a decrease in professional services costs of $2.1 million, and (4) a decrease in other general and administrative expenses of $2.6 million. The decrease was partially offset by an increase in office and other expenses of $5.4 million, primarily driven by the impairment of non-recoverable production insurance of $6.4 million as a result of PPA V Upgrade, and an increase in facility costs and depreciation expenses of $2.1 million and $1.5 million, respectively.
General and administrative expenses increased by $11.0 million in the nine months ended September 30, 2023, as compared to the prior year period. This increase was primarily driven by increases(1) an increase in facility costs of $8.5 million, primarily due to rent expenses and utility costs, (2) an increase in office and other expenses of $4.7 million, primarily driven by the impairment of non-recoverable production insurance of $6.4 million as a result of PPA V Upgrade, (3) an increase in depreciation expenses of $3.5 million, and (4) an increase in employee compensation and benefits of $4.3 million to expand our U.S. and international sales force, increased investment in brand and product management,$1.9 million. The increase was partially offset by a decrease in outside services.
Salesprofessional services costs of $3.0 million and marketing expenses increased by $2.3 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $8.8 million to expand our U.S. and international sales force, increased investment in brand and product management, partially offset by a decrease in outside services.
General and Administrative
Generalother general and administrative expenses increased by $11.1 million in the three months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $4.0 million and outside services and an increase in factoring of receivables.
General and administrative expenses increased by $29.5 million in the nine months ended September 30, 2022 as compared to the prior year period. This increase was primarily driven by increases in employee compensation and benefits of $10.6 million, outside services and an increase in factoring of receivables.$6.9 million.
Stock-Based Compensation
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % |
| | (dollars in thousands) | | (dollars in thousands) | | |
Cost of revenue | | $ | 4,982 | | | $ | 2,945 | | | $ | 2,037 | | | 69.2 | % | | $ | 13,609 | | | $ | 9,749 | | | $ | 3,860 | | | 39.6 | % |
Research and development | | 4,818 | | | 5,678 | | | (860) | | | (15.1) | % | | 25,113 | | | 15,876 | | | 9,237 | | | 58.2 | % |
Sales and marketing | | 3,948 | | | 4,391 | | | (443) | | | (10.1) | % | | 13,528 | | | 12,486 | | | 1,042 | | | 8.3 | % |
General and administrative | | 10,283 | | | 7,952 | | | 2,331 | | | 29.3 | % | | 30,688 | | | 19,198 | | | 11,490 | | | 59.8 | % |
Total stock-based compensation | | $ | 24,031 | | | $ | 20,966 | | | $ | 3,065 | | | 14.6 | % | | $ | 82,938 | | | $ | 57,309 | | | $ | 25,629 | | | 44.7 | % |
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | (dollars in thousands) |
Cost of revenue | | $ | 5,581 | | | $ | 4,982 | | | $ | 599 | | | 12.0 | % | | $ | 14,809 | | | $ | 13,609 | | | $ | 1,200 | | | 8.8 | % |
Research and development | | 5,585 | | | 4,818 | | | 767 | | | 15.9 | % | | 21,673 | | | 25,113 | | | (3,440) | | | (13.7) | % |
Sales and marketing | | 3,015 | | | 3,948 | | | (933) | | | (23.6) | % | | 15,089 | | | 13,528 | | | 1,561 | | | 11.5 | % |
General and administrative | | 7,383 | | | 10,283 | | | (2,900) | | | (28.2) | % | | 28,025 | | | 30,688 | | | (2,663) | | | (8.7) | % |
Total stock-based compensation | | $ | 21,564 | | | $ | 24,031 | | | $ | (2,467) | | | (10.3) | % | | $ | 79,596 | | | $ | 82,938 | | | $ | (3,342) | | | (4.0) | % |
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Total stock-based compensation for the three months ended September 30, 20222023 compared to the prior year period increaseddecreased by $3.1 million$2.5 million. The decrease was primarily driven by (1) the efforts to expand our employee base across allseparation of full-time employees holding equity awards as a result of the Company’s functions.restructuring, (2) the voluntary resignation of our Executive Vice President and Chief Business Development and Marketing Officer on September 1, 2023, and (3) modified awards in the second quarter of fiscal year 2022.
Total stock-based compensation for the nine months ended September 30, 20222023 compared to the prior year period increaseddecreased by $25.6 million$3.3 million. The decrease was primarily driven by (1) the efforts to expand our employee base across allseparation of full-time employees holding equity awards as a result of the Company’s functions.restructuring, (2) the voluntary resignation of our Executive Vice President and Chief Business Development and Marketing Officer on September 1, 2023, and (3) a decrease in option expense compared to the nine months ended September 30, 2022, as existing options were either exercised, expired or cancelled. This decrease was partially offset by an increase in ESPP expense of $1.3 million and the increased headcount.
Other Income and Expense
| | | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 | | 2023 | | 2022 | |
| | | (in thousands) | | | (in thousands) |
Interest income | Interest income | | $ | 1,109 | | | $ | 72 | | | $ | 1,037 | | | $ | 1,364 | | | $ | 222 | | | $ | 1,142 | | Interest income | | $ | 7,419 | | | $ | 1,109 | | | $ | 6,310 | | | $ | 13,771 | | | $ | 1,364 | | | $ | 12,407 | |
Interest expense | Interest expense | | (13,099) | | | (14,514) | | | 1,415 | | | (41,000) | | | (43,798) | | | 2,798 | | Interest expense | | (68,037) | | | (13,099) | | | (54,938) | | | (93,736) | | | (41,000) | | | (52,736) | |
| Other income, net | | 4,472 | | | 2,011 | | | 2,461 | | | 254 | | | 1,948 | | | (1,694) | | |
Other (expense) income, net | | Other (expense) income, net | | (1,577) | | | 4,472 | | | (6,049) | | | (3,660) | | | 254 | | | (3,914) | |
Loss on extinguishment of debt | Loss on extinguishment of debt | | — | | | — | | | — | | | (4,233) | | | — | | | (4,233) | | Loss on extinguishment of debt | | (1,415) | | | — | | | (1,415) | | | (4,288) | | | (4,233) | | | (55) | |
Gain (loss) on revaluation of embedded derivatives | | 54 | | | (184) | | | 238 | | | 623 | | | (1,644) | | | 2,267 | | |
(Loss) gain on revaluation of embedded derivatives | | (Loss) gain on revaluation of embedded derivatives | | (114) | | | 54 | | | (168) | | | (1,213) | | | 623 | | | (1,836) | |
Total | Total | | $ | (7,464) | | | $ | (12,615) | | | $ | 5,151 | | | $ | (42,992) | | | $ | (43,272) | | | $ | 280 | | Total | | $ | (63,724) | | | $ | (7,464) | | | $ | (56,260) | | | $ | (89,126) | | | $ | (42,992) | | | $ | (46,134) | |
Interest Income
Interest income is derived from investment earnings on our cash balances primarily from money market funds. The increase in interest income of $6.3 million and $12.4 million was due to the increaseincreases in cash balances forin our money market funds for the three and nine months ended September 30, 20222023, respectively, as compared to the prior year periods.
Interest Expense
Interest expense is fromprimarily due to our debt held by third parties.
Interest expense for the three and nine months ended September 30, 20222023, as compared to the prior year period decreasedperiods, increased by $1.4 million. This decrease$54.9 million and $52.7 million, respectively. The increase was primarily driven by (1) the expensing of current and long-term commitment assets of $5.3 million and $47.5 million, respectively, immediately upon the automatic conversion on September 23, 2023, of Series B RCPS to Class A common stock as a result of the Second Tranche Closing with SK ecoplant, and (2) an increase in interest expense related to the 3% Green Convertible Senior Notes due to lowerJune 2028, issued on May 16, 2023. The increase was offset by a decrease in interest expense as a result of ourthe redemption on June 1, 2023 of 10.25% Senior Secured Notes due March 2027, and the repayment of the 7.5% Term Loan due September 2028, the 6.07% Senior Secured Notes due March 2030, and refinancing our notes at a lower interest rate.
Interest expense for the nine months ended September 30,3.04% Senior Secured Notes due June 2031 on June 14, 2022, as compared to the prior year period decreased by $2.8 million. This decrease was primarily due to lower interest expense as a result of our repayment of the 7.5% Term Loan due September 2028November 22, 2022, and refinancing our notes at a lower interest rate.August 24, 2023, respectively.
Other (Expense) Income, net
Other (expense) income, net is primarily derived from gain from SK Option revaluation, investments in joint ventures, the impact of foreign currency translation,transactions, and adjustments to fair value for derivatives.
Other income, net for the three months ended September 30, 20222023, as compared to the prior year period, increaseddecreased by $2.5$6.0 million primarily as a result of the gain on the revaluation of the Option to purchase Class A common stock of $7.9 million upon receipt of the notice of exercise from SK ecoplant on August 10, 2022 for the three months ended September 30, 2022, and an increase in unrealized foreign exchange loss of $7.9$1.5 million, partially offset by the loss on foreign currencyeffect of a cumulative translation adjustment of $3.6$3.5 million.
Other income, net for the nine months ended September 30, 20222023, as compared to the prior year period, decreased by $1.7$3.9 million primarily as a result of the loss on remeasurement of our equity investment in the Bloom Energy Japan joint venture, loss on foreign currency translation of $5.3 million, partially offset by the gain on the revaluation of the Option to purchase Class A common stock of $9.0 million upon receipt of the notice of exercise from SK ecoplant on August 10, 2022 for the nine months ended September 30, 2022, and an increase in unrealized foreign exchange loss of $9.0$3.3 million. The decrease was partially offset by the effect of a cumulative translation adjustment of $5.1 million, and the loss on remeasurement of our equity investments of $3.5 million recorded for the nine months ended September 30, 2022.
Loss on Extinguishment of Debtdebt
Loss on extinguishment of debt for the three months ended September 30, 2023 was $1.4 million, which was recognized as a result of the repayment on August 24, 2023 of 3.04% Senior Secured Notes due June 2031 as part of the PPA V Upgrade, and comprised in its entirety of derecognition of debt issuance costs.
Loss on extinguishment of debt for the nine months ended September 30, 2023 was $4.3 million, which was recognized as a result of the redemption on June 1, 2023 of the 10.25% Senior Secured Notes due March 2027, and the repayment on August 24, 2023 of the 3.04% Senior Secured Notes due June 2031 as part of the PPA V Upgrade, and including the repayment of the 4% premium upon redemption of the 10.25% Senior Secured Notes due March 2027 of $2.3 million and derecognition of debt issuance costs of $2.0 million.
Loss on extinguishment of debt for the nine months ended September 30, 2022 was $4.2 million, which was recognized as a result of repayment of the 7.5% Term Loan due September 2028 as part of the PPA IIIa Upgrade. There was no loss (gain) on extinguishment of debt for the three months ended September 30, 2022.
(Loss) Gain (Loss) on Revaluation of Embedded Derivatives
Gain (loss)(Loss) gain on revaluation of embedded derivatives is derived from the change in fair value of our sales contracts of embedded EPP derivatives valued using historical grid prices and available forecasts of future electricity prices to estimate future electricity prices.
Gain on revaluation of embedded derivatives for the three months ended September 30, 20222023, as compared to the prior year period, increaseddecreased by $0.2 million due to an increase in the change in fair value of our embedded EPP derivatives in our sales contractscontracts.
Gain on revaluation of embedded derivatives for the nine months ended September 30, 20222023, as compared to the prior year period, increaseddecreased by $2.3$1.8 million due to an increase in the change in fair value of our embedded EPP derivatives in our sales contracts.contracts of $1.2 million, offset by a payment of $3.2 million to one of our customers in the second quarter of fiscal 2023.
Income Tax Provision
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | (dollars in thousands) |
Income tax provision | | 646 | | | 336 | | | $ | 310 | | | 92.3 | % | | 1,083 | | | 888 | | | $ | 195 | | | 22.0 | % |
Income tax provision for the three and nine months ended September 30, 2023, as compared to the prior year periods, increased by $0.3 million and $0.2 million, respectively.
Net LossGain (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2022 | | 2021 | | Amount | | % | | 2022 | | 2021 | | Amount | | % |
| | (dollars in thousands) |
Net loss attributable to noncontrolling interests | | $ | (3,315) | | | $ | (4,309) | | | $ | (994) | | | (23.1) | % | | $ | (9,768) | | | $ | (13,733) | | | $ | (3,965) | | | (28.9) | % |
Net (loss) income attributable to redeemable noncontrolling interest | | $ | — | | | $ | 17 | | | $ | 17 | | | (100.0) | % | | $ | (300) | | | $ | (9) | | | $ | 291 | | | 3,233.3 | % |
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| | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| | 2023 | | 2022 | | Amount | | % | | 2023 | | 2022 | | Amount | | % |
| | (dollars in thousands) |
Net gain (loss) attributable to noncontrolling interest | | $ | 921 | | | $ | (3,315) | | | $ | 4,236 | | | (127.8) | % | | $ | (5,427) | | | $ | (9,768) | | | $ | 4,341 | | | (44.4) | % |
Net loss attributable to redeemable noncontrolling interest | | $ | — | | | $ | — | | | $ | — | | | — | % | | — | | | (300) | | | $ | 300 | | | (100.0) | % |
Net lossgain (loss) attributable to noncontrolling interests is the result of allocating profits and losses to noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method. HLBV is a balance sheet-oriented approach for applying the equity method of accounting when there is a complex structure, such as the flip structure of the PPA Entities.
Net loss attributable to noncontrolling interests for the three months ended September 30, 20222023, as compared to the prior year period, changedimproved by $1.0$4.2 million due to decreased lossesan increase in ourgain in the joint venture in the Republic of Korea of $1.8 million, and loss in PPA Entities, which are allocated to our noncontrolling interests.IV of $2.8 million recorded for the three months ended September 30, 2022, partially offset by an increase in loss in PPA V of $0.4 million.
Net loss attributable to noncontrolling interests for the nine months ended September 30, 20222023, as compared to the prior year period, changedimproved by $4.0$4.3 million primarily due to decreased lossesloss in our PPA Entities, which are allocated to our noncontrolling interests.
Changes in net (loss) income attributable to redeemable noncontrolling interestIV of $6.8 million recorded for the three and nine months ended September 30, 2022, partially offset by an increase in loss in PPA V of $2.2 million and 2021 were immaterial.a decrease in gain in the joint venture in the Republic of Korea of $0.5 million.
Off-Balance Sheet Arrangements
We include in our condensed consolidated financial statements all assets and liabilities and results of operations of our PPA Entities that we have entered into and over which we have substantial control. For additional information, see Part II, Item 8, Note 11 -Portfolio Financingsin our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.We have not entered into any other transactions that have generated relationships with unconsolidated entities or financial partnerships or special purpose entities. Accordingly, as of September 30, 2022 and December 31, 2021 we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as applied in the United States (“U.S. GAAP”). The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Our discussion and analysis of our financial results under Results of Operations above are based on our audited results of operations, which we have prepared in accordance with U.S. GAAP. In preparing these condensed consolidated financial statements, we make assumptions, judgments and estimates that can affect the reported amounts of assets, liabilities, revenues and expenses, and net income. On an ongoing basis, we base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are representative of estimation uncertainty and are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating the consolidated financial condition and results of operations.
The accounting policies that most frequently require us to make assumptions, judgments and estimates, and therefore are critical to understanding our results of operations, include:
•Discussion of Earliest Year of Changes in Financial Condition and Results of Operations;
•Revenue Recognition;
•Leases: Incremental Borrowing Rate;
•Valuation of Escalator Protection Plan Agreements (“EPP”);
•Valuation of Certain Financial Instruments and Customer Financing Receivables;
•Valuation of Assets and Liabilities of the SK ecoplant Strategic Investment;
•Incremental Borrowing Rate (“IBR”) by Lease Class;
•Stock-Based Compensation;
•Income Taxes;Taxes;
•Principles of Consolidation; and
•Allocation of Profits and Losses of Consolidated Entities to Noncontrolling Interests and Redeemable Noncontrolling Interests.
Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperation in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 provides a more complete discussion of our critical accounting policies and estimates. During the nine months ended September 30, 2022,2023, there were no significant changes to our critical accounting policies and estimates.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes to our quantitative and qualitative disclosures about market risk during the nine months ended September 30, 2022.2023. Please refer to Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for our fiscal year ended December 31, 20212022 for a more complete discussion of the market risks we consider.
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, is 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 and Accounting 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 September 30, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2023, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2022,2023, there were no changes in our internal controlscontrol over financial reporting, which were identified in connection with management’s evaluation required by paragraphparagraphs (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As of September 30, 2022 based on evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer and Chief Financial Officer (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) it was concluded that our disclosure controls and procedures were effective.
For further information on controls and procedures, see Part II, Item 9A, Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
2022.
Part II- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
We are, and from time to time we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. For a discussion of our legal proceedings, see Part II, Item 8 Note 13 - Commitments and Contingencies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part I, Item 1, Note 13 - Commitments and Contingencies. We are not presently a party to any other legal proceedings that in the opinion of our management and if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
ITEM 1A - RISK FACTORS
ThereExcept as discussed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, there were no material changes in our risk factors as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 - OtherOTHER INFORMATION
Not applicable.(a) On November 7, 2023, our board of directors (the “Board”) approved a resolution to file a Certificate of Elimination (the “Certificate of Elimination”) of the Certificate of Designation (as amended, the “Certificate of Designation”) of our Series B redeemable convertible preferred stock, par value $0.0001 per share (the “Series B Preferred Stock”), which was filed with the Secretary of State of the State of Delaware (“Secretary of State”) on November 7, 2023, following the prior conversion of all of the 13,491,701 shares of Series B Preferred Stock that were outstanding into shares of our Class A common stock, par value $0.0001 per share (“Class A common stock”). The filing of the Certificate of Elimination had the effect of eliminating from our Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) all matters set forth in the Certificate of Designation with respect to the Series B Preferred Stock and returning all previously designated shares of Series B Preferred Stock to their status as authorized Preferred Stock, par value $0.0001 per share, available for issuance as determined by the Board.
In addition, on November 7, 2023, the Board approved a resolution to file a Certificate of Retirement (the “Certificate of Retirement”) with the Secretary of State effecting the retirement of all of the previously outstanding shares of our Class B common stock, par value $0.0001 per share (“Class B common stock”), following the automatic conversion of the remaining outstanding shares of the Class B common stock into shares of Class A common stock pursuant to Section 2 of Article V of the Certificate of Incorporation, which conversion occurred on July 27, 2023 (the “Class B Conversion”). No additional shares of Class B common stock have been or will be issued following the Class B Conversion. The Certificate of Retirement was filed with the Secretary of State on November 7, 2023. Pursuant to Section 243 of the General Corporation Law of the State of Delaware, the filing of the Certificate of Retirement had the effect of amending the Certificate of Incorporation such that, upon the effectiveness of the Certificate of Retirement, our total number of authorized shares of capital stock and the total number of authorized shares of Class B Common Stock were reduced by the number of the retired shares of Class B common stock. Following the Class B Conversion, the Class A common stock continued, and will continue, to trade on The New York Stock
Exchange under the ticker symbol “BE” and did and will maintain the same CUSIP number previously assigned to the Class A common stock.
The foregoing descriptions of the Certificate of Elimination and Certificate of Retirement are summaries only and are qualified in their entirety by reference to the full text of (a) the Certificate of Retirement, (b) the Certificate of Elimination, (c) the Certificate of Incorporation and (d) the Certificate of Amendment to the Certificate of Incorporation, copies of which are filed with this Quarterly Report on Form 10-Q as Exhibits 3.2, 3.3, 3.4 and 3.5, respectively, and are incorporated herein by reference.
(c) Trading Plans
During the quarter ended September 30, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
ITEM 6 - EXHIBITS
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| | | Incorporated by Reference |
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| | Amended and Restated Bylaws of Bloom Energy Corporation (effective as of August 10, 2022) | 8-K | 001-38598 | 3.1 | 8/16/2022 |
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| | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | Filed herewith |
| | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | Filed herewith |
| ** | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | Filed herewith |
101.INS | | XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | Filed herewith |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | Filed herewith |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | Filed herewith |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | Filed herewith |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | Filed herewith |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | Filed herewith |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | |
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3.1 | | Amended and Restated Bylaws, as effective August 9, 2023 | 8-K | 001-38598 | 3.1 | 8/11/2023 |
| | Certificate of Retirement for Class B Common Stock | | | | Filed herewith |
| | Certificate of Elimination of Certificate of Designations of Series B Convertible Preferred Stock | | | | Filed herewith |
3.4 | | Restated Certificate of Incorporation | 10-Q | 001-38598 | 3.1 | 9/07/2018 |
3.5 | | Certificate of Amendment to the Restated Certificate of Incorporation | 10-Q | 001-38598 | 3.1 | 8/09/2022 |
| | Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | Filed herewith |
| | Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | Filed herewith |
| * | Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | Furnished herewith |
101.INS | | XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | Filed herewith |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | Filed herewith |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | Filed herewith |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | Filed herewith |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | Filed herewith |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | Filed herewith |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | |
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† | Portions of this exhibit are redacted as permitted under Regulation S-K, Rule 601. |
** | The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed"“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | | | BLOOM ENERGY CORPORATION |
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Date: | November 3, 20228, 2023 | By: | | /s/ KR Sridhar |
| | | | KR Sridhar |
| | | | Founder, President, Chief Executive Officer, Chairman and Director |
| | | | (Principal Executive Officer) |
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Date: | November 3, 20228, 2023 | By: | | /s/ Gregory Cameron |
| | | | Gregory Cameron |
| | | | Executive Vice President and |
| | | | Chief Financial Officer |
| | | | (Principal Financial and Accounting Officer) |
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