UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________
FORM 10-Q
Commission File Number 001-38598
| (Mark One) | |||||
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarter ended June 30, 2022 | |||||
| or | |||||
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the transition period from ____________to ____________ | |||||
________________________________________________________________________
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 Symbol | 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 number of shares of the registrant’s common stock outstanding as of August 1, 2022 was as follows:
Class A Common Stock, $0.0001 par value, 163,294,503 shares
Class B Common Stock, $0.0001 par value, 15,827,865 shares
1
Bloom Energy Corporation
Quarterly Report on Form 10-Q for the Three and Six Months Ended June 30, 2022
Table of Contents
| 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' Deficit | |||||
| Condensed Consolidated Statements of Cash Flows | |||||
| Notes to Unaudited Condensed Consolidated Financial Statements | |||||
| Item 2 - Management'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", "we," "us," "our," and "Bloom Energy," each refer to Bloom Energy Corporation and all of its subsidiaries.
2
Part I
ITEM 1 - FINANCIAL STATEMENTS
Bloom Energy Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
Cash and cash equivalents1 | $ | 235,638 | $ | 396,035 | ||||||||||
Restricted cash1 | 50,293 | 92,540 | ||||||||||||
Accounts receivable less allowance for doubtful accounts of $119 as of June 30, 2022 and December 31, 20211 | 77,972 | 87,789 | ||||||||||||
| Contract assets | 33,374 | 25,201 | ||||||||||||
| Inventories | 206,707 | 143,370 | ||||||||||||
| Deferred cost of revenue | 30,110 | 25,040 | ||||||||||||
Customer financing receivable1 | — | 5,784 | ||||||||||||
Prepaid expenses and other current assets1 | 35,155 | 30,661 | ||||||||||||
| Total current assets | 669,249 | 806,420 | ||||||||||||
Property, plant and equipment, net1 | 628,759 | 604,106 | ||||||||||||
| Operating lease right-of-use assets | 110,362 | 106,660 | ||||||||||||
Customer financing receivable1 | — | 39,484 | ||||||||||||
Restricted cash1 | 128,248 | 126,539 | ||||||||||||
| Deferred cost of revenue | 5,310 | 1,289 | ||||||||||||
Other long-term assets1 | 38,905 | 41,073 | ||||||||||||
| Total assets | $ | 1,580,833 | $ | 1,725,571 | ||||||||||
| Liabilities, redeemable convertible preferred stock, redeemable noncontrolling interest and stockholders’ deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 134,020 | $ | 72,967 | ||||||||||
| Accrued warranty | 9,319 | 11,746 | ||||||||||||
Accrued expenses and other current liabilities1 | 101,204 | 114,138 | ||||||||||||
Deferred revenue and customer deposits1 | 93,237 | 89,975 | ||||||||||||
| Operating lease liabilities | 12,581 | 13,101 | ||||||||||||
| Financing obligations | 16,159 | 14,721 | ||||||||||||
| Recourse debt | 12,434 | 8,348 | ||||||||||||
Non-recourse debt1 | 14,734 | 17,483 | ||||||||||||
| Total current liabilities | 393,688 | 342,479 | ||||||||||||
Deferred revenue and customer deposits1 | 76,890 | 90,310 | ||||||||||||
| Operating lease liabilities | 118,291 | 106,187 | ||||||||||||
| Financing obligations | 447,595 | 461,900 | ||||||||||||
| Recourse debt | 278,538 | 283,483 | ||||||||||||
Non-recourse debt1 | 183,555 | 217,416 | ||||||||||||
| Other long-term liabilities | 18,646 | 16,772 | ||||||||||||
| Total liabilities | 1,517,203 | 1,518,547 | ||||||||||||
| Commitments and contingencies (Note 13) | ||||||||||||||
Redeemable convertible preferred stock, Series A: — shares authorized and — shares and no shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively. | 208,551 | 208,551 | ||||||||||||
| Redeemable noncontrolling interest | — | 300 | ||||||||||||
| Stockholders’ deficit: | ||||||||||||||
Common stock: $0.0001 par value; Class A shares - 600,000,000 shares authorized and 163,085,510 shares and 160,627,544 shares issued and outstanding and Class B shares - 600,000,000 shares authorized and 15,828,287 shares and 15,832,863 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively. | 18 | 18 | ||||||||||||
| Additional paid-in capital | 3,284,261 | 3,219,081 | ||||||||||||
| Accumulated other comprehensive loss | (1,000) | (350) | ||||||||||||
| Accumulated deficit | (3,460,234) | (3,263,075) | ||||||||||||
| Total deficit attributable to Class A and Class B common stockholders | (176,955) | (44,326) | ||||||||||||
| Noncontrolling interest | 32,034 | 42,499 | ||||||||||||
| Total stockholders' deficit | $ | (144,921) | $ | (1,827) | ||||||||||
| Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interest and stockholders' deficit | $ | 1,580,833 | $ | 1,725,571 | ||||||||||
1We have variable interest entities, which represent a portion of the consolidated balances recorded within these financial statement line items in the condensed consolidated balance sheets (see Note 11 - Portfolio Financings).
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Bloom Energy Corporation
Condensed Consolidated Statements of Operations
(in thousands, except share data)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Product | $ | 173,625 | $ | 146,867 | $ | 307,172 | $ | 284,797 | ||||||||||||||||||
| Installation | 12,729 | 28,879 | 26,282 | 31,538 | ||||||||||||||||||||||
| Service | 38,426 | 35,707 | 73,665 | 72,124 | ||||||||||||||||||||||
| Electricity | 18,456 | 17,017 | 37,156 | 34,018 | ||||||||||||||||||||||
| Total revenue | 243,236 | 228,470 | 444,275 | 422,477 | ||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||
| Product | 129,419 | 108,891 | 235,161 | 196,185 | ||||||||||||||||||||||
| Installation | 16,730 | 36,515 | 29,503 | 41,140 | ||||||||||||||||||||||
| Service | 41,028 | 35,565 | 82,854 | 71,683 | ||||||||||||||||||||||
| Electricity | 58,029 | 10,155 | 70,790 | 21,474 | ||||||||||||||||||||||
| Total cost of revenue | 245,206 | 191,126 | 418,308 | 330,482 | ||||||||||||||||||||||
| Gross (loss) profit | (1,970) | 37,344 | 25,967 | 91,995 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | 41,614 | 25,673 | 76,140 | 48,968 | ||||||||||||||||||||||
| Sales and marketing | 20,475 | 22,727 | 41,809 | 42,679 | ||||||||||||||||||||||
| General and administrative | 38,114 | 31,655 | 75,850 | 57,456 | ||||||||||||||||||||||
| Total operating expenses | 100,203 | 80,055 | 193,799 | 149,103 | ||||||||||||||||||||||
| Loss from operations | (102,173) | (42,711) | (167,832) | (57,108) | ||||||||||||||||||||||
| Interest income | 196 | 76 | 255 | 150 | ||||||||||||||||||||||
| Interest expense | (13,814) | (14,553) | (27,901) | (29,284) | ||||||||||||||||||||||
| Loss on extinguishment of debt | (4,233) | — | (4,233) | — | ||||||||||||||||||||||
| Other (expense) income, net | (1,191) | 22 | (4,218) | (63) | ||||||||||||||||||||||
| Gain (loss) on revaluation of embedded derivatives | 38 | (942) | 569 | (1,460) | ||||||||||||||||||||||
| Loss before income taxes | (121,177) | (58,108) | (203,360) | (87,765) | ||||||||||||||||||||||
| Income tax (benefit) provision | (12) | 313 | 552 | 437 | ||||||||||||||||||||||
| Net loss | (121,165) | (58,421) | (203,912) | (88,202) | ||||||||||||||||||||||
| Less: Net loss attributable to noncontrolling interest | (2,365) | (4,536) | (6,453) | (9,424) | ||||||||||||||||||||||
| Net loss attributable to Class A and Class B common stockholders | $ | (118,800) | $ | (53,885) | (197,459) | (78,778) | ||||||||||||||||||||
| Less: Net loss attributable to redeemable noncontrolling interest | — | (22) | (300) | (26) | ||||||||||||||||||||||
| Net loss before portion attributable to redeemable noncontrolling interest and noncontrolling interest | $ | (118,800) | $ | (53,863) | $ | (197,159) | $ | (78,752) | ||||||||||||||||||
| Net loss per share available to Class A and Class B common stockholders, basic and diluted | $ | (0.67) | $ | (0.31) | $ | (1.11) | $ | (0.46) | ||||||||||||||||||
| Weighted average shares used to compute net loss per share available to Class A and Class B common stockholders, basic and diluted | 178,507 | 172,749 | 177,852 | 171,753 | ||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Bloom Energy Corporation
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Net loss | $ | (121,165) | $ | (58,421) | $ | (203,912) | $ | (88,202) | ||||||||||||||||||
| Other comprehensive loss, net of taxes: | ||||||||||||||||||||||||||
| Change in derivative instruments designated and qualifying as cash flow hedges | — | 1,385 | — | (3,268) | ||||||||||||||||||||||
| Foreign currency translation adjustment | (594) | 4 | (747) | (224) | ||||||||||||||||||||||
| Other comprehensive loss, net of taxes | (594) | 1,389 | (747) | (3,492) | ||||||||||||||||||||||
| Comprehensive loss | (121,759) | (57,032) | (204,659) | (91,694) | ||||||||||||||||||||||
| Less: Comprehensive loss attributable to noncontrolling interest | (2,462) | (5,919) | (6,550) | (6,265) | ||||||||||||||||||||||
| Comprehensive loss attributable to Class A and Class B common stockholders | $ | (119,297) | $ | (51,113) | $ | (198,109) | $ | (85,429) | ||||||||||||||||||
| Less: Comprehensive loss attributable to redeemable noncontrolling interest | — | (22) | (300) | (26) | ||||||||||||||||||||||
| Comprehensive loss after portion attributable to redeemable noncontrolling interest and noncontrolling interest | $ | (119,297) | $ | (51,091) | $ | (197,809) | $ | (85,403) | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Bloom Energy Corporation
Condensed Consolidated Statements of Changes in Stockholders' Deficit
(in thousands, except share data) (unaudited)
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 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' Deficit | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2022 | 177,995,695 | $ | 18 | $ | 3,251,128 | $ | (503) | $ | (3,341,434) | $ | (90,791) | $ | 36,035 | $ | (54,756) | |||||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | 824,702 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 93,400 | — | 337 | — | — | 337 | — | 337 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 32,796 | — | — | 32,796 | — | 32,796 | ||||||||||||||||||||||||||||||||||||||||||
| Distributions and payments to noncontrolling interests | — | — | — | — | — | — | (1,539) | (1,539) | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | (497) | — | (497) | (97) | (594) | ||||||||||||||||||||||||||||||||||||||||||
Net loss1 | — | — | — | — | (118,800) | (118,800) | (2,365) | (121,165) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | 178,913,797 | $ | 18 | $ | 3,284,261 | $ | (1,000) | $ | (3,460,234) | $ | (176,955) | $ | 32,034 | $ | (144,921) | |||||||||||||||||||||||||||||||||||
1There is no net loss attributable to redeemable noncontrolling interest.
Note: There was no redeemable noncontrolling interest as of March 31, 2022 and June 30, 2022.
| Three Months Ended June 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' Deficit | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2021 | 172,099,453 | $ | 17 | $ | 3,129,687 | $ | (126) | $ | (3,123,518) | $ | 6,060 | $ | 57,986 | $ | 64,046 | |||||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | 811,162 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 491,545 | — | 7,715 | — | — | 7,715 | — | 7,715 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 18,515 | — | — | 18,515 | — | 18,515 | ||||||||||||||||||||||||||||||||||||||||||
| Change in effective portion of interest rate swap agreement | — | — | — | — | — | — | (1,385) | (1,385) | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (882) | (882) | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | 2 | — | 2 | 2 | 4 | ||||||||||||||||||||||||||||||||||||||||||
Net loss2 | — | — | — | — | (53,863) | (53,863) | (4,536) | (58,399) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2021 | 173,402,160 | $ | 17 | $ | 3,155,917 | $ | (124) | $ | (3,177,381) | $ | (21,571) | $ | 51,185 | $ | 29,614 | |||||||||||||||||||||||||||||||||||
2Excludes $22 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $356 - net loss attributable to redeemable noncontrolling interest of $22 = ending redeemable noncontrolling interest of $334.
6
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 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' 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 | 1,789,639 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| ESPP purchase | 420,689 | — | 5,981 | — | — | 5,981 | — | 5,981 | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 243,062 | — | 1,317 | — | — | 1,317 | — | 1,317 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 58,382 | — | — | 58,382 | — | 58,382 | ||||||||||||||||||||||||||||||||||||||||||
| Distributions and payments to noncontrolling interests | — | — | (500) | — | — | (500) | (3,915) | (4,415) | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | (650) | — | (650) | (97) | (747) | ||||||||||||||||||||||||||||||||||||||||||
Net loss3 | — | — | — | — | (197,159) | (197,159) | (6,453) | (203,612) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | 178,913,797 | $ | 18 | $ | 3,284,261 | $ | (1,000) | $ | (3,460,234) | $ | (176,955) | $ | 32,034 | $ | (144,921) | |||||||||||||||||||||||||||||||||||
3Excludes $300 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $300 - net loss attributable to redeemable noncontrolling interest of $300 = ending redeemable noncontrolling interest of Nil.
| Six Months Ended June 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' Deficit | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | 168,002,726 | $ | 17 | $ | 3,182,753 | $ | (9) | $ | (3,103,937) | $ | 78,824 | $ | 62,195 | $ | 141,019 | |||||||||||||||||||||||||||||||||||
| — | — | (126,799) | — | 5,308 | (121,491) | — | (121,491) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | 1,951,664 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| ESPP purchase | 977,508 | — | 4,726 | — | — | 4,726 | — | 4,726 | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 2,470,262 | — | 60,942 | — | — | 60,942 | — | 60,942 | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 34,295 | — | — | 34,295 | — | 34,295 | ||||||||||||||||||||||||||||||||||||||||||
| Change in effective portion of interest rate swap agreement | — | — | — | — | — | — | 3,268 | 3,268 | ||||||||||||||||||||||||||||||||||||||||||
| Distributions and payments to noncontrolling interests | — | — | — | — | — | — | (4,745) | (4,745) | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | (115) | — | (115) | (109) | (224) | ||||||||||||||||||||||||||||||||||||||||||
Net loss4 | — | — | — | — | (78,752) | (78,752) | (9,424) | (88,176) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2021 | 173,402,160 | $ | 17 | $ | 3,155,917 | $ | (124) | $ | (3,177,381) | $ | (21,571) | $ | 51,185 | $ | 29,614 | |||||||||||||||||||||||||||||||||||
4Excludes $26 attributable to redeemable noncontrolling interest.
Note: Beginning redeemable noncontrolling interest of $377 - distributions to redeemable noncontrolling interest of $17 - net loss attributable to redeemable noncontrolling interest of $26 = ending redeemable noncontrolling interest of $334.
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Bloom Energy Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six Months Ended June 30, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | (203,912) | $ | (88,202) | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | 30,697 | 26,808 | ||||||||||||
| Non-cash lease expense | 8,800 | 4,520 | ||||||||||||
| Gain on sale of property, plant and equipment | (523) | — | ||||||||||||
| Write-off of assets related to PPA IIIa | 44,800 | — | ||||||||||||
| Revaluation of derivative liabilities | 1,680 | 462 | ||||||||||||
| Stock-based compensation | 57,774 | 36,343 | ||||||||||||
| Loss on extinguishment of debt | 4,233 | — | ||||||||||||
| Amortization of warrants and debt issuance costs | 1,651 | 1,900 | ||||||||||||
| Other | 3,487 | — | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | 9,817 | 41,718 | ||||||||||||
| Contract assets | (8,173) | (15,311) | ||||||||||||
| Inventories | (62,824) | (21,026) | ||||||||||||
| Deferred cost of revenue | (8,995) | 4,984 | ||||||||||||
| Customer financing receivable | 2,510 | 2,636 | ||||||||||||
| Prepaid expenses and other assets | (5,813) | 6,246 | ||||||||||||
| Operating lease right-of-use assets and operating lease liabilities | 2,422 | (5,140) | ||||||||||||
| Finance lease liabilities | 48 | — | ||||||||||||
| Accounts payable | 51,982 | 29,449 | ||||||||||||
| Accrued expenses and other liabilities | (18,017) | (17,261) | ||||||||||||
| Deferred revenue and customer deposits | (10,158) | (43,428) | ||||||||||||
| Net cash used in operating activities | (98,514) | (35,302) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchase of property, plant and equipment | (44,728) | (34,460) | ||||||||||||
| Net cash used in investing activities | (44,728) | (34,460) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Repayment of debt of PPA IIIa | (30,212) | — | ||||||||||||
| Repayment of debt | (10,729) | (7,838) | ||||||||||||
| Debt make-whole payment related to PPA IIIa debt | (2,413) | — | ||||||||||||
| Proceeds from financing obligations | — | 7,123 | ||||||||||||
| Repayment of financing obligations | (16,475) | (6,387) | ||||||||||||
| Distributions to redeemable noncontrolling interests | — | (17) | ||||||||||||
| Distributions to noncontrolling interests | (4,415) | (4,745) | ||||||||||||
| Proceeds from issuance of common stock | 5,981 | 65,668 | ||||||||||||
| Proceeds from exercise of options | 1,317 | — | ||||||||||||
| Net cash (used in) provided by financing activities | (56,946) | 53,804 | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalent and restricted cash | (747) | (224) | ||||||||||||
| Net decrease in cash, cash equivalents and restricted cash | (200,935) | (16,182) | ||||||||||||
| Cash, cash equivalents and restricted cash: | ||||||||||||||
| Beginning of period | 615,114 | 416,710 | ||||||||||||
| End of period | $ | 414,179 | $ | 400,528 | ||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||
| Cash paid during the period for interest | $ | 25,938 | $ | 27,219 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash flows from operating leases | 4,387 | 6,132 | ||||||||||||
| Operating cash flows from finance leases | 462 | 259 | ||||||||||||
| Cash paid during the period for income taxes | 982 | 185 | ||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||
| 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 | ||||||||||
| Liabilities recorded for property, plant and equipment, net | 15,988 | 11 | ||||||||||||
| Recognition of operating lease right-of-use asset during the year-to-date period | 11,192 | 40,762 | ||||||||||||
| Recognition of finance lease right-of-use asset during the year-to-date period | — | 1,335 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Bloom Energy Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
The unaudited interim financial statements reflects all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.
The unaudited interim financial statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, included in our 2021 Annual Report on Form 10-K.
1. 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.
We have not experienced any supply chain disruptions as a result of the invasion by the Russian Federation in Ukraine on February 24, 2022.
Liquidity
We have generally incurred operating losses and negative cash flows from operations since our inception. With the series of new debt offerings, debt extensions and conversions to equity that we completed during 2020 and 2021, we had $291.0 million of total outstanding recourse debt as of June 30, 2022, $278.5 million of which is classified as long-term debt. Our recourse debt scheduled repayments commenced in June 2022.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our product, our ability to secure financing for customer use of our Energy Servers, the timing of installations, and overall economic conditions including the impact of COVID-19 and inflationary pressure in the US on our ongoing and future operations. The rising interest rates in the US will adversely impact the cost of new capital deployment.
In the opinion of management, the combination of our existing cash and cash equivalents and operating cash flows is expected to be sufficient to meet our operational and capital cash flow requirements and other cash flow needs for the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.
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 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.
9
Use of Estimates
For information on the use of accounting estimates, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Use of Estimates section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Concentration of Risk
Geographic Risk - The majority of our revenue and long-lived assets are attributable to operations in the United States for all periods presented. In addition to shipments in the US, we also ship our Energy Servers to other countries, primarily to the Republic of Korea, Japan, and India (collectively, the "Asia Pacific region"). In the three and six months ended June 30, 2022, total revenue in the Asia Pacific region was 62% and 63%, respectively, of our total revenue. In the three and six months ended June 30, 2021, total revenue in the Asia Pacific region was 34% and 39%, respectively, of our total revenue.
Credit Risk - At June 30, 2022 and December 31, 2021, one customer accounted for approximately 56% and 60% of accounts receivable, respectively. To date, we have not experienced any credit losses.
Customer Risk - During the three months ended June 30, 2022, two customers represented approximately 57% and 16% of our total revenue, respectively. During the six months ended June 30, 2022, two customers represented approximately 45% and 15% of our total revenue, respectively.
During the three months ended June 30, 2021, revenue from three customers represented 31%, 26% and 12% of our total revenue, respectively. During the six months ended June 30, 2021, revenue from two customers represented 36% and 14% 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.
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 a business 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 acquired contract assets or liabilities from business combinations occurring prior to the adoption date.
10
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):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Accounts receivable | $ | 77,972 | $ | 87,788 | ||||||||||
| Contract assets | 33,374 | 25,201 | ||||||||||||
| Customer deposits | 73,750 | 64,809 | ||||||||||||
| Deferred revenue | 96,377 | 115,476 | ||||||||||||
Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current in the condensed consolidated balance sheet when the Company expects to complete the related performance obligations and invoice the customers within one year of the balance sheet date, and as long-term when the Company expects to complete the related performance obligations and invoice the customers more than one year out from the balance sheet date. Contract liabilities are classified as current in the condensed consolidated balance sheet when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year from the balance sheet date.
Contract Assets
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Beginning balance | $ | 13,533 | $ | 5,008 | $ | 25,201 | $ | 3,327 | ||||||||||||||||||
| Transferred to accounts receivable from contract assets recognized at the beginning of the period | (1,387) | (556) | (15,963) | — | ||||||||||||||||||||||
| Revenue recognized and not billed as of the end of the period | 21,228 | 14,186 | 24,136 | 15,311 | ||||||||||||||||||||||
| Ending balance | $ | 33,374 | $ | 18,638 | $ | 33,374 | $ | 18,638 | ||||||||||||||||||
Deferred Revenue
Deferred revenue activity, including deferred incentive revenue activity, during the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Beginning balance | $ | 103,489 | $ | 120,643 | $ | 115,476 | $ | 135,578 | ||||||||||||||||||
| Additions | 182,067 | 195,324 | 348,744 | 350,785 | ||||||||||||||||||||||
| Revenue recognized | (189,179) | (199,712) | (367,843) | (370,108) | ||||||||||||||||||||||
| Ending balance | $ | 96,377 | $ | 116,255 | $ | 96,377 | $ | 116,255 | ||||||||||||||||||
11
Disaggregated Revenue
We disaggregate revenue from contracts with customers into four revenue categories: product, installation, services and electricity (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue from contracts with customers: | ||||||||||||||||||||||||||
| Product revenue | $ | 173,625 | $ | 146,867 | $ | 307,172 | $ | 284,797 | ||||||||||||||||||
| Installation revenue | 12,729 | 28,879 | 26,282 | 31,538 | ||||||||||||||||||||||
| Services revenue | 38,426 | 35,707 | 73,665 | 72,124 | ||||||||||||||||||||||
| Electricity revenue | 2,794 | 707 | 5,476 | 1,302 | ||||||||||||||||||||||
| Total revenue from contract with customers | 227,574 | 212,160 | 412,595 | 389,761 | ||||||||||||||||||||||
| Revenue from contracts accounted for as leases: | ||||||||||||||||||||||||||
| Electricity revenue | 15,662 | 16,310 | 31,680 | 32,716 | ||||||||||||||||||||||
| Total revenue | $ | 243,236 | $ | 228,470 | $ | 444,275 | $ | 422,477 | ||||||||||||||||||
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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):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| As Held: | ||||||||||||||
| Cash | $ | 241,700 | $ | 318,080 | ||||||||||
| Money market funds | 172,479 | 297,034 | ||||||||||||
| $ | 414,179 | $ | 615,114 | |||||||||||
| As Reported: | ||||||||||||||
| Cash and cash equivalents | $ | 235,638 | $ | 396,035 | ||||||||||
| Restricted cash | 178,541 | 219,079 | ||||||||||||
| $ | 414,179 | $ | 615,114 | |||||||||||
Restricted cash consisted of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Current: | ||||||||||||||
| Restricted cash | $ | 48,563 | $ | 89,462 | ||||||||||
Restricted cash related to PPA Entities1 | 1,730 | 3,078 | ||||||||||||
| $ | 50,293 | $ | 92,540 | |||||||||||
| Non-current: | ||||||||||||||
| Restricted cash | $ | 110,908 | $ | 103,300 | ||||||||||
Restricted cash related to PPA Entities1 | 17,340 | 23,239 | ||||||||||||
| 128,248 | 126,539 | |||||||||||||
| $ | 178,541 | $ | 219,079 | |||||||||||
1 We have VIEs that represent a portion of the consolidated balances recorded within the "restricted cash" and other financial statement line items in the condensed consolidated balance sheets (see Note 11 - Portfolio Financings). In addition, the restricted cash held in the PPA II and PPA IIIb entities as of June 30, 2022 includes $41.1 million and $1.2 million of current restricted cash, respectively, and $42.9 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 $41.7 million and $1.2 million of current restricted cash, respectively, and $57.7 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 designated financial institution. These transactions are accounted for as sales and cash proceeds are included in cash used in operating activities. We derecognized $90.9 million and $116.3 million of accounts receivable as of June 30, 2022 and December 31, 2021, respectively, under these factoring arrangements. The costs of factoring such accounts receivable on our condensed consolidated statements of operations for the three and six months ended June 30, 2022 was $0.9 million and $1.2 million. The costs of factoring such accounts receivable on our condensed consolidated statements of operations for the three and six months ended June 30, 2021 were not material.
13
5. Fair Value
Our accounting policy for the fair value measurement of cash equivalents, natural gas fixed price forward contracts, and embedded Escalation Protection Plan ("EPP") derivatives is described in Part II, Item 8 Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
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 | ||||||||||||||||||||||||||
| June 30, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Money market funds | $ | 172,479 | $ | — | $ | — | $ | 172,479 | ||||||||||||||||||
| $ | 172,479 | $ | — | $ | — | $ | 172,479 | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Derivatives: | ||||||||||||||||||||||||||
| Option to acquire a variable number of shares of Class A Common Stock | $ | — | $ | 12,089 | $ | — | $ | 12,089 | ||||||||||||||||||
| Embedded EPP derivatives | — | — | 5,892 | 5,892 | ||||||||||||||||||||||
| $ | — | $ | 12,089 | $ | 5,892 | $ | 17,981 | |||||||||||||||||||
| Fair Value Measured at Reporting Date Using | ||||||||||||||||||||||||||
| December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Money market funds | $ | 297,034 | $ | — | $ | — | $ | 297,034 | ||||||||||||||||||
| $ | 297,034 | $ | — | $ | — | $ | 297,034 | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Derivatives: | ||||||||||||||||||||||||||
| Option to acquire a variable number of shares of Class A Common Stock | $ | — | $ | 13,200 | $ | — | $ | 13,200 | ||||||||||||||||||
| Embedded EPP derivatives | — | — | 6,461 | 6,461 | ||||||||||||||||||||||
| $ | — | $ | 13,200 | $ | 6,461 | $ | 19,661 | |||||||||||||||||||
We revalued the Option to its fair value as of June 30, 2022, which is included in other (expense) income, net in our condensed consolidated statements of operations. The fair value of the Option is reflected in accrued expenses and other current liabilities in our condensed consolidated balance sheets.
For the three months ended June 30, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized immaterial gain and an unrealized loss of $0.9 million, respectively, in (loss) gain on revaluation of embedded derivatives on our condensed consolidated statements of operations.
For the six months ended June 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 $1.5 million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statements of operations.
14
The changes in the Level 3 financial liabilities during the six months ended June 30, 2022 were as follows (in thousands):
| Embedded EPP Derivative Liability | ||||||||
Liabilities at December 31, 2021 | $ | 6,461 | ||||||
| Changes in fair value | (569) | |||||||
Liabilities at June 30, 2022 | $ | 5,892 | ||||||
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). The following table presents the estimated fair values and carrying values of customer receivables and debt instruments (in thousands):
| June 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 | 67,124 | 64,775 | 68,968 | 72,573 | ||||||||||||||||||||||
2.5% Green Convertible Senior Notes due August 2025 | 223,848 | 289,271 | 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 | 71,060 | 73,691 | 73,262 | 83,251 | ||||||||||||||||||||||
3.04% Senior Secured Notes due June 2031 | 127,229 | 120,481 | 132,631 | 137,983 | ||||||||||||||||||||||
6. Balance Sheet Components
Inventories
The components of inventory consist of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Raw materials | $ | 118,881 | $ | 80,809 | ||||||||||
| Finished goods | 47,108 | 30,668 | ||||||||||||
| Work-in-progress | 40,718 | 31,893 | ||||||||||||
| $ | 206,707 | $ | 143,370 | |||||||||||
The inventory reserves were $16.5 million and $13.9 million as of June 30, 2022 and December 31, 2021, respectively.
15
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Receivables from employees | $ | 8,399 | $ | 5,463 | ||||||||||
| Prepaid hardware and software maintenance | 3,171 | 3,494 | ||||||||||||
| Tax receivables | 2,998 | 1,518 | ||||||||||||
| Prepaid managed services | 1,742 | 2,480 | ||||||||||||
| Deposits made | 1,420 | 817 | ||||||||||||
| Prepaid workers compensation | 1,090 | 5,330 | ||||||||||||
| Prepaid deferred commissions | 642 | 724 | ||||||||||||
| State incentive receivable | 203 | 427 | ||||||||||||
| Other prepaid expenses and other current assets | 15,490 | 10,408 | ||||||||||||
| $ | 35,155 | $ | 30,661 | |||||||||||
Property, Plant and Equipment, Net
Property, plant and equipment, net consists of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Energy Servers | $ | 669,606 | $ | 674,799 | ||||||||||
| Machinery and equipment | 125,371 | 110,600 | ||||||||||||
| Construction-in-progress | 69,227 | 43,544 | ||||||||||||
| Leasehold improvements | 65,572 | 52,936 | ||||||||||||
| Building | 49,240 | 48,934 | ||||||||||||
| Computers, software and hardware | 23,423 | 21,276 | ||||||||||||
| Furniture and fixtures | 8,770 | 8,607 | ||||||||||||
| 1,011,209 | 960,696 | |||||||||||||
| Less: accumulated depreciation | (382,450) | (356,590) | ||||||||||||
| $ | 628,759 | $ | 604,106 | |||||||||||
Depreciation expense related to property, plant and equipment for the three and six months ended June 30, 2022 was $16.3 million and $30.7 million, respectively. Depreciation expense related to property, plant and equipment for the three and six months ended June 30, 2021 was $13.4 million and $26.8 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 $148.0 million and $139.4 million as of June 30, 2022 and December 31, 2021, respectively. Depreciation expense for these assets was $5.6 million and $11.5 million for the three and six months ended June 30, 2022, respectively. Depreciation expense for these assets was $5.9 million and $11.7 million for the three and six months ended June 30, 2021, respectively.
PPA IIIa Upgrade
In June 2022, we started a project to replace 9.8 megawatts of second-generation Energy Servers (the "old Energy Servers") at PPA IIIa Investment Company and Operating Company ("PPA IIIa") with current generation Energy Servers (the "new Energy Servers") (the "PPA IIIa Upgrade", the "PPA IIIa Repowering"). The replacement was ongoing as of June 30, 2022. See Note 11 - Portfolio Financing for additional information.
16
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 consist of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Prepaid insurance | $ | 8,490 | $ | 9,534 | ||||||||||
| Long-term lease receivable | 8,126 | 7,953 | ||||||||||||
| Deferred commissions | 7,369 | 7,569 | ||||||||||||
| Prepaid managed services | 2,693 | 3,010 | ||||||||||||
| Deposits made | 2,319 | 1,923 | ||||||||||||
| Deferred tax asset | 908 | 954 | ||||||||||||
| Investments in subsidiaries | — | 1,819 | ||||||||||||
| Prepaid and other long-term assets | 9,000 | 8,311 | ||||||||||||
| $ | 38,905 | $ | 41,073 | |||||||||||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Compensation and benefits | $ | 35,114 | $ | 38,222 | ||||||||||
| Option to acquire a variable number of shares of Class A Common Stock | 12,089 | 13,200 | ||||||||||||
| Sales-related liabilities | 7,482 | 6,040 | ||||||||||||
| Accrued legal expenses | 5,397 | 1,765 | ||||||||||||
| Accrued installation | 3,888 | 13,968 | ||||||||||||
| Current portion of derivative liabilities | 2,959 | 6,059 | ||||||||||||
| Accrued consulting expenses | 2,264 | 1,731 | ||||||||||||
| Interest payable | 2,156 | 2,159 | ||||||||||||
| Sales tax liabilities | 1,103 | 1,491 | ||||||||||||
| Other | 28,752 | 29,503 | ||||||||||||
| $ | 101,204 | $ | 114,138 | |||||||||||
17
7. Outstanding Loans and Security Agreements
The following is a summary of our debt as of June 30, 2022 (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 | $ | 67,980 | $ | 12,434 | $ | 54,690 | $ | 67,124 | 10.25% | March 2027 | Company | Yes | ||||||||||||||||||||||||||||||||||||||
2.5% Green Convertible Senior Notes due August 2025 | 230,000 | — | 223,848 | 223,848 | 2.5% | August 2025 | Company | Yes | ||||||||||||||||||||||||||||||||||||||||||
| Total recourse debt | 297,980 | 12,434 | 278,538 | 290,972 | ||||||||||||||||||||||||||||||||||||||||||||||
3.04% Senior Secured Notes due June 30, 2031 | 129,061 | 9,643 | 117,586 | 127,229 | 3.04% | June 2031 | PPA V | No | ||||||||||||||||||||||||||||||||||||||||||
6.07% Senior Secured Notes due March 2030 | 71,687 | 5,091 | 65,969 | 71,060 | 6.07% | March 2030 | PPA IV | No | ||||||||||||||||||||||||||||||||||||||||||
| Total non-recourse debt | 200,748 | 14,734 | 183,555 | 198,289 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total debt | $ | 498,728 | $ | 27,168 | $ | 462,093 | $ | 489,261 | ||||||||||||||||||||||||||||||||||||||||||
The following is a summary of our debt as of December 31, 2021 (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 | $ | 70,000 | $ | 8,348 | $ | 60,620 | $ | 68,968 | 10.25% | March 2027 | Company | Yes | ||||||||||||||||||||||||||||||||||||||
2.5% Green Convertible Senior Notes due August 2025 | 230,000 | — | 222,863 | 222,863 | 2.5% | August 2025 | Company | Yes | ||||||||||||||||||||||||||||||||||||||||||
| Total recourse debt | 300,000 | 8,348 | 283,483 | 291,831 | ||||||||||||||||||||||||||||||||||||||||||||||
3.04% Senior Secured Notes due June 30, 2031 | 134,644 | 9,376 | 123,255 | 132,631 | 3.04% | June 2031 | PPA V | No | ||||||||||||||||||||||||||||||||||||||||||
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 | 239,669 | 17,483 | 217,416 | 234,899 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total debt | $ | 539,669 | $ | 25,831 | $ | 500,899 | $ | 526,730 | ||||||||||||||||||||||||||||||||||||||||||
We and all of our subsidiaries were in compliance with all financial covenants as of June 30, 2022 and December 31, 2021.
Recourse Debt Facilities
Please refer to Part II, Item 8, Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 2021 for discussion of our 10.25% Senior Secured Notes due March 2027 and 2.5% Green Convertible Senior Notes due August 2025.
Interest expense on the Green Notes for the three and six months ended June 30, 2022 was $2.0 million and $3.9 million, respectively, including amortization of issuance costs of $0.5 million and $1.0 million, respectively. Interest expense on the Green Notes for the three and six months ended June 30, 2021 was $1.9 million and $3.9 million, respectively, including amortization of issuance costs of $0.5 million and $1.0 million, respectively.
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Non-recourse Debt Facilities
Please refer to Note 7 - Outstanding Loans and Security Agreements in our Annual Form 10-K for the fiscal year ended December 31, 2021 for discussion of our non-recourse debt
Both note purchase and credit agreements require us to maintain a debt service reserve, the balances of which are presented below (in millions):
| June 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 | 9.3 | 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 Loan due September 2028 - On June 14, 2022, as part of the PPA IIIa Upgrade, we paid off the outstanding balance and related accrued interest of $30.2 million and $0.4 million, respectively, and recognized a loss on extinguishment of debt of $4.2 million. The debt service reserve of $3.6 million was reclassified from restricted cash to cash and cash equivalents as of June 30, 2022.
Repayment Schedule and Interest Expense
The following table presents details of our outstanding loan principal repayment schedule as of June 30, 2022 (in thousands):
| Remainder of 2022 | $ | 12,524 | |||
| 2023 | 28,503 | ||||
| 2024 | 31,872 | ||||
| 2025 | 265,494 | ||||
| 2026 | 39,078 | ||||
| Thereafter | 121,257 | ||||
| $ | 498,728 | ||||
Interest expense of $13.8 million and $14.6 million for the three months ended June 30, 2022 and 2021, respectively, was recorded in interest expense on the condensed consolidated statements of operations. Interest expense of $27.9 million and $29.3 million for the six months ended June 30, 2022 and 2021, respectively, was recorded in interest expense on the condensed consolidated statements of operations. We did not incur any interest expense - related parties during the three and six months ended June 30, 2022 and 2021.
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8. Derivative Financial Instruments
Cash Flow Hedges
As of December 31, 2021, we had settled our interest rate swaps, which had been designated as cash flow hedges. There were no cash flow hedges as of June 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 during the three and six months ended June 30, 2022 and 2021 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Beginning balance | $ | — | $ | 11,301 | $ | — | $ | 15,989 | ||||||||||||||||||
| Loss (gain) recognized in other comprehensive loss | — | 1,880 | — | (2,284) | ||||||||||||||||||||||
| Amounts reclassified from other comprehensive loss to earnings | — | (495) | — | (984) | ||||||||||||||||||||||
| Net loss (gain) recognized in other comprehensive loss | — | 1,385 | — | (3,268) | ||||||||||||||||||||||
| Gain recognized in earnings | — | (35) | — | (70) | ||||||||||||||||||||||
| Ending balance | $ | — | $ | 12,651 | $ | — | $ | 12,651 | ||||||||||||||||||
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
For the three and six months ended June 30, 2022, rent expense for all occupied facilities was $4.7 million and $9.2 million, respectively. For the three and six months ended June 30, 2021, rent expense for all occupied facilities was $3.8 million and $7.0 million, respectively.
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Operating and finance lease right-of-use assets and lease liabilities for facilities, Energy Servers, and vehicles as of June 30, 2022 and December 31, 2021 were as follows (in thousands):
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Operating Leases: | ||||||||||||||
Operating lease right-of-use assets, net 1, 2 | $ | 110,362 | $ | 106,660 | ||||||||||
| Current operating lease liabilities | (12,581) | (13,101) | ||||||||||||
| Non-current operating lease liabilities | (118,291) | (106,187) | ||||||||||||
| Total operating lease liabilities | $ | (130,872) | $ | (119,288) | ||||||||||
| Finance Leases: | ||||||||||||||
Finance lease right-of-use assets, net 2, 3, 4 | $ | 2,614 | $ | 2,944 | ||||||||||
| (924) | (863) | |||||||||||||
| Non-current finance lease liabilities | (1,876) | (2,157) | ||||||||||||
| Total finance lease liabilities | $ | (2,800) | $ | (3,020) | ||||||||||
| Total lease liabilities | $ | (133,672) | $ | (122,308) | ||||||||||
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.
The components of our facilities, Energy Servers, and vehicles' lease costs for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Operating lease costs | $ | 6,049 | $ | 3,743 | $ | 11,885 | $ | 6,757 | ||||||||||||||||||
| Finance lease costs: | ||||||||||||||||||||||||||
| Amortization of finance lease right-of-use assets | 263 | 174 | 521 | 881 | ||||||||||||||||||||||
| Interest expense for finance lease liabilities | 52 | 46 | 105 | 244 | ||||||||||||||||||||||
| Total finance lease costs | 315 | 220 | 626 | 1,125 | ||||||||||||||||||||||
| Short-term lease costs | 167 | 169 | 241 | 341 | ||||||||||||||||||||||
| Total lease costs | $ | 6,531 | $ | 4,132 | $ | 12,752 | $ | 8,223 | ||||||||||||||||||
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Weighted average remaining lease terms and discount rates for our facilities, Energy Servers and vehicles as of June 30, 2022 and December 31, 2021 were as follows:
| June 30, | December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Weighted average remaining lease term: | ||||||||||||||
| Operating leases | 9.2 years | 8.9 years | ||||||||||||
| Finance leases | 3.3 years | 3.5 years | ||||||||||||
| Weighted average discount rate: | ||||||||||||||
| Operating leases | 9.8 | % | 9.6 | % | ||||||||||
| Finance leases | 7.7 | % | 7.6 | % | ||||||||||
Future lease payments under lease agreements for our facilities, Energy Servers and vehicles as of June 30, 2022 were as follows (in thousands):
| Operating Leases | Finance Leases | |||||||||||||
| Remainder of 2022 | $ | 9,456 | $ | 509 | ||||||||||
| 2023 | 19,496 | 1,013 | ||||||||||||
| 2024 | 18,007 | 840 | ||||||||||||
| 2025 | 18,246 | 369 | ||||||||||||
| 2026 | 17,853 | 139 | ||||||||||||
| Thereafter | 76,434 | 32 | ||||||||||||
| Total minimum lease payments | 159,492 | 2,902 | ||||||||||||
| Less: amounts representing interest or imputed interest | (28,620) | (102) | ||||||||||||
| Present value of lease liabilities | $ | 130,872 | $ | 2,800 | ||||||||||
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Managed Services and Portfolio Financings Through PPA Entities
At June 30, 2022, future lease payments under the Managed Services Agreements financing obligations were as follows (in thousands):
| Financing Obligations | ||||||||
| Remainder of 2022 | $ | 21,687 | ||||||
| 2023 | 44,041 | |||||||
| 2024 | 41,967 | |||||||
| 2025 | 40,939 | |||||||
| 2026 | 36,339 | |||||||
| Thereafter | 55,427 | |||||||
| Total minimum lease payments | 240,400 | |||||||
| Less: imputed interest | (134,902) | |||||||
| Present value of net minimum lease payments | 105,498 | |||||||
| Less: current financing obligations | (16,159) | |||||||
| Long-term financing obligations | $ | 89,339 | ||||||
The long-term financing obligations, as reflected in our condensed consolidated balance sheets, were $447.6 million and $461.9 million as of June 30, 2022 and December 31, 2021, respectively. The difference between these obligations and the principal obligations in the table above will be offset against the carrying value of the related Energy Servers at the end of the lease and the remainder recognized as a gain at that point.
Portfolio Financings through PPA Entities
The components of our aggregate net investment in sales-type leases under our Portfolio Financings through PPA entities consisted of the following (in thousands):
| June 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 June 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.
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As of June 30, 2022, future estimated operating minimum lease payments we expect to receive from Portfolio Financing arrangements through PPA Entities were as follows (in thousands):
| Operating Leases | ||||||||
| Remainder of 2022 | $ | 20,237 | ||||||
| 2023 | 43,620 | |||||||
| 2024 | 45,571 | |||||||
| 2025 | 46,609 | |||||||
| 2026 | 47,757 | |||||||
| Thereafter | 213,233 | |||||||
| Total minimum lease payments | $ | 417,027 | ||||||
10. 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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Cost of revenue | $ | 4,767 | $ | 3,804 | $ | 8,627 | $ | 6,803 | ||||||||||||||||||
| Research and development | 13,213 | 5,291 | 20,295 | 10,199 | ||||||||||||||||||||||
| Sales and marketing | 4,805 | 4,010 | 9,580 | 8,095 | ||||||||||||||||||||||
| General and administrative | 9,814 | 6,028 | 20,405 | 11,246 | ||||||||||||||||||||||
| $ | 32,599 | $ | 19,133 | $ | 58,907 | $ | 36,343 | |||||||||||||||||||
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) | ||||||||||||||||||||||||||