Plug Power CFO, Paul Middleton, Getting the Financial Facts Straight

By Paul Middleton, CFO, Plug Power

As Andy stated in a blog earlier today, we want to clear up some misinformation that has been circulating.  Some of this came from a Motley Fool posting today.

 

Sales volume not growing fast enough

Based on our public guidance for 2018 coupled with three quarters already completed,  we will grow year over year by over 40%, and may be closer to 50% based on our pipeline and customer project timelines.  Our first three quarters alone have almost surpassed all of last year’s sales.  I don’t know too many industrial technology companies growing at this scale year over year.  The chart this blogger included shows incorrect sales for 2017 and 2018 and does not tie to our published GAAP results.  This is publicly reported information we are so not sure why they would get this wrong.

 

Business may never get profitable

Any new business and especially one in a completely new market can take time to mature and cross over into profitability.  Plug is the only company doing hydrogen mobility solutions at scale and has pretty much single handedly developed this market and the supply chain by itself on a global scale.  Given the growth and continued focus on driving down cost and improving performance we have two recent quarters with positive operating cash flows – this is not a matter of opinion this is a fact that is public record.  In addition, we have been very forthright that we need to achieve around $60 to $65 million in quarterly sales at approximately 15% gross margins to achieve break even ebitdas.  Again, we have two recent quarters in the past 12 months that have been very close to this threshold and and have we have publicly stated we believe fourth quarter 2018 will prove this out.  Plug’s market is seasonal and hence you will see these results in the second half of 2017 and 2018 and given our continued growth you will start to see these quarterly volume levels be met more routinely throughout the year as we progress into 2019; couple this with the fact that our costs continue to come down, lowering these thresholds even further.

 

Other markets for hydrogen not developing as hoped given the traction in batteries

We are not purists; we expect the overall EV market to grow and we expect batteries to be a part of that in certain applications.  However, for applications with long run times and that require quick fill cycles, these will have to use hydrogen mobility solutions.  These needs are exacerbated if you need greater power density and power requirements as batteries fundamentally have limitations.  We are already seeing traction in this direction, many programs are under development but would be premature to announce as unlike many other pretenders out there we announce programs when they become real and there is near term traction commercial activity developing.  Having said that, we expect in the coming months to be able to start talking about these.  And by the way, this is not Plug alone pushing this, the biggest companies in the world like Toyota, Total, Air Liquide, Shell, etc. came together a few years back to form the Global Hydrogen Council given their focus in these areas and they asked Plug to be on that council since we are the only one in the world doing hydrogen mobility solutions at scale.

 

Plug only surviving because of equity and debt

Yes, as we have grown over the recent years to a profitable cash generating enterprise, we have leveraged the best capital solutions but as we sit today, we have a backlog in excess of $500 million, a balance sheet only leveraged by around $17 million in corporate debt against over $120 million in current assets, and will end 2018 with a substantial cash position given our seasonality in year-end collections.  The author shows debt balances on a chart that again is not correct – not sure where they get these numbers since our numbers are public record.  What I will say is that many folks point to our project financing obligations (effectively lease obligations); what is not always so apparent is that these obligations secure a project pipeline where future receipts on these programs exceed these obligations and obligations where the key customer is now guaranteeing a growing portion of this balance with each new program (hence synthetically passing the lease through to the customer).

The key to not needing more capital is growth and cost containment.  Given our 40 to 50% growth record coupled with track record of cost reduction, we are close to this critical juncture and will hit that within the coming year.  This is clearly evidenced by our recent quarters generating positive operating cash flows and our EBITDAS progression.

 

I trust this information is helpful. If the author would like to discuss this or other information, Plug Power is always happy to get the story straight. I look forward to sharing more on our upcoming call on January 9th.