Notes to Condensed Consolidated Financial Statements
1. Nature of Business, Liquidity, Basis of Presentation and Summary of Significant Accounting Policies
Nature of Business
We design, manufacture, sell and, in certain cases, install solid-oxide fuel cell systems ("Energy Servers") for on-site power generation. Our Energy Servers utilize an innovative fuel cell technology and provide efficient energy generation with reduced operating costs and lower greenhouse gas emissions as compared to conventional fossil fuel generation. By generating power where it is consumed, our energy producing systems offer increased electrical reliability and improved energy security while providing a path to energy independence. We were originally incorporated in Delaware under the name of Ion America Corporation on January 18, 2001 and on September 16, 2006, we changed our name to Bloom Energy Corporation.
Liquidity
We have incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2019, the current portion of our total debt was $337.6 million, which would have required cash payments of $353.5 million in 2020, the difference in these amounts primarily being due to a debt discount on the 6% Convertible Notes Due 2020, and at that time cash and cash equivalents and other liquidity was insufficient to satisfy the above current debt obligations as well as operating cash flow requirements as of December 31, 2019. On March 31, 2020, we extended the maturity for our current debt to reduce our required debt payments in the next 12 months. After the following debt extensions were completed, the current portion of our total debt was $26.2 million as of March 31, 2020. Notable elements of our debt extension are as follows:
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On March 31, 2020, we entered into an Amendment Support Agreement (the “Amendment Support Agreement”)with the beneficial owners (the “Noteholders”) of our outstanding 6% Convertible Notes due December 1, 2020 (the “10% Convertible Notes”) pursuant to which such Noteholders agreed to extend the maturity date of the outstanding 6% Convertible Notes to December 1, 2021, increase the interest rate from 6% to 10%, and reduce the strike price on the conversion feature from $11.25 to $8.00 per share. The Amendment Support Agreement required that we repay at least $70.0 million of the 10% Convertible Notes on or before September 1, 2020, which we satisfied through a cash payment in the amount of $70.0 million on May 1, 2020. The amended terms are reflected in the Amended and Restated Indenture between the Company and US Bank National Association dated April 20, 2020.
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In conjunction with entering into the Amendment Support Agreement on March 31, 2020, we also entered into a 10% Convertible Note Purchase Agreement with Foris Ventures, LLC, a new Noteholder, and New Enterprise Associates 10, Limited Partnership, an existing Noteholder, and we issued an additional $30.0 million aggregate principal amount of 10% Convertible Notes. The Amended and Restated Indenture was also amended to reflect a new principle amount of $290.0 million to accommodate the additional $30.0 million in new 10% Convertible Notes.
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On March 31, 2020, we entered into an Amended and Restated Subordinated Secured Convertible Note Modification Agreement (the “Constellation Note Modification Agreement”) with Constellation NewEnergy, Inc. (“Constellation”), pursuant to which Constellation agreed to extend the maturity date to December 31, 2021, increase the interest rate from 5% to 10% and reduce the strike price on the conversion feature from $38.64 to $8.00 per share.
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On May 1, 2020, we entered into a note purchase agreement (the “Note Purchase Agreement”) pursuant to which certain investors have agreed to purchase, and we have issued, $70.0 million of 10.25% Senior Secured Notes due 2027 in a private placement. The proceeds from this note were used to extinguish the $70.0 million of 10% Convertible Notes on May 1, 2020.
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Additionally, the impact of COVID-19 on our ability to execute our business strategy and on our financial position and results of operations is uncertain. Our future cash flow requirements may vary materially from those currently planned and 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, the expansion of sales and marketing activities, market acceptance of our product, our ability to secure financing for customer use, the timing of installations, the timing of receipt by us of distributions from our PPA Entities and overall economic conditions including the impact of COVID-19 on our ongoing and future operations. However, in the opinion of management, the combination of our existing cash and cash equivalents, the extension of the 10% Convertible Notes and 10% Constellation Note to December 2021, the proceeds from the 10% Convertible Note Purchase Agreement, the proceeds from the 10.25% Senior Secured Note 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.
For additional information, see Note 7, Outstanding Loans and Security Agreements and Note 17, Subsequent Events.
Basis of Presentation
We have prepared the unaudited 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, the condensed consolidated financial statements do not include all disclosures required by generally accepted accounting principles as applied in the United States (“U.S. GAAP”). However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. The consolidated balance sheets as of March 31, 2020 and December 31, 2019 (the latter has been derived from the audited consolidated financial statements included in the our Annual Report on Form 10-K for the fiscal year ended December 31, 2019), and the condensed consolidated statements of operations, of comprehensive loss, of redeemable noncontrolling interest, stockholders' deficit and noncontrolling interest, and of cash flows for the three months ended March 31, 2020 and 2019, and related notes, should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on March 31, 2020.
We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to fairly state the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for our fiscal year ending December 31, 2020.
Principles of Consolidation
These condensed consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. We use a qualitative approach in assessing the consolidation requirement for each of our variable interest entities ("VIE"), which we refer to as our power purchase agreement entities ("PPA Entities"). This approach focuses on determining whether we haves the power to direct those activities of the PPA Entities that most significantly affect their economic performance and whether we have the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the PPA Entities. For all periods presented, we have determined that we are the primary beneficiary in all of our operational PPA Entities, other than with respect to the PPA II and PPA IIIb Entities, as discussed in Note 13, Power Purchase Agreement Programs. We evaluate our relationships with the PPA Entities on an ongoing basis to ensure that we continue to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The most significant estimates include the determination of the stand-alone selling price, including material rights estimates, inventory valuation, specifically excess and obsolescence provisions for obsolete or unsellable inventory and, in relation to property, plant and equipment (specifically Energy Servers), assumptions relating to economic useful lives and impairment assessments.
Other accounting estimates include variable consideration relating to product performance guaranties, assumptions to compute the fair value of lease and non-lease components and related financing obligations such as incremental borrowing rates, estimated output, efficiency and residual value of the Energy Servers, warranty, product performance guaranties and extended maintenance, derivative valuations, estimates for recapture of U.S. Treasury grants and similar grants, estimates relating to contractual indemnities provisions, estimates for income taxes and deferred tax asset valuation allowances, and stock-based compensation costs. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, our allowance for doubtful accounts, stock-based compensation, the carrying value of our long-lived assets, inventory, financial assets, and valuation allowances for tax assets, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers, suppliers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods as new information becomes available. Actual results could differ materially from these estimates under different assumptions and conditions.
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. Additionally, we sell our Energy Servers in Japan, China, India, and the Republic of Korea (collectively, our "Asia Pacific region"). In the quarters ended March 31, 2020 and 2019, total revenue in the Asia Pacific region was 37% and 33%, respectively, of our total revenue.
Credit Risk - At March 31, 2020, one customer, Costco Wholesale Corporation accounted for approximately 8% of accounts receivable. At December 31, 2019, two customers, Costco Wholesale Corporation and The Kraft Group LLC accounted for approximately 19% and 17% of accounts receivable, respectively. At March 31, 2020 and December 31, 2019, we did not maintain any allowances for doubtful accounts as we deemed all of our receivables fully collectible. To date, we have neither provided an allowance for uncollectible accounts nor experienced any credit loss.
Customer Risk - In the quarter ended March 31, 2020, revenue from two customers, SK Engineering & Construction Co., Ltd. (SK E&C) and Duke Energy accounted for approximately 36% and 31%, respectively, of our total revenue. In the quarter ended March 31, 2019, revenue from three customers, SK E&C, The Southern Company, and Costco accounted for approximately 32%, 27%, and 12%, respectively, of our total revenue. Duke Energy and The Southern Company wholly own a Third-Party PPA which purchases Energy Servers from us, however such purchases and resulting revenue are made on behalf of various customers of these two Third-Party PPAs.
Summary of Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2020 are consistent with those discussed in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, except as described below.
Recent Accounting Pronouncements
Other than the adoption of the accounting guidance mentioned below, there have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.
Accounting Guidance Implemented in 2020
Fair Value Measurement - In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 has eliminated, amended and added disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We adopted ASU 2018-13 as of January 1, 2020 and the adoption did not have a material effect on our financial statements and related disclosures. See Note 5, Fair Value.
Stock Compensation - In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") which aligns the accounting for share-based payment awards issued to employees and nonemployees. Measurement of equity-classified nonemployee awards will now be valued on the grant date and will no longer be remeasured through the performance completion date. ASU 2018-07 also changes the accounting for nonemployee awards with performance conditions to recognize compensation cost when achievement of the performance condition is probable, rather than upon achievement of the performance condition, as well as eliminating the requirement to reassess the equity or liability classification for nonemployee awards upon vesting, except for certain award types. ASU 2018-07 is effective for us for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. We adopted ASU 2018-07 using a modified retrospective approach in January 2020 and the adoption of ASU 2018-07 did not have a material effect on our financial statements and related disclosures.
Accounting Guidance Not Yet Adopted
Leases - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended (“ASC 842”), which provides new authoritative guidance on lease accounting. Among its provisions, the standard changes the definition of a lease, requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases and also requires additional qualitative and quantitative disclosures about lease arrangements. All leases in scope will be classified as either operating or financing. Operating and financing leases will require the recognition of an asset and liability to be measured at the present value of the lease payments. ASC 842 also makes a distinction between operating and financing leases for purposes of reporting expenses on the income statement. We are the lessee under various agreements for facilities and equipment that are currently accounted for as operating leases and expect to continue to enter into new such leases. Additionally, we expect to continue to enter into Managed Services related financing leases in the future and are the lessor of Energy Servers that are subject to power purchase arrangements with customers under our PPA and Managed Services programs that are currently accounted for as leases.
We are currently evaluating the impact of the adoption of this update on our financial statements. We expect that the most significant impacts will be assessing whether new power purchase arrangements with customers meet the new definition
of a lease and recognizing right of use assets and lease liabilities for arrangements currently accounted for as operating leases where we are the lessee. We expect to adopt this guidance on a prospective basis on January 1, 2021.
Financial Instruments - In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326). The pronouncement was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. This pronouncement will be effective for us commencing January 1, 2021. A prospective transition approach is required for debt securities for which an 'other than temporary' impairment had been recognized before the effective date. We are currently evaluating the impact of the adoption of this update on our financial statements.
Income taxes - In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) ("ASU 2019-12"), wherein the accounting for income taxes is simplified by eliminating certain exceptions and implementing additional requirements which result in a more consistent application of ASC 740 Income Taxes. ASU 2019-12 is effective as for public business entities, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We are evaluating the effect on our financial statements and related disclosures. We expect to adopt this guidance on a prospective basis on January 1, 2022.
Cessation of LIBOR - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") which provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We are currently evaluating the impact of the adoption of this update on our financial statements.
We do not expect any other new accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.
2. Restatement of Previously Issued Consolidated Financial Statements
We have restated herein our condensed consolidated financial statements as of and for the quarter ended March 31, 2019. We have also restated related amounts within the accompanying footnotes to the condensed consolidated financial statements.
Restatement Background
As previously disclosed in our Annual Report on Form 10-K as filed on March 31, 2020, on February 11, 2020, our management, in consultation with the Audit Committee of our Board of Directors, determined that Bloom's previously issued consolidated financial statements as of and for the year ended December 31, 2018, as well as financial statements for the three month period ended March 31, 2019, the three and six month periods ended June 30, 2019 and 2018 and the three and nine month periods ended September 30, 2019 and 2018 should no longer be relied upon due to misstatements related to our Managed Services Agreements and similar arrangements and we would restate such financial statements to make the necessary accounting corrections. The revenue for the Managed Services Agreements and similar transactions will now be recognized over the duration of the contract instead of upfront. The restatement also includes corrections for additional identified immaterial misstatements in certain of the impacted periods.
The misstatements impacting the three-month period ended March 31, 2019 are described in greater detail below.
Description of Misstatements
Under our Managed Services program, we sell our equipment to a bank financing party under a sale-leaseback transaction, which pays us for the Energy Server and takes title to the Energy Server. We then enter into a service contract with an end customer, who pays the bank a fixed, monthly fee for its use of the Energy Server and pays us for our maintenance and operation of the Energy Server.
The majority of these Managed Services Agreements and similar transactions were originally recorded as sales, subject to an operating lease, in which revenues and associated costs were recognized at the time of installation and acceptance of the Bloom Energy Server at the customer site.
In December 2019, in the course of reviewing a Managed Services transaction that closed on November 27, 2019, an issue was identified related to the accounting for our Managed Services transactions. The issue primarily related to whether the terms of our Managed Services Agreements and similar arrangements, including the events of default provisions, satisfied the requirements for sales under the revenue accounting standards. Subsequently, it was determined that the previous
accounting for the Managed Services Agreements and similar transactions was misstated, as the Managed Services Agreements and similar transactions should have been accounted for as financing transactions under lease accounting standards.
The impact of the correction of the misstatement is to recognize amounts received from the bank financing party as a financing obligation, and the Energy Server is recorded within property, plant and equipment, net on our consolidated balance sheets. We recognize revenue for the electricity generated by the systems, based on payments received by the bank from the customer, and the corresponding financing obligations to the bank is also amortized as these payments are received by the bank from the customer, with interest thereon being calculated on an effective interest rate basis. Depreciation expense is also recognized over the estimated useful life of the Energy Server.
In addition, it was determined that stock-based compensation costs relating to manufacturing employees that were previously expensed as incurred incorrectly, should have been capitalized as a component of Energy Server manufacturing costs to inventory, deferred cost of revenues, construction-in-progress and property, plant and equipment in accordance with SEC Staff Accounting Bulletin Topic 14. These costs will now be expensed on consumption of the related inventory and over the economic useful life of the property, plant and equipment, as applicable.
Also, as part of a review of historical revenue agreements as a result of the above errors, it was noted that we failed to identify embedded derivatives in certain revenue agreements for an escalator price protection (“EPP”) feature given to our customers. As a result, we have recorded a derivative liability, with an offset to product revenue, to account for the fair value of this feature at inception and will record the liability at its then fair value at each period end with any changes in fair value recognized in gain (loss) on revaluation of embedded derivatives.
In addition to the impact of the restatement described above, in preparation of the condensed consolidated financial statements for the three months ended March 31, 2020, errors in our Condensed Consolidated Statements of Comprehensive Loss were discovered. For the three months ended March 31, 2019, the presentation of the Statement and other errors identified in the Statement have been corrected, which resulted in an additional $3.8 million increase to Comprehensive Loss, a change of $7.9 million in Comprehensive (Income) Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests and an additional decrease of $4.1 million to Comprehensive Loss Attributable to Class A and Class B Stockholders. The Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and the three and nine months ended September 30, 2019 will also be corrected when those periods are next reported. In the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018, Comprehensive Loss as previously reported is understated by $5.8 million and overstated by $1.8 million, respectively. In addition, the reconciliation of Comprehensive Loss to Comprehensive Loss Attributable to Class A and Class B Stockholders was erroneously omitted. As it relates to the impact of the errors to the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018, management evaluated the impact of the errors to the previously issued financial statements and concluded the impacts were not material. Accordingly, these items will be corrected when those periods are next reported.
Finally, there were certain other immaterial misstatements identified or which had been previously identified which are also being corrected in connection with the restatement of previously issued financial statements.
Description of Restatement Reconciliation Tables
In the following tables, we have presented a reconciliation of our Condensed Consolidated Balance Sheet and Statements of Operations and Cash Flows from our prior periods as previously reported to the restated amounts as of and for the quarter ended March 31, 2019. In addition to the errors to the Condensed Consolidated Statement of Comprehensive Loss discussed above, that Statement has been restated for the restatement impact to net loss. The Statement of Redeemable Noncontrolling Interest, Stockholders' Deficit and Noncontrolling Interest for the quarter ended March 31, 2019 has also been restated for the restatement impact to Net Loss. See the Condensed Consolidated Statements of Operations reconciliation table below for additional information on the restatement impact to Net Loss.
Bloom Energy Corporation
Condensed Consolidated Balance Sheet
(in thousands, except share and per share data)
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March 31, 2019
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As Previously Reported
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Restatement Impacts
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Restatement Reference
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ASC 606 Adoption Impacts
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As Restated And Recast
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Assets
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Current assets:
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Cash and cash equivalents
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$
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320,414
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$
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—
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$
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—
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$
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320,414
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Restricted cash
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18,419
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—
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—
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18,419
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Accounts receivable
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84,070
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3,995
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1
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(2,418
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)
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85,647
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Inventories
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116,544
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3,327
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2
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—
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119,871
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Deferred cost of revenue
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66,316
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(13,405
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)
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3
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—
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52,911
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Customer financing receivable
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5,717
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—
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—
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5,717
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Prepaid expenses and other current assets
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28,362
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1,582
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4
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|
129
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30,073
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Total current assets
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639,842
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(4,501
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)
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(2,289
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)
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633,052
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Property, plant and equipment, net
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475,385
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236,246
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5
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—
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711,631
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Customer financing receivable, non-current
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65,620
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—
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—
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65,620
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Restricted cash, non-current
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31,101
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—
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—
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31,101
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Deferred cost of revenue, non-current
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72,516
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(70,583
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)
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3
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—
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1,933
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Other long-term assets
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34,386
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8,486
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6
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2,575
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45,447
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Total assets
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$
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1,318,850
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$
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169,648
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$
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286
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$
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1,488,784
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Liabilities, Redeemable Noncontrolling Interest, Stockholders’ Deficit and Noncontrolling Interests
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Current liabilities:
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Accounts payable
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$
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64,425
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$
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—
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—
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64,425
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Accrued warranty
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16,736
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(1,219
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)
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7
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(1,280
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)
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14,237
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Accrued expenses and other current liabilities
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67,966
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(3,893
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)
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8
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—
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64,073
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Financing obligations
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—
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8,819
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9
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—
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8,819
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Deferred revenue and customer deposits
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89,557
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(16,153
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)
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|
10
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1,665
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75,069
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Current portion of recourse debt
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15,683
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—
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—
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15,683
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Current portion of non-recourse debt
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19,486
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—
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—
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19,486
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Current portion of non-recourse debt from related parties
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2,341
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—
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—
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2,341
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Total current liabilities
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276,194
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(12,446
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)
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|
385
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264,133
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Derivative liabilities
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11,166
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4,556
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|
|
11
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—
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15,722
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Deferred revenue and customer deposits, net of current portion
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201,863
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(115,432
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)
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10
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17,320
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103,751
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Financing obligations, non-current
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—
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394,037
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9
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—
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394,037
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Long-term portion of recourse debt
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357,876
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—
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—
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357,876
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Long-term portion of non-recourse debt
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284,541
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—
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—
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284,541
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Long-term portion of recourse debt from related parties
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27,734
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—
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—
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27,734
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Long-term portion of non-recourse debt from related parties
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33,417
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—
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—
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33,417
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Other long-term liabilities
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58,032
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(29,062
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)
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8
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—
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28,970
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Total liabilities
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1,250,823
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241,653
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17,705
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1,510,181
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Redeemable noncontrolling interest
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58,802
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—
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—
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58,802
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Total stockholders’ deficit
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(105,439
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)
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(72,005
|
)
|
|
12
|
|
(17,419
|
)
|
|
(194,863
|
)
|
Noncontrolling interest
|
|
114,664
|
|
|
—
|
|
|
|
|
—
|
|
|
114,664
|
|
Total liabilities, redeemable noncontrolling interest, stockholders' deficit and noncontrolling interest
|
|
$
|
1,318,850
|
|
|
$
|
169,648
|
|
|
|
|
$
|
286
|
|
|
$
|
1,488,784
|
|
1 Accounts receivable — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which the amount recorded to accounts receivable represents amounts invoiced for capacity billings to end customers which have not yet been collected by the financing entity as of the period end.
2 Inventories — The correction of these misstatements resulted from the change of accounting for inventory, including net capitalization of stock-based compensation cost of $3.8 million and reclassification of inventories of $0.5 million held for shipments to customers under the Managed Services Program and similar arrangements to construction in progress within property, plant and equipment, net.
3 Deferred cost of revenue, current and non-current — The correction of these misstatements resulted from reclassifying deferred cost of revenue to property, plant and equipment, net for the leased Energy Servers under the Managed Services Agreements and similar sale-leaseback arrangements of $13.9 million (short-term) and $70.6 million (long-term), net capitalization of stock-based compensation costs of $2.1 million into current deferred cost of revenue, and the correction of certain other immaterial misstatements identified to relieve installation deferred cost of revenue of $1.7 million.
4 Prepaid expenses and other current assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements whereby prepaid property tax and insurance payments are now classified within prepaid expenses, rather than offset against deferred revenue.
5 Property, plant and equipment, net — The correction of these misstatements resulted from the change of accounting for Managed Services transactions and similar arrangements, whereby product and install costs of goods sold of $232.6 million are now recorded as property, plant and equipment, net in the cases where the risks of ownership have not completely transferred to the financing party. This includes a net capitalization of stock-based compensation cost for these assets of $3.6 million.
6 Other long-term assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby the timing difference of capacity billings to end customers and the payments received from the financing entity is recorded within long term receivables and prepaid property tax and insurance payments are now classified within other long-term assets, rather than offset against long-term deferred revenue.
7 Accrued warranty — The correction of these misstatements resulted from the change of accounting for accrued warranty which is now recorded on an as-incurred basis for our Managed Services Agreements and similar arrangements, reducing accrued warranty by $0.4 million and the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements, which are now recorded as derivative liabilities, reducing accrued warranty by $0.8 million.
8 Accrued expense and other current liabilities and other long-term liabilities — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which historical accrued liabilities recorded at inception of the agreements, as well as subsequent reductions of those liabilities, were reversed.
9 Financing obligations, current and non-current — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby instead of recognizing the upfront proceeds received from the bank as revenue, the proceeds received are classified as financing obligations.
10Deferred revenue and customer deposits, current and non-current — The correction of these misstatements resulted from the change of accounting for the recognition of product and installation revenue from upfront or ratable recognition to recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue.
11 Derivative liabilities — The correction of these misstatements resulted from the change of accounting for embedded derivatives related to grid pricing escalation guarantees we provided in some of our sales arrangements. These are now recorded as derivative liabilities and were previously treated as an accrued liability.
12 Total stockholders' deficit — Relates to the correction of an unadjusted misstatement in the valuation of our 6% Notes derivative, resulting in a credit to additional paid-in capital and additional expense of $0.8 million recorded within other expense, net, together with the cumulative increase to accumulated deficit from the restatement of $72.8 million.
.
Bloom Energy Corporation
Condensed Consolidated Statement of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
|
As Previously Reported
|
|
Restatement Impacts
|
|
Restatement Reference
|
|
ASC 606 Adoption Impacts
|
|
As Restated And Recast
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
141,734
|
|
|
$
|
(48,171
|
)
|
|
a
|
|
$
|
(2,637
|
)
|
|
$
|
90,926
|
|
Installation
|
|
22,258
|
|
|
(11,195
|
)
|
|
a
|
|
1,156
|
|
|
12,219
|
|
Service
|
|
23,290
|
|
|
(574
|
)
|
|
a
|
|
751
|
|
|
23,467
|
|
Electricity
|
|
13,425
|
|
|
6,964
|
|
|
a
|
|
—
|
|
|
20,389
|
|
Total revenue
|
|
200,707
|
|
|
(52,976
|
)
|
|
|
|
(730
|
)
|
|
147,001
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
124,000
|
|
|
(34,980
|
)
|
|
c, d
|
|
(248
|
)
|
|
88,772
|
|
Installation
|
|
24,166
|
|
|
(8,406
|
)
|
|
c
|
|
—
|
|
|
15,760
|
|
Service
|
|
27,557
|
|
|
1,331
|
|
|
b, d
|
|
(967
|
)
|
|
27,921
|
|
Electricity
|
|
9,229
|
|
|
3,755
|
|
|
c
|
|
—
|
|
|
12,984
|
|
Total cost of revenue
|
|
184,952
|
|
|
(38,300
|
)
|
|
|
|
(1,215
|
)
|
|
145,437
|
|
Gross profit
|
|
15,755
|
|
|
(14,676
|
)
|
|
|
|
485
|
|
|
1,564
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
28,859
|
|
|
—
|
|
|
|
|
—
|
|
|
28,859
|
|
Sales and marketing
|
|
20,463
|
|
|
2
|
|
|
e
|
|
(92
|
)
|
|
20,373
|
|
General and administrative
|
|
39,074
|
|
|
—
|
|
|
|
|
—
|
|
|
39,074
|
|
Total operating expenses
|
|
88,396
|
|
|
2
|
|
|
|
|
(92
|
)
|
|
88,306
|
|
Loss from operations
|
|
(72,641
|
)
|
|
(14,678
|
)
|
|
|
|
577
|
|
|
(86,742
|
)
|
Interest income
|
|
1,885
|
|
|
—
|
|
|
|
|
—
|
|
|
1,885
|
|
Interest expense
|
|
(15,962
|
)
|
|
(5,838
|
)
|
|
f
|
|
—
|
|
|
(21,800
|
)
|
Interest expense to related parties
|
|
(1,612
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(1,612
|
)
|
Other expense, net
|
|
265
|
|
|
—
|
|
|
|
|
—
|
|
|
265
|
|
Loss on revaluation of warrant liabilities and embedded derivatives
|
|
—
|
|
|
(540
|
)
|
|
g
|
|
—
|
|
|
(540
|
)
|
Loss before income taxes
|
|
(88,065
|
)
|
|
(21,056
|
)
|
|
|
|
577
|
|
|
(108,544
|
)
|
Income tax provision
|
|
208
|
|
|
—
|
|
|
|
|
—
|
|
|
208
|
|
Net loss
|
|
(88,273
|
)
|
|
(21,056
|
)
|
|
|
|
577
|
|
|
(108,752
|
)
|
Less: net loss attributable to noncontrolling interests and redeemable noncontrolling interests
|
|
(3,832
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(3,832
|
)
|
Net loss attributable to Class A and Class B common stockholders
|
|
$
|
(84,441
|
)
|
|
$
|
(21,056
|
)
|
|
|
|
$
|
577
|
|
|
$
|
(104,920
|
)
|
a Revenue impacted by Managed Services restatements — The correction of these misstatements resulted from the change from upfront recognition of product and installation revenue to recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue over the term of our Managed Services Agreements and similar sale-leaseback arrangements, which also impacted our service revenue allocation.
b Service cost of revenue impacted by grid pricing escalation guarantees — The correction of these misstatements resulted in a change in the accounting for our grid escalation guarantees that resulted in a decrease in service cost of revenue of $0.1 million.
c Cost of revenue impacted by Managed Services restatements — The correction of these misstatements resulted from the change from upfront recognition of product and installation cost of revenue to recognition of the depreciation expense on the capitalized Energy Servers over their useful life of 21 years for our Managed Services Agreements and similar sale-leaseback transactions, resulting in a decrease in product cost of revenue of $37.5 million and installation cost of revenue of $9.2 million, offset by an increase in electricity cost of revenue of $3.7 million, together with the correction of certain other immaterial misstatements identified to record installation cost of revenue of $0.8 million.
d Cost of revenue impacted by stock-based compensation allocation — The correction of these misstatements resulted from the capitalization of stock-based compensation costs, with a net increase to product cost of revenue of $2.5 million, and an increase in service cost of revenue of $1.4 million due to the expensing of stock-based compensation related to field replacement units.
e Sales and marketing and general and administrative expenses — The correction of these misstatements primarily resulted from the change of accounting for sales commission expense on an as earned basis, to accounting for the expense over the term of our Managed Services Agreements and similar sale-leaseback arrangements.
f Interest expense — The correction of these misstatements resulted from the change of accounting for sales that should have been accounted for as financing transactions, in which the upfront consideration received from the financing party is accounted for as a financing obligation and interest expense is recognized over the term of the Managed Services Agreement using the effective interest method.
g Gain (loss) on revaluation of warrant liabilities and embedded derivatives — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements which is now recorded as a derivative liability that needs to be fair valued each period end. The fair value increased in the period, resulting in a loss of $0.5 million.
Bloom Energy Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
|
As Previously Reported
|
|
Restatement Impacts
|
|
Restatement Reference
|
|
ASC 606 Adoption Impacts
|
|
As Restated And Recast
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(88,273
|
)
|
|
$
|
(21,056
|
)
|
|
|
|
$
|
577
|
|
|
$
|
(108,752
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
11,271
|
|
|
2,954
|
|
|
A
|
|
—
|
|
|
14,225
|
|
Write-off of property, plant and equipment, net
|
|
1
|
|
|
—
|
|
|
|
|
—
|
|
|
1
|
|
Revaluation of derivative contracts
|
|
(453
|
)
|
|
540
|
|
|
B
|
|
—
|
|
|
87
|
|
Stock-based compensation
|
|
63,882
|
|
|
3,940
|
|
|
C
|
|
—
|
|
|
67,822
|
|
Loss on long-term REC purchase contract
|
|
59
|
|
|
—
|
|
|
|
|
—
|
|
|
59
|
|
Amortization of debt issuance cost
|
|
5,152
|
|
|
—
|
|
|
|
|
—
|
|
|
5,152
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
816
|
|
|
(98
|
)
|
|
D
|
|
3,413
|
|
|
4,131
|
|
Inventories
|
|
15,932
|
|
|
(4,845
|
)
|
|
E
|
|
—
|
|
|
11,087
|
|
Deferred cost of revenue
|
|
26,014
|
|
|
(37,098
|
)
|
|
F
|
|
—
|
|
|
(11,084
|
)
|
Customer financing receivable and other
|
|
1,339
|
|
|
—
|
|
|
|
|
—
|
|
|
1,339
|
|
Prepaid expenses and other current assets
|
|
5,194
|
|
|
1,423
|
|
|
G
|
|
11
|
|
|
6,628
|
|
Other long-term assets
|
|
83
|
|
|
(396
|
)
|
|
H
|
|
(103
|
)
|
|
(416
|
)
|
Accounts payable
|
|
(2,464
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(2,464
|
)
|
Accrued warranty
|
|
(2,500
|
)
|
|
50
|
|
|
I
|
|
(247
|
)
|
|
(2,697
|
)
|
Accrued expense and other current liabilities
|
|
823
|
|
|
(1,196
|
)
|
|
J
|
|
—
|
|
|
(373
|
)
|
Deferred revenue and customer deposits
|
|
(44,533
|
)
|
|
49,428
|
|
|
K
|
|
(3,651
|
)
|
|
1,244
|
|
Other long-term liabilities
|
|
3,487
|
|
|
679
|
|
|
L
|
|
—
|
|
|
4,166
|
|
Net cash used in operating activities
|
|
(4,170
|
)
|
|
(5,675
|
)
|
|
|
|
—
|
|
|
(9,845
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(8,543
|
)
|
|
(3,403
|
)
|
|
M
|
|
—
|
|
|
(11,946
|
)
|
Payments for acquisition of intangible assets
|
|
(848
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(848
|
)
|
Proceeds from maturity of marketable securities
|
|
104,500
|
|
|
—
|
|
|
|
|
—
|
|
|
104,500
|
|
Net cash used in investing activities
|
|
95,109
|
|
|
(3,403
|
)
|
|
|
|
—
|
|
|
91,706
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
|
(5,016
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(5,016
|
)
|
Repayment of debt to related parties
|
|
(778
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(778
|
)
|
Proceeds from financing obligations
|
|
—
|
|
|
10,961
|
|
|
N
|
|
—
|
|
|
10,961
|
|
Repayment of financing obligations
|
|
—
|
|
|
(1,883
|
)
|
|
N
|
|
—
|
|
|
(1,883
|
)
|
Distributions to noncontrolling and redeemable noncontrolling interests
|
|
(3,189
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(3,189
|
)
|
Proceeds from issuance of common stock
|
|
7,493
|
|
|
—
|
|
|
|
|
—
|
|
|
7,493
|
|
Net cash (used in) provided by financing activities
|
|
(1,490
|
)
|
|
9,078
|
|
|
|
|
—
|
|
|
7,588
|
|
Net increase in cash, cash equivalents, and restricted cash
|
|
89,449
|
|
|
—
|
|
|
|
|
—
|
|
|
89,449
|
|
Cash, cash equivalents, and restricted cash:
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
280,485
|
|
|
—
|
|
|
|
|
—
|
|
|
280,485
|
|
End of period
|
|
$
|
369,934
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
369,934
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
14,545
|
|
|
$
|
5,838
|
|
|
N
|
|
$
|
—
|
|
|
$
|
20,383
|
|
Cash paid during the period for taxes
|
|
222
|
|
|
—
|
|
|
|
|
—
|
|
|
222
|
|
A Depreciation and amortization — The correction of these misstatements resulted from the change of accounting for Energy Servers under the Managed Services Program and similar arrangements that were previously expensed as product and install cost of revenue, but are now recorded as property, plant and equipment, net and depreciated over their useful lives of 21 years.
B Revaluation of derivative contracts — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements. These commitments were previously treated as an accrued liability. We now consider the commitments a derivative liability, with the initial value of recorded as a reduction in product revenue and then any changes in the value adjusted through other expense, net each period thereafter.
C Stock-based compensation — The correction of these misstatements resulted from the change of accounting for stock-based compensation, including net capitalization of stock-based compensation cost into inventory of $4.4 million. The correction of this misstatement also resulted in the capitalization of $0.5 million of stock-based compensation costs related to assets under the Managed Services Programs now recorded as construction in progress within property, plant and equipment, net.
D Accounts receivable — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which the amount recorded to accounts receivable represents amounts invoiced for capacity billings to end customers which have not yet been collected by the financing entity as of the period end.
E Inventories — The correction of these misstatements resulted from the change of accounting for inventories held for shipments planned to customers under the Managed Services Program and similar arrangements now being accounted for as construction in progress within property, plant and equipment, net.
F Deferred cost of revenue, current and non-current — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby leased Energy Servers of $37.2 million previously classified as deferred cost of revenue is now recorded as construction in progress within property, plant and equipment, net, and the net capitalization of stock-based compensation expenses of $0.1 million.
G Prepaid expenses and other current assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby prepaid property tax and insurance payments are now classified within prepaid expenses.
H Other long-term assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby the timing difference of capacity billings to end customers and the payments received from the financing entity is recorded within long term receivables and prepaid property tax and insurance payments are now classified within other long-term assets, rather than offset against long-term deferred revenue.
I Accrued warranty — The correction of these misstatements resulted from the change of accounting for accrued warranty which is now recorded on an as-incurred basis on our Managed Services Agreements and similar arrangements.
J Accrued expense and other current liabilities and other long-term liabilities — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements whereby instead of recognizing the bank financing as revenue, the bank financing loan proceeds received and due are classified as a financing liability.
K Deferred revenue and customer deposits, current and non-current — The correction of these misstatements resulted from the change of accounting for the recognition of product and installation revenue from upfront or ratable recognition to the recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue.
L Other long-term liabilities — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements. These commitments were previously treated as an accrued liability. We now consider the commitments a derivative liability, with the initial value recorded as a reduction in product revenue and then any changes in the value adjusted through gain (loss) on revaluation of embedded derivatives, net each period thereafter.
M Purchase of property, plant and equipment — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby costs previously recognized as product and installation cost of revenue are now recorded as property, plant and equipment, net in the cases where the risks of ownership have not completely transferred to the financing party.
N Proceeds and repayments from financing obligations — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby instead of recognizing the upfront proceeds received from the bank as revenue, the proceeds received and due are classified as proceeds from financing obligations and the capacity payments received from the end customer are classified as repayment of financing obligations and interest paid.
3. Revenue Recognition
Deferred Revenue and Customer Deposits
Deferred revenue and customer deposits as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31, 2019
|
|
|
|
|
|
Deferred revenue
|
|
$
|
170,034
|
|
|
$
|
168,223
|
|
Deferred incentive revenue
|
|
7,232
|
|
|
7,397
|
|
Customer deposits
|
|
42,707
|
|
|
39,101
|
|
Deferred revenue and customer deposits
|
|
$
|
219,973
|
|
|
$
|
214,721
|
|
Deferred revenue activity during the quarters ended March 31, 2020 and 2019 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
March 31,
2019
|
|
|
|
|
As Restated
|
Beginning balance
|
|
$
|
168,223
|
|
|
$
|
140,130
|
|
Additions
|
|
138,113
|
|
|
118,359
|
|
Revenue recognized
|
|
(136,302
|
)
|
|
(117,755
|
)
|
Ending balance
|
|
$
|
170,034
|
|
|
$
|
140,734
|
|
Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of March 31, 2020. The most significant 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 which provide customers with material rights over a period that we estimate will 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 cost-to-cost 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 period and we expect to recognize all amounts within a year.
Revenue by source
We disaggregate revenue from contracts with customers into four revenue categories: (i) product, (ii) installation, (iii) services and (iv) electricity (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
As Restated
|
Revenue from contracts with customers:
|
|
|
|
|
Product revenue
|
|
$
|
99,559
|
|
|
$
|
90,926
|
|
Installation revenue
|
|
16,618
|
|
|
12,219
|
|
Services revenue
|
|
25,147
|
|
|
23,467
|
|
Electricity revenue
|
|
—
|
|
|
3,418
|
|
Total revenue from contract with customers
|
|
141,324
|
|
|
130,030
|
|
Revenue from contracts accounted for as leases:
|
|
|
|
|
Electricity revenue
|
|
15,375
|
|
|
16,971
|
|
Total revenue
|
|
$
|
156,699
|
|
|
$
|
147,001
|
|
4. Financial Instruments
Cash, Cash Equivalents and Restricted Cash
The carrying value of cash and cash equivalents approximate fair value and are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
As Held:
|
|
|
|
|
Cash
|
|
$
|
82,484
|
|
|
$
|
100,773
|
|
Money market funds
|
|
271,435
|
|
|
276,615
|
|
|
|
$
|
353,919
|
|
|
$
|
377,388
|
|
As Reported:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
180,307
|
|
|
$
|
202,823
|
|
Restricted cash
|
|
173,612
|
|
|
174,565
|
|
|
|
$
|
353,919
|
|
|
$
|
377,388
|
|
Restricted cash consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Current:
|
|
|
|
|
Restricted cash
|
|
$
|
27,256
|
|
|
$
|
28,494
|
|
Restricted cash related to PPA Entities 1
|
|
2,474
|
|
|
2,310
|
|
Restricted cash, current
|
|
$
|
29,730
|
|
|
$
|
30,804
|
|
Non-current:
|
|
|
|
|
Restricted cash
|
|
$
|
10
|
|
|
$
|
10
|
|
Restricted cash related to PPA Entities 1
|
|
143,872
|
|
|
143,751
|
|
Restricted cash, non-current
|
|
143,882
|
|
|
143,761
|
|
|
|
$
|
173,612
|
|
|
$
|
174,565
|
|
1 We have variable interest entities which represent a portion of the consolidated balances recorded within the "restricted cash," and other financial statement line items in the Consolidated Balance Sheets (see Note 13, Power Purchase Agreement Programs). This amount includes $108.7 million and $20.0 million of non-current restricted cash, held in PPA II and PPA IIIb entities, respectively, and as of December 31, 2019, these entities are no longer considered variable interest entities.
Derivative Instruments
We have derivative financial instruments related to natural gas fixed price forward contracts, embedded derivatives in sales contracts, and interest rate swaps. See Note 8, Derivative Financial Instruments for a full description of our derivative financial instruments.
5. Fair Value
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below set forth, by level, our financial assets that were 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
|
March 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
271,435
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
271,435
|
|
|
|
$
|
271,435
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
271,435
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
697
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
697
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
Natural gas fixed price forward contracts
|
|
—
|
|
|
—
|
|
|
6,503
|
|
|
6,503
|
|
Embedded EPP derivatives
|
|
—
|
|
|
—
|
|
|
5,892
|
|
|
5,892
|
|
Interest rate swap agreements
|
|
—
|
|
|
17,415
|
|
|
—
|
|
|
17,415
|
|
|
|
$
|
697
|
|
|
$
|
17,415
|
|
|
$
|
12,395
|
|
|
$
|
30,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measured at Reporting Date Using
|
December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
276,615
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
276,615
|
|
Interest rate swap agreements
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
|
$
|
276,615
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
276,618
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
996
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
996
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
Natural gas fixed price forward contracts
|
|
—
|
|
|
—
|
|
|
6,968
|
|
|
6,968
|
|
Embedded EPP derivatives
|
|
—
|
|
|
—
|
|
|
6,176
|
|
|
6,176
|
|
Interest rate swap agreements
|
|
—
|
|
|
9,241
|
|
|
—
|
|
|
9,241
|
|
|
|
$
|
996
|
|
|
$
|
9,241
|
|
|
$
|
13,144
|
|
|
$
|
23,381
|
|
Money Market Funds - Money market funds are valued using quoted market prices for identical securities and are therefore classified as Level 1 financial assets.
Interest Rate Swap Agreements - Interest rate swap agreements are valued using quoted prices for similar contracts and are therefore classified as Level 2 financial assets. Interest rate swaps are designed as hedging instruments and are recognized at fair value on our consolidated balance sheets. As of March 31, 2020, $1.8 million of the gain on the interest rate swaps accumulated in other comprehensive income (loss) is expected to be reclassified into earnings in the next twelve months.
Natural Gas Fixed Price Forward Contracts - Natural gas fixed price forward contracts are valued using a combination of factors including the counterparty's credit rating and estimates of future natural gas prices and therefore, as no observable inputs to support market activity are available, are classified as Level 3 financial liabilities.
The following table provides the number and fair value of our natural gas fixed price forward contracts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
Number of
Contracts
(MMBTU)²
|
|
Fair
Value
|
|
Number of
Contracts
(MMBTU)²
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
Liabilities¹:
|
|
|
|
|
|
|
|
|
Natural gas fixed price forward contracts (not under hedging relationships)
|
|
1,699
|
|
|
$
|
6,503
|
|
|
1,991
|
|
|
$
|
6,968
|
|
|
|
|
|
|
|
|
|
|
¹ Recorded in current liabilities and derivative liabilities in the consolidated balance sheets.
|
² One MMBTU is a traditional unit of energy used to describe the heat value (energy content) of fuels.
|
For the three months ended March 31, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contracts and recorded an unrealized loss of $0.6 million and an unrealized gain of $0.4 million, respectively, and recorded a realized gain of $1.0 million and a realized gain of $0.5 million, respectively, on the settlement of these contracts in cost of revenue on our condensed consolidated statement of operations.
Embedded EPP Derivative Liability in Sales Contracts - We estimated 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 available forecasts of future electricity prices to estimate future electricity prices. We have classified these derivatives as a Level 3 financial liability. For the three months ended March 31, 2020 and 2019, we marked-to-market the fair value of our embedded EPP derivatives and recorded an unrealized gain of $0.3 million and an unrealized loss of $0.5 million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statement of operations.
There were no transfers between fair value measurement classifications during the periods ended March 31, 2020 and 2019. The changes in the Level 3 financial liabilities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas
Fixed Price
Forward
Contracts
|
|
Embedded EPP Derivative Liability
|
|
Total
|
Liabilities at December 31, 2019
|
|
$
|
6,968
|
|
|
$
|
6,176
|
|
|
$
|
13,144
|
|
Settlement of natural gas fixed price forward contracts
|
|
(1,025
|
)
|
|
—
|
|
|
(1,025
|
)
|
Changes in fair value
|
|
560
|
|
|
(284
|
)
|
|
276
|
|
Liabilities at March 31, 2020
|
|
$
|
6,503
|
|
|
$
|
5,892
|
|
|
$
|
12,395
|
|
The following table presents the unobservable inputs related to our Level 3 liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2020
|
Commodity Contracts
|
|
Derivative Liabilities
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Units
|
|
Range
|
|
Weighted Average
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
($ per Units)
|
Natural Gas
|
|
$
|
6,503
|
|
|
Discounted Cash Flow
|
|
Forward basis price
|
|
MMBtu
|
|
$1.69 - $4.61
|
|
$
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2019
|
Commodity Contracts
|
|
Derivative Liabilities
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Units
|
|
Range
|
|
Weighted Average
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
($ per Units)
|
Natural Gas
|
|
$
|
6,968
|
|
|
Discounted Cash Flow
|
|
Forward basis price
|
|
MMBtu
|
|
$2.39 - $5.65
|
|
$
|
3.23
|
|
The unobservable inputs used in the fair value measurement of the natural gas commodity types consist of inputs that are less observable due in part to lack of available broker quotes, supported by little, if any, market activity at the measurement date or are based on internally developed models. Certain basis prices (i.e., the difference in pricing between two locations) included in the valuation of natural gas contracts were deemed unobservable.
To estimate the liabilities related to the EPP contracts an option pricing method was implemented through a Monte Carlo simulation. The unobservable inputs were simulated based on the available values for Avoided Cost and Cost of Electricity as calculated for March 31, 2020 and December 31, 2019, using an expected growth rate of 7% over the contracts life and volatility of 20%. The estimated growth rate and volatility were estimated based on the historical tariff changes for the period 2008 to 2020. Avoided Cost is the Transmission and Distribution cost expressed in $/kWh avoided in the given year of the contract, calculated using the billing rates of the effective utility tariff applied during the year to the host account for which usage is offset by the generator. If the billing rates within the utility tariff change during the measurement period, the average of the amount of charge for each rate shall be weighted by the number of effective months for each amount.
The inputs listed above would have had a direct impact on the fair values of the above derivatives if they were adjusted. Generally, an increase in natural gas prices and a decrease in electric grid prices would each result in an increase in the estimated fair value of our derivative liabilities.
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
Customer Receivables and Debt Instruments - We estimate fair value for customer financing receivables, senior secured notes, term loans and convertible promissory notes 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
Net Carrying
Value
|
|
Fair Value
|
|
Net Carrying
Value
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
Customer receivables
|
|
|
|
|
|
|
|
|
Customer financing receivables
|
|
$
|
54,616
|
|
|
$
|
43,567
|
|
|
$
|
55,855
|
|
|
$
|
44,002
|
|
Debt instruments
|
|
|
|
|
|
|
|
|
Recourse:
|
|
|
|
|
|
|
|
|
LIBOR + 4% term loan due November 2020
|
|
1,117
|
|
|
1,116
|
|
|
1,536
|
|
|
1,590
|
|
10% convertible promissory Constellation note due December 2021
|
|
40,709
|
|
|
40,709
|
|
|
36,482
|
|
|
32,070
|
|
10% convertible promissory notes due December 2021
|
|
338,944
|
|
|
340,694
|
|
|
273,410
|
|
|
302,047
|
|
10% notes due July 2024
|
|
83,230
|
|
|
72,582
|
|
|
89,962
|
|
|
97,512
|
|
Non-recourse:
|
|
|
|
|
|
|
|
|
7.5% term loan due September 2028
|
|
33,036
|
|
|
32,053
|
|
|
34,969
|
|
|
41,108
|
|
6.07% senior secured notes due March 2030
|
|
79,319
|
|
|
78,831
|
|
|
80,016
|
|
|
87,618
|
|
LIBOR + 2.5% term loan due December 2021
|
|
119,646
|
|
|
104,377
|
|
|
120,436
|
|
|
120,510
|
|
Long-Lived Assets - Our long-lived assets include property, plant and equipment and Energy Servers capitalized in connection with our Managed Services Program, Purchase Power Agreement Programs and other similar arrangements. The carrying amounts of our long-lived assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. During the quarter ended March 31, 2020, we upgraded 0.4 megawatts of Energy Servers in PPA IIIb by decommissioning these systems and selling and installing new Energy Servers. As a result of these upgrades, the useful lives of all other remaining Energy Servers included within our long-lived assets were reassessed and we concluded that no change in the useful lives or impairment of these remaining Energy Servers was identified in the period ended March 31, 2020. See Note 13, Purchase Power Agreement Programs for further information.
6. Balance Sheet Components
Inventories
The components of inventory consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Raw materials
|
|
$
|
59,099
|
|
|
$
|
67,829
|
|
Work-in-progress
|
|
18,564
|
|
|
21,207
|
|
Finished goods
|
|
29,541
|
|
|
20,570
|
|
|
|
$
|
107,204
|
|
|
$
|
109,606
|
|
The inventory reserves were $14.9 million and $14.6 million as of March 31, 2020 and December 31, 2019, respectively.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Government incentives receivable
|
|
$
|
839
|
|
|
$
|
893
|
|
Prepaid production insurance
|
|
3,961
|
|
|
3,763
|
|
Receivables from employees
|
|
6,653
|
|
|
6,130
|
|
Other prepaid expenses and other current assets
|
|
13,541
|
|
|
17,282
|
|
|
|
$
|
24,994
|
|
|
$
|
28,068
|
|
Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Energy Servers
|
|
$
|
648,273
|
|
|
$
|
650,600
|
|
Computers, software and hardware
|
|
20,453
|
|
|
20,275
|
|
Machinery and equipment
|
|
102,837
|
|
|
101,650
|
|
Furniture and fixtures
|
|
8,309
|
|
|
8,339
|
|
Leasehold improvements
|
|
35,694
|
|
|
35,694
|
|
Building
|
|
40,512
|
|
|
40,512
|
|
Construction in progress
|
|
22,854
|
|
|
12,611
|
|
|
|
878,932
|
|
|
869,681
|
|
Less: Accumulated depreciation
|
|
(272,082
|
)
|
|
(262,622
|
)
|
|
|
$
|
606,850
|
|
|
$
|
607,059
|
|
Construction in progress increased $10.2 million from 2019, primarily due to an increase of $8.4 million of Energy Servers under our Managed Services sale-leaseback program pending acceptance, and increased $1.8 million primarily due to Delaware plant expansion.
Depreciation expense related to property, plant and equipment was $13.0 million and $13.9 million for the three months ended March 31, 2020 and 2019, respectively.
Property, plant and equipment under operating leases by the PPA Entities was $368.0 million and $371.4 million as of March 31, 2020 and December 31, 2019, respectively. The accumulated depreciation for these assets was $98.3 million and
$95.5 million as of March 31, 2020 and December 31, 2019, respectively. Depreciation expense related to our property, plant and equipment under operating leases by the PPA Entities was $6.2 million and $6.4 million for the three months ended March 31, 2020 and 2019, respectively.
Customer Financing Receivable
The components of investment in sales-type financing leases consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
Total minimum lease payments to be received
|
|
$
|
74,955
|
|
|
$
|
76,886
|
|
Less: Amounts representing estimated executing costs
|
|
(19,344
|
)
|
|
(19,931
|
)
|
Net present value of minimum lease payments to be received
|
|
55,611
|
|
|
56,955
|
|
Estimated residual value of leased assets
|
|
890
|
|
|
890
|
|
Less: Unearned income
|
|
(1,885
|
)
|
|
(1,990
|
)
|
Net investment in sales-type financing leases
|
|
54,616
|
|
|
55,855
|
|
Less: Current portion
|
|
(5,170
|
)
|
|
(5,108
|
)
|
Non-current portion of investment in sales-type financing leases
|
|
$
|
49,446
|
|
|
$
|
50,747
|
|
The future scheduled customer payments from sales-type financing leases were as follows as of March 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder of 2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future minimum lease payments, less interest
|
|
$
|
3,868
|
|
|
$
|
5,428
|
|
|
$
|
5,784
|
|
|
$
|
6,155
|
|
|
$
|
6,567
|
|
|
$
|
25,923
|
|
Other Long-Term Assets
Other long-term assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Prepaid and other long-term assets
|
|
$
|
31,134
|
|
|
$
|
29,153
|
|
Deferred commissions
|
|
5,668
|
|
|
5,007
|
|
Equity-method investments
|
|
5,897
|
|
|
5,733
|
|
Long-term deposits
|
|
1,897
|
|
|
1,759
|
|
|
|
$
|
44,596
|
|
|
$
|
41,652
|
|
Accrued Warranty
Accrued warranty liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Product warranty
|
|
$
|
2,566
|
|
|
$
|
2,345
|
|
Product performance
|
|
6,940
|
|
|
7,536
|
|
Maintenance services contracts
|
|
1,508
|
|
|
453
|
|
|
|
$
|
11,014
|
|
|
$
|
10,334
|
|
Changes in the product warranty and product performance liabilities were as follows (in thousands):
|
|
|
|
|
Balances at December 31, 2019
|
$
|
9,881
|
|
Accrued warranty, net
|
514
|
|
Warranty expenditures during period
|
(889
|
)
|
Balances at March 31, 2020
|
$
|
9,506
|
|
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
17,611
|
|
|
$
|
17,173
|
|
Current portion of derivative liabilities
|
|
6,434
|
|
|
4,834
|
|
Sales related liabilities
|
|
391
|
|
|
416
|
|
Accrued installation
|
|
10,923
|
|
|
10,348
|
|
Sales tax liabilities
|
|
3,899
|
|
|
3,849
|
|
Interest payable
|
|
2,880
|
|
|
3,875
|
|
Accrued payables
|
|
24,860
|
|
|
18,650
|
|
Other
|
|
10,811
|
|
|
11,139
|
|
|
|
$
|
77,809
|
|
|
$
|
70,284
|
|
Other Long-Term Liabilities
Other long-term liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Delaware grant
|
|
$
|
10,469
|
|
|
$
|
10,469
|
|
Other
|
|
18,074
|
|
|
17,544
|
|
|
|
$
|
28,543
|
|
|
$
|
28,013
|
|
In March 2012, we entered into an agreement with the Delaware Economic Development 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. We have received $12.0 million of the grant which is contingent upon us meeting certain milestones related to the construction of the manufacturing facility and the employment of full-time workers at the facility through September 30, 2023. We paid $1.5 million in 2017 for recapture provisions, and no additional amounts have been paid. As of March 31, 2020, we have recorded $10.5 million in other long-term liabilities for potential repayments. See Note 14, Commitments and Contingencies for a full description of the grant.
7. Outstanding Loans and Security Agreements
The following is a summary of our debt as of March 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
Principal
Balance
|
|
Net Carrying Value
|
|
Unused
Borrowing
Capacity
|
|
Interest
Rate
|
|
Maturity Dates
|
|
Entity
|
|
Recourse
|
|
|
Current
|
|
Long-
Term
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR + 4% term loan due November 2020
|
|
$
|
1,143
|
|
|
$
|
1,117
|
|
|
$
|
—
|
|
|
$
|
1,117
|
|
|
$
|
—
|
|
|
LIBOR
plus
margin
|
|
November 2020
|
|
Company
|
|
Yes
|
10% convertible promissory Constellation note due December 2021
|
|
36,940
|
|
|
—
|
|
|
40,709
|
|
|
40,709
|
|
|
—
|
|
|
10.0%
|
|
December 2021
|
|
Company
|
|
Yes
|
10% convertible promissory notes due December 2021 *
|
|
319,299
|
|
|
—
|
|
|
338,944
|
|
|
338,944
|
|
|
—
|
|
|
10.0%
|
|
December 2021
|
|
Company
|
|
Yes
|
10% notes due July 2024
|
|
86,000
|
|
|
14,000
|
|
|
69,230
|
|
|
83,230
|
|
|
—
|
|
|
10.0%
|
|
July 2024
|
|
Company
|
|
Yes
|
Total recourse debt
|
|
443,382
|
|
|
15,117
|
|
|
448,883
|
|
|
464,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
7.5% term loan due September 2028
|
|
36,232
|
|
|
2,439
|
|
|
30,597
|
|
|
33,036
|
|
|
—
|
|
|
7.5%
|
|
September
2028
|
|
PPA IIIa
|
|
No
|
6.07% senior secured notes due March 2030
|
|
80,255
|
|
|
3,330
|
|
|
75,989
|
|
|
79,319
|
|
|
—
|
|
|
6.1%
|
|
March 2030
|
|
PPA IV
|
|
No
|
LIBOR + 2.5% term loan due December 2021
|
|
120,818
|
|
|
5,340
|
|
|
114,306
|
|
|
119,646
|
|
|
—
|
|
|
LIBOR
plus
margin
|
|
December 2021
|
|
PPA V
|
|
No
|
Letters of Credit due December 2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,220
|
|
|
2.25%
|
|
December 2021
|
|
PPA V
|
|
No
|
Total non-recourse debt
|
|
237,305
|
|
|
11,109
|
|
|
220,892
|
|
|
232,001
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
680,687
|
|
|
$
|
26,226
|
|
|
$
|
669,775
|
|
|
$
|
696,001
|
|
|
$
|
1,220
|
|
|
|
|
|
|
|
|
|
* Note that $70.0 million of this amount was due on or before September 1, 2020, but as it was repaid on May 1, 2020 with the proceeds from long-term debt, as described below, this amount has also been classified as long-term in the condensed consolidated balance sheet as of March 31, 2020. See Note 17, Subsequent Events for additional information.
The following is a summary of our debt as of December 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
Principal
Balance
|
|
Net Carrying Value
|
|
Unused
Borrowing
Capacity
|
|
Interest
Rate
|
|
Maturity Dates
|
|
Entity
|
|
Recourse
|
|
|
Current
|
|
Long-
Term
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR + 4% term loan due November 2020
|
|
$
|
1,571
|
|
|
$
|
1,536
|
|
|
$
|
—
|
|
|
$
|
1,536
|
|
|
$
|
—
|
|
|
LIBOR
plus margin
|
|
November 2020
|
|
Company
|
|
Yes
|
5% convertible promissory note due December 2020
|
|
33,104
|
|
|
36,482
|
|
|
—
|
|
|
36,482
|
|
|
—
|
|
|
5.0%
|
|
December 2020
|
|
Company
|
|
Yes
|
6% convertible promissory notes due December 2020
|
|
289,299
|
|
|
273,410
|
|
|
—
|
|
|
273,410
|
|
|
—
|
|
|
6.0%
|
|
December 2020
|
|
Company
|
|
Yes
|
10% notes due July 2024
|
|
93,000
|
|
|
14,000
|
|
|
75,962
|
|
|
89,962
|
|
|
—
|
|
|
10.0%
|
|
July 2024
|
|
Company
|
|
Yes
|
Total recourse debt
|
|
416,974
|
|
|
325,428
|
|
|
75,962
|
|
|
401,390
|
|
|
—
|
|
|
|
|
|
|
|
|
|
7.5% term loan due September 2028
|
|
38,337
|
|
|
3,882
|
|
|
31,087
|
|
|
34,969
|
|
|
—
|
|
|
7.5%
|
|
September 2028
|
|
PPA IIIa
|
|
No
|
6.07% senior secured notes due March 2030
|
|
80,988
|
|
|
3,151
|
|
|
76,865
|
|
|
80,016
|
|
|
—
|
|
|
6.1%
|
|
March 2030
|
|
PPA IV
|
|
No
|
LIBOR + 2.5% term loan due December 2021
|
|
121,784
|
|
|
5,122
|
|
|
115,315
|
|
|
120,437
|
|
|
—
|
|
|
LIBOR plus
margin
|
|
December 2021
|
|
PPA V
|
|
No
|
Letters of Credit due December 2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,220
|
|
|
2.25%
|
|
December 2021
|
|
PPA V
|
|
No
|
Total non-recourse debt
|
|
241,109
|
|
|
12,155
|
|
|
223,267
|
|
|
235,422
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
658,083
|
|
|
$
|
337,583
|
|
|
$
|
299,229
|
|
|
$
|
636,812
|
|
|
$
|
1,220
|
|
|
|
|
|
|
|
|
|
Recourse debt refers to debt that Bloom Energy Corporation has an obligation to pay. Non-recourse debt refers to debt that is recourse to only specified assets or our subsidiaries. The differences between the unpaid principal balances and the net carrying values apply to debt discounts and deferred financing costs. We were in compliance with all financial covenants as of March 31, 2020 and December 31, 2019.
Recourse Debt Facilities
LIBOR + 4% Term Loan due November 2020 - In May 2013, we entered into a $5.0 million credit agreement and a $12.0 million financing agreement to help fund the building of a new facility in Newark, Delaware. The $5.0 million credit agreement expired in December 2016. The $12.0 million financing agreement has a term of 90 months, payable monthly at a variable rate equal to one month LIBOR plus the applicable margin. The weighted average interest rate as of March 31, 2020 and December 31, 2019 was 5.7% and 6.3%, respectively. The loan requires monthly payments and is secured by the manufacturing facility. In addition, the credit agreements also include a cross-default provision which provides that the remaining balance of borrowings under the agreements will be due and payable immediately if a lien is placed on the Newark facility in the event we default on any indebtedness in excess of $100,000 individually or $300,000 in the aggregate. Under the terms of these credit agreements, we are required to comply with various restrictive covenants. As of March 31, 2020 and December 31, 2019, the unpaid principal balance of debt outstanding was $1.1 million and $1.6 million, respectively.
10% Constellation Convertible Promissory Note due 2021 (originally 8% Convertible Promissory Notes) - Between December 2014 and June 2016, we issued $193.2 million of three-year convertible promissory notes ("8% Notes") to certain investors. The 8% Notes had a fixed interest rate of 8% compounded monthly, due at maturity or at the election of the investor with accrued interest due in December of each year.
On January 18, 2018, amendments were finalized to extend the maturity dates for all the 8% Notes to December 2019. At the same time, the portion of the notes that was held by Constellation NewEnergy, Inc. ("Constellation") was extended to December 2020 and the interest rate decreased from 8% to 5% ("5% Notes").
Investors held the right to convert the unpaid principal and accrued interest of both the 8% Notes and 5% Notes to Series G convertible preferred stock at any time at the price of $38.64 per share. In July 2018, upon our IPO, the $221.6 million of principal and accrued interest of outstanding 5% Notes automatically converted into additional paid-in capital, the conversion of which included all the related-party noteholders. The 5% Notes converted to shares of Series G convertible preferred stock and, concurrently, each such share of Series G convertible preferred stock converted automatically into one share of Class B
common stock. Upon our IPO, conversions of 5,734,440 shares of Class B common stock were issued and the 5% Notes were retired. Constellation, the holder of the 5% Notes ("5% Constellation Note"), has not elected to convert as of March 31, 2020.
On March 31, 2020, we entered into an Amended and Restated Subordinated Secured Convertible Note Modification Agreement (the “Constellation Note Modification Agreement”) which amended the terms of the 5% Constellation Note to extend the maturity date to December 31, 2021 and increased the interest rate from 5% to 10% ("10% Constellation Note"). Additionally, the debt is convertible at the option of Constellation into common stock at any time through the maturity date. We further amended the 10% Constellation Note by reducing the strike price on the conversion feature from $38.64 per share to $8.00 per share. If we fail to meet certain conditions under the Constellation Note Modification Agreement, including obtaining stockholder approval prior to September 1, 2020, the interest rate will be increased to 18% per year. At any time, we may redeem the 10% Constellation Note, at our option, at a redemption price equal to the principal amount of the 10% Constellation Note outstanding, plus accrued and unpaid interest as of the redemption date, plus a certain percentage, determined based on the time of redemption of the aggregate sum of all discounted remaining scheduled interest payments. The discount rate that shall be applied to all remaining scheduled interest payments shall be determined based on the Treasury Rate in effect as of the redemption date, plus 50 basis points, multiplied by the applicable percentage in effect as of the redemption date.
We evaluated the Constellation Note Modification Agreement in accordance with ASC 470-60, Debt - Troubled Debt Restructurings by Debtors, and 470-50, Debt - Modifications and Extinguishments, and concluded that the amendment did not constitute a troubled debt restructuring and, furthermore, the amendment qualified as a substantial modification as a result of the increase in the fair value of the conversion feature due to the reduced strike price. As a result, on March 31, 2020, the 10% Constellation Note, which consisted of $33.1 million in principal and $3.8 million in accrued and unpaid interest, was extinguished and the 10% Constellation Note was recorded at their fair market value which equaled $40.7 million. The difference between the fair market value of the 10% Constellation Note and the carrying value of the 5% Constellation Note of $3.8 million has been recorded, as of March 31, 2020, as a loss on extinguishment of debt in the Condensed Consolidated Statement of Operations.
The new carrying amount of the 10% Constellation Note of $40.7 million, which consists of the $36.9 million principal amount of the 10% Constellation Note and a $3.8 million deemed premium paid for the 10% Constellation Note, was classified as non-current as of March 31, 2020. Furthermore, the $3.8 million deemed premium shall be amortized over the term of the 10% Constellation Note using the effective interest method.
10% Convertible Promissory Notes due December 2021 (Originally 5% Convertible Promissory Notes) - Between December 2015 and September 2016, we issued $260.0 million convertible promissory notes due December 2020, ("5% Convertible Notes") to certain investors (each a "Noteholder" and collectively, the "Noteholders"). The 5% Convertible Notes bore a 5.0% fixed interest rate, payable monthly either in cash or in kind, at our election. We amended the terms of the 5% Convertible Notes in June 2017 to increase the interest rate from 5% to 6% and to reduce the collateral securing the notes ("6% Convertible Notes"). In November 2019, one Noteholder exchanged a portion of their 6% Convertible Notes at the conversion price of $11.25 per share into 616,302 shares of common stock.
The 6% Convertible Notes contained a conversion feature in which the strike price was determined by applying a specified discount to the price of the Company’s stock upon a qualified initial public offering. Until the occurrence of a qualified public offering, the number of shares required to settle this conversion feature could not be determined. Accordingly, this conversion feature was bifurcated from the 6% Convertible Notes and accounted for as a derivative liability in accordance with ASC 815, Derivatives and Hedging. Since the amendments to the 6% Convertible Notes were accounted for as a modification of terms, the derivative liability remained as a separate financial instrument from the 6% Convertible Notes that was separately accounted for with changes in fair value being recognized in earnings. Upon our initial public offering in July 2018, the conversion terms became fixed and met all of the requirements for equity classification. Accordingly, we reclassified the conversion feature from a derivative liability to additional paid in capital. The fair value of the embedded derivative was $178.0 million upon classification.
On March 31, 2020, we entered into an Amendment Support Agreement (the “Amendment Support Agreement”) with the Noteholders of our outstanding 6% Convertible Notes pursuant to which such Noteholders agreed to extend the maturity date of the outstanding 6% Convertible Notes to December 1, 2021 and increase the interest rate from 6% to 10%, ("10% Convertible Notes"). Additionally, the debt is convertible at the option of the Noteholders into common stock at any time through the maturity date and we further amended the10% Convertible Notes by reducing the strike price on the conversion feature from $11.25 to $8.00 per share. In conjunction with entering into the Amendment Support Agreement, on March 31, 2020, we also entered into a Convertible Note Purchase Agreement (the “10% Convertible Note Purchase Agreement”) and issued an additional $30.0 million aggregate principal amount of 10% Convertible Notes to Foris Ventures, LLC, a new Noteholder, and New Enterprise Associates 10, Limited Partnership, an existing Noteholder. The Amendment Support Agreement required that we repay at least $70.0 million of the 10% Convertible Notes on or before September 1, 2020. In return, collateral would be released to support the collateral required under the 10.25% Senior Secured Notes, and 50% of the proceeds from the consummation of certain transactions, including equity offerings or additional indebtedness, will be applied
to redeem the 10% Convertible Notes at a redemption price equal to (i) 100% of the principal amount of the 10% Convertible Notes, plus (ii) accrued and unpaid interest, plus (iii) a certain percentage, determined based on the time of redemption of the aggregate sum of all discounted remaining scheduled interest payments.. The discount rate to determine the present value decreases, creating a redemption penalty, if redemption occurs after October 21, 2020. The Amended Convertible Notes and the $30.0 million new 10% Convertible Notes are all reflected in the Amended and Restated Indenture between the Company and US National Bank dated April 20, 2020.
We evaluated the Amendment Support Agreement in accordance with ASC 470-60, Debt - Troubled Debt Restructurings by Debtors, and 470-50, Debt - Modifications and Extinguishments, and concluded that the amendment did not constitute a troubled debt restructuring and, furthermore, the amendment qualified as a substantial modification as a result of the increase in the fair value of the conversion feature due to the reduced strike price. As a result, on March 31, 2020, we recorded a $10.3 million loss on extinguishment of debt in the condensed consolidated statement of operations, which was calculated as the difference between the reacquisition price of the 6% Convertible Notes and the carrying value of the 6% Convertible Notes. The total carrying value of the 6% Convertible Notes equaled $279.0 million which consisted of $289.3 million in principal and $1.4 million in accrued and unpaid interest reduced by $10.7 million in unamortized discount and $1.0 million in unamortized debt issuance costs. The total reacquisition price of the 6% Convertible Notes equaled $289.3 million which consisted of the $340.7 million fair value of the 10% Convertible Notes, $1.4 million in accrued and unpaid interest, and $1.2 million of fees paid to Noteholders as part of the amendment, reduced by $24.0 million, the fair value at March 31, 2020 of the embedded derivative relating to the equity classified conversion feature that is reclassified from additional paid in capital, $20.0 million cash received from the additional 10% Convertible Notes that were issued to New Enterprise Associates 10, Limited Partnership, and the $10.0 million issuance to Foris Ventures, LLC.
The new net carrying amount of the 10% Convertible Notes of $338.9 million, which consists of the $319.3 million principal of the 10% Convertible Notes, a $21.4 million premium paid for the 10% Convertible Notes less $1.8 million debt issuance costs was classified as non-current as of March 31, 2020. Furthermore, the $21.4 million deemed premium shall be amortized over the term of the 10% Convertible Notes using the effective interest method.
10% Notes due July 2024 - In June 2017, we issued $100.0 million of senior secured notes ("10% Notes"). The 10% Notes mature in 2024 and bear a 10.0% fixed rate of interest and with principal amortization started July 2019, payable semi-annually. The 10% Notes have a continuing security interest in the cash flows payable to us as servicing, operations and maintenance fees and administrative fees from certain active power purchase agreements in our Bloom Electrons program. Under the terms of the indenture governing the notes, we are required to comply with various restrictive covenants including, among other things, to maintain certain financial ratios such as debt service coverage ratios, to incur additional debt, issue guarantees, incur liens, make loans or investments, make asset dispositions, issue or sell share capital of our subsidiaries and pay dividends, meet reporting requirements, including the preparation and delivery of audited consolidated financial statements, or maintain certain restrictions on investments and requirements in incurring new debt. In addition, we are required to maintain collateral which secures the 10% Notes based on debt ratio analyses. This minimum collateral test is not a negative covenant and does not result in a default if not met. However, the minimum debt service coverage ratio test does restrict our access to the excess cash escrowed in a collection account which would otherwise be released to us on a bi-annual basis after principal amortization and interest payment. The outstanding unpaid principal and accrued interest debt balance of the 10% Notes of $14.0 million and $14.0 million were classified as current as of March 31, 2020 and December 31, 2019, respectively and the outstanding unpaid principal and accrued interest debt balances of the 10% Notes of $69.2 million and $76.0 million were classified as non-current as of March 31, 2020 and December 31, 2019 respectively.
Non-recourse Debt Facilities
5.22% Senior Secured Term Notes - In March 2013, PPA Company II refinanced its existing debt by issuing 5.22% Senior Secured Notes due March 30, 2025. The total amount of the loan proceeds was $144.8 million, including $28.8 million to repay outstanding principal of existing debt, $21.7 million for debt service reserves and transaction costs and $94.3 million to fund the remaining system purchases. In June 2019, as part of the PPA II upgrade of Energy Servers, we paid off the outstanding debt and interest of these notes for the outstanding amount of $77.6 million. The Note Purchase Agreement debt service reserve balance of $11.2 million was written off in June 2019.
7.5% Term Loan due September 2028 - In December 2012 and later amended in August 2013, PPA IIIa entered into a $46.8 million credit agreement to help fund the purchase and installation of our Energy Servers. The loan bears a fixed interest rate of 7.5% payable quarterly. The loan requires quarterly principal payments which began in March 2014. The credit agreement requires us to maintain a debt service reserve for all funded systems, the balance of which was $3.8 million and $3.8 million as of March 31, 2020 and December 31, 2019, respectively, and which was included as part of long-term restricted cash in the consolidated balance sheets. The loan is secured by all assets of PPA IIIa.
LIBOR + 5.25% Term Loan due October 2020 - In September 2013, PPA IIIb entered into a credit agreement to help fund the purchase and installation of our Energy Servers. In accordance with that agreement, PPA IIIb issued floating rate debt
based on LIBOR plus a margin of 5.2%, paid quarterly. The aggregate amount of the debt facility was $32.5 million. In December 2019, as part of the PPA IIIa upgrade of Energy Servers, we paid off the outstanding debt and interest of these notes for the outstanding amount of $24.2 million. The credit agreement required us to maintain a debt service reserve for all funded systems, the balance of which was $1.8 million which was written off in December 2019.
6.07% Senior Secured Notes due March 2025 - In July 2014, PPA IV issued senior secured notes amounting to $99.0 million to third parties to help fund the purchase and installation of our Energy Servers. The notes bear a fixed interest rate of 6.07% payable quarterly which began in December 2015 and ends in March 2030. The notes are secured by all the assets of the PPA IV. The Note Purchase Agreement requires us to maintain a debt service reserve, the balance of which was $8.1 million as of March 31, 2020 and $8.0 million as of December 31, 2019, and which was included as part of long-term restricted cash in the consolidated balance sheets.
LIBOR + 2.5% Term Loan due December 2021 - In June 2015, PPA V entered into a $131.2 million credit agreement to fund the purchase and installation of our Energy Servers. The lenders are a group of five financial institutions and the terms included commitments to a letter of credit ("LC") facility (see below). The loan was initially advanced as a construction loan during the development of the PPA V Project and converted into a term loan on February 28, 2017 (the “Term Conversion Date”). As part of the term loan’s conversion, the LC facility commitments were adjusted.
In accordance with the credit agreement, PPA V was issued a floating rate debt based on LIBOR plus a margin, paid quarterly. The applicable margins used for calculating interest expense are 2.25% for years 1-3 following the Term Conversion Date and 2.5% thereafter. For the Lenders’ commitments to the loan and the commitments to the LC loan, the PPA V also pays commitment fees at 0.50% per annum over the outstanding commitments, paid quarterly. The loan is secured by all the assets of the PPA V and requires quarterly principal payments which began in March 2017. In connection with the floating-rate credit agreement, in July 2015 the PPA V entered into pay-fixed, receive-float interest rate swap agreements to convert its floating-rate loan into a fixed-rate loan.
Letters of Credit due December 2021 - In June 2015, PPA V entered into a $131.2 million term loan due December 2021. The agreement also included commitments to a LC facility with the aggregate principal amount of $6.4 million, later adjusted down to $6.2 million. The amount reserved under the letter of credit as of March 31, 2020 and December 31, 2019 was $5.0 million. The unused capacity as of March 31, 2020 and December 31, 2019 was $1.2 million.
Related Party Debt
Portions of the above described recourse and non-recourse debt are held by various related parties. See Note 16, Related Party Transactions for a full description.
Repayment Schedule and Interest Expense
The following table presents detail of our outstanding loan principal repayment schedule as of March 31, 2020 (in thousands):
|
|
|
|
|
Remainder of 2020 *
|
$
|
86,493
|
|
2021
|
425,609
|
|
2022
|
26,046
|
|
2023
|
29,450
|
|
2024
|
35,941
|
|
Thereafter
|
77,148
|
|
|
$
|
680,687
|
|
*Note that $70.0 million of this amount was due on or before September 1, 2020, but as it was repaid on May 1, 2020 with the proceeds from long-term debt, as described below, this amount has also been classified as long-term in the condensed consolidated balance sheet as of March 31, 2020. See Note 17, Subsequent Events for additional information.
Interest expense of $22.1 million and $23.4 million for the three months ended March 31, 2020 and 2019, respectively, was recorded in interest expense on the consolidated statements of operations.
8. Derivative Financial Instruments
Interest Rate Swaps
We use various financial instruments to minimize the impact of variable market conditions on our results of operations. We use interest rate swaps to minimize the impact of fluctuations of interest rate changes on our outstanding debt where LIBOR is applied. We do not enter into derivative contracts for trading or speculative purposes.
The fair values of the derivatives designated as cash flow hedges as of March 31, 2020 and December 31, 2019 on our consolidated balance sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
Assets
|
|
|
|
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
1,943
|
|
|
$
|
782
|
|
Derivative liabilities
|
|
15,472
|
|
|
8,459
|
|
|
|
$
|
17,415
|
|
|
$
|
9,241
|
|
PPA Company V - In July 2015, PPA Company V entered into nine interest rate swap agreements to convert a variable interest rate debt to a fixed rate and we designated and documented the interest rate swap arrangements as cash flow hedges. Three of these swaps matured in 2016, three will mature on December 21, 2021 and the remaining three will mature on September 30, 2031. We evaluate and calculate the effectiveness of the hedge at each reporting date. The effective change was recorded in accumulated other comprehensive income (loss) and was recognized as interest expense on settlement. The notional amounts of the swaps were $183.7 million and $184.2 million as of March 31, 2020 and December 31, 2019, respectively.
We measure the swaps at fair value on a recurring basis. Fair value is determined by discounting future cash flows using LIBOR rates with appropriate adjustment for credit risk. We recorded a gain of $36,000 and a loss of $24,000 attributable to the change in valuation during both of the quarters ended March 31, 2020 and 2019, respectively, and were included in other income (expense), net in the consolidated statement of operations.
The changes in fair value of the derivative contracts designated as cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2020
|
|
2019
|
Beginning balance
|
|
$
|
9,238
|
|
|
$
|
3,548
|
|
Loss recognized in other comprehensive loss
|
|
8,356
|
|
|
2,130
|
|
Amounts reclassified from other comprehensive loss to earnings
|
|
(142
|
)
|
|
61
|
|
Net loss recognized in other comprehensive loss
|
|
8,214
|
|
|
2,191
|
|
Gain recognized in earnings
|
|
(37
|
)
|
|
(47
|
)
|
Ending balance
|
|
$
|
17,415
|
|
|
$
|
5,692
|
|
|
|
|
|
|
Natural Gas Derivatives
On September 1, 2011, we entered into a natural gas fixed price forward contract with a gas supplier. This fuel forward contract is used as part of our program to manage the risk for controlling the overall cost of natural gas. PPA I is the only PPA Company for which natural gas was provided by us. This fuel forward contract meets the definition of a derivative under U.S. GAAP. We have not elected to designate this contract as a hedge and, accordingly, any changes in its fair value is recorded within cost of revenue in the statements of operations. The fair value of the contract is determined using a combination of factors including the counterparty’s credit rate and estimates of future natural gas prices.
For the quarter ended March 31, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contract and recorded an unrealized loss of $0.6 million and an unrealized gain of $0.4 million, respectively. For the
three months ended March 31, 2020 and 2019, we recorded a realized gain of $1.0 million and realized gain of $0.5 million, respectively, on the settlement of these contracts. Gains and losses are recorded in cost of revenue on the consolidated statement of operations.
Embedded EPP Derivatives in Sales Contracts
Embedded EPP Derivatives in Sales Contracts - We estimated the fair value of the embedded Escalation Protection Plan ("EPP") derivatives in certain sales contracts using a Monte Carlo simulation model which considers various potential electricity price forward curves over the sales contracts' terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. The grid pricing EPP guarantees that we provided in some of our sales arrangements represent an embedded derivative, with the initial value accounted for as a reduction in product revenue and any changes, reevaluated quarterly, in the fair market value of the derivative recorded in gain (loss) on revaluation of embedded derivatives. We recorded an unrealized gain of $0.3 million and an unrealized loss of $0.5 million attributable to the change in fair value for the three months ended March 31, 2020 and 2019, respectively. These gains and losses were included within loss on revaluation of embedded derivatives in the Consolidated Statements of Operations. The fair value of these derivatives was $5.9 million and $6.2 million as of March 31, 2020 and December 31, 2019, respectively.
9. Common Stock Warrants
Common Stock Warrants
During 2018, all of the preferred and common stock warrants we issued in connection with loan agreements and a dispute settlement converted to warrants to purchase shares of Class B common stock. As of March 31, 2020 and December 31, 2019, we had Class B common stock warrants outstanding to purchase 481,181 and 12,940 shares of Class B common stock at exercise prices of $27.78 and $38.64, respectively.
10. Income Taxes
For the three months ended March 31, 2020 and 2019, we recorded a provision for income taxes of $0.1 million on a pre-tax loss of $81.5 million for an effective tax rate of (0.2)%, and a provision for income taxes of $0.2 million on a pre-tax loss of $108.5 million for an effective tax rate of (0.2)%, respectively.
The effective tax impact for the three months ended March 31, 2020 and 2019 is lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.
11. Net Loss per Share Attributable to Common Stockholders
Net loss per share (basic) attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Net loss per share (diluted) is computed by using the "if-converted" method when calculating the potential dilutive effect, if any, of convertible shares whereby net loss attributable to common stockholders is adjusted by the effect of dilutive securities such as awards under equity compensation plans and inducement awards under separate restricted stock unit, or RSUs, award agreements. Net loss per share (diluted) attributable to common stockholders is then calculated by dividing the resulting adjusted net loss attributable to common stockholders by the combined weighted-average number of fully diluted common shares outstanding.
In July 2018, we completed an initial public offering of our common shares wherein 20,700,000 shares of Class A common stock were sold into the market. Added to existing shares of Class B common stock were shares mandatorily converted from various financial instruments as a result of the IPO. See Note 9, Common Stock Warrants.
There were no adjustments to net loss attributable to common stockholders in determining net loss attributable to common stockholders (diluted). Equally, there were no adjustments to the weighted average number of outstanding shares of common stock (basic) in arriving at the weighted average number of outstanding shares (diluted), as such adjustments would have been antidilutive.
Net loss per share is the same for each class of common stock as they are entitled to the same liquidation and dividend rights with the exception of voting rights. As a result, net loss per share (basic) and net loss per share (diluted) attributed to common stockholders are the same for both Class A and Class B common stock and are combined for presentation. The following table sets forth the computation of our net loss per share (basic) and net loss per share (diluted) attributable to common stockholders (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
As Restated
|
Numerator:
|
|
|
|
|
Net loss attributable to Class A and Class B common stockholders
|
|
$
|
(75,949
|
)
|
|
$
|
(104,920
|
)
|
Denominator:
|
|
|
|
|
Weighted average shares of common stock, basic and diluted
|
|
123,763
|
|
|
111,842
|
|
|
|
|
|
|
Net loss per share available to Class A and Class B common stockholders, basic and diluted
|
|
$
|
(0.61
|
)
|
|
$
|
(0.94
|
)
|
The following common stock equivalents (in thousands) were excluded from the computation of our net loss per share attributable to common stockholders (diluted) for the periods presented as their inclusion would have been antidilutive:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Convertible and non-convertible redeemable preferred stock and convertible notes
|
|
40,723
|
|
|
27,241
|
|
Stock options to purchase common stock
|
|
4,993
|
|
|
5,190
|
|
|
|
45,716
|
|
|
32,431
|
|
12. Stock-Based Compensation and Employee Benefit Plans
Share-based grants are designed to reward employees for their long-term contributions to us and provide incentives for them to remain with Bloom.
2002 Stock Plan
As of March 31, 2020, options to purchase 1,767,487 shares of Class B common stock were outstanding with a weighted average exercise price of $24.13 per share.
2012 Equity Incentive Plan
As of March 31, 2020, options to purchase 9,805,266 shares of Class B common stock were outstanding with a weighted average exercise price of $27.14 per share and no shares were available for future grant. As of March 31, 2020, we had outstanding RSUs that may be settled for 4,093,230 shares of Class B common stock under the plan.
2018 Equity Incentive Plan
As of March 31, 2020, options to purchase 5,933,885 shares of Class A common stock were outstanding with a weighted average exercise price of $9.31 per share and 2,919,204 shares of outstanding RSUs that may be settled for Class A common stock which were granted pursuant to the plan. As of March 31, 2020, we had 23,519,848 shares of Class A common stock available for future grant. No stock options were granted during the three months ended March 31, 2020.
Stock-Based Compensation Expense
We used the following weighted-average assumptions in applying the Black-Scholes valuation model for determination of options:
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Risk-free interest rate
|
|
—%
|
|
2.60% - 2.64%
|
Expected term (years)
|
|
0
|
|
6.3 - 6.6
|
Expected dividend yield
|
|
—
|
|
—
|
Expected volatility
|
|
—%
|
|
50.2%
|
The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
As Restated
|
|
|
|
|
|
Cost of revenue
|
|
$
|
5,507
|
|
|
$
|
18,312
|
|
Research and development
|
|
6,096
|
|
|
14,230
|
|
Sales and marketing
|
|
3,890
|
|
|
11,512
|
|
General and administrative
|
|
7,526
|
|
|
23,768
|
|
|
|
$
|
23,019
|
|
|
$
|
67,822
|
|
Stock-based Compensation - During the quarters ended March 31, 2020 and 2019, we recognized $23.0 million and $67.8 million of total stock-based compensation costs, respectively. During the quarters ended March 31, 2020 and 2019, we recognized $0.2 million and $3.9 million, respectively, of stock-based compensation expense previously capitalized in inventory and property, plant and equipment.
Stock Option and RSU Activity
The following table summarizes the stock option activity under our stock plans during the reporting period (in thousands), except per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2019
|
|
17,837,316
|
|
|
$
|
20.76
|
|
|
6.94
|
|
$
|
14,964
|
|
Exercised
|
|
(110,949
|
)
|
|
6.14
|
|
|
|
|
|
Cancelled
|
|
(219,729
|
)
|
|
25.79
|
|
|
|
|
|
Balances at March 31, 2020
|
|
17,506,638
|
|
|
20.79
|
|
|
6.66
|
|
6,814
|
|
Vested and expected to vest at Current period end
|
|
16,856,937
|
|
|
21.20
|
|
|
6.57
|
|
6,071
|
|
Exercisable at Current period end
|
|
9,499,310
|
|
|
28.59
|
|
|
4.76
|
|
9
|
|
Stock Options - During the quarters ended March 31, 2020 and 2019, we recognized $5.6 million and $9.2 million of stock-based compensation costs for stock options, respectively.
We did not grant options for Class A common stock during the quarter ended March 31, 2020, and we granted 743,705 options for Class A and Class B common stock during the quarter ended March 31, 2019 and the weighted-average grant-date fair value of those awards was $11.38 per share.
As of March 31, 2020 and 2019, we had unrecognized compensation costs related to unvested stock options of $36.3 million and $65.8 million, respectively. This cost is expected to be recognized over the remaining weighted-average period of 2.4 years and 2.7 years, respectively. We had no excess tax benefits in the quarters ended March 31, 2020 and 2019. Cash received from stock options exercised totaled $0.7 million and $0.6 million ended March 31, 2020 and 2019, respectively.
A summary of our RSUs activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Awards
Outstanding
|
|
Weighted
Average Grant
Date Fair
Value
|
|
|
|
|
|
Unvested Balance at December 31, 2019
|
|
10,112,266
|
|
|
$
|
17.29
|
|
Granted
|
|
78,338
|
|
|
10.88
|
|
Vested
|
|
(3,010,606
|
)
|
|
19.80
|
|
Forfeited
|
|
(167,564
|
)
|
|
15.77
|
|
Balances at March 31, 2020
|
|
7,012,434
|
|
|
16.18
|
|
Restricted Stock Units (RSUs) - The estimated fair value of RSU awards is based on the fair value of our common stock on the date of grant.
During the quarters ended March 31, 2020 and March 31, 2019, we recognized $13.2 million and $51.0 million of stock-based compensation costs for RSUs, respectively.
As of March 31, 2020, we had $37.6 million of unrecognized stock-based compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted average period of 1.3 years. As of March 31, 2019, we had $145.5 million of unrecognized stock-based compensation cost related to unvested RSUs. This expense was expected to be recognized over a weighted average period of 1.3 years.
The following table presents the stock activity and the total number of RSUs available for grant under our stock plans as of March 31, 2020:
|
|
|
|
|
|
|
Plan Shares Available
for Grant
|
|
|
|
|
|
|
Balances at December 31, 2019
|
|
17,233,144
|
|
Added to plan
|
|
6,263,315
|
|
Granted
|
|
(78,338
|
)
|
Cancelled
|
|
385,766
|
|
Expired
|
|
(284,039
|
)
|
Balances at March 31, 2020
|
|
23,519,848
|
|
2018 Employee Stock Purchase Plan
During the quarter ended March 31, 2020, we added an additional 1,494,819 shares for use under the 2018 ESPP. During the quarters ended March 31, 2020 and 2019, we recognized $2.9 million and $2.8 million of stock-based compensation costs for the ESPP, respectively. We issued 992,846 shares in the quarter ended March 31, 2020 and there were 3,532,380 shares available for issuance under the ESPP as of March 31, 2020. We use the Black-Scholes option pricing model to determine the fair value of shares purchased under the 2018 ESPP with the following weighted average assumptions on the date of grant:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
1.51%
|
|
2.60% - 2.64%
|
|
Expected term (years)
|
|
0.5 - 2.0
|
|
0.5 - 2.0
|
|
Expected dividend yield
|
|
—
|
|
—
|
|
Expected volatility
|
|
61.0%
|
|
50.2%
|
|
2019 Executive Awards
In November 2019, the Board of Directors approved stock option awards ("2019 Executive Awards") to certain executive staff. The 2019 Executive Awards consist of three vesting tranches with a vesting schedule based on the attainment of market conditions and assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2019 Executive Awards is recognized over the service period, even though no tranches of the 2019 Performance Awards vest unless a market condition is achieved. The grant date fair value of the options is determined using a Monte Carlo simulation.
13. Power Purchase Agreement Programs
Overview
In mid-2010, we began offering our Energy Servers through our Bloom Electrons program, which we denote as Power Purchase Agreement Programs, financed via investment entities. Under these arrangements, an operating entity is created (the "Operating Company") which purchases our Energy Servers from us. The end customer then enters into a power purchase agreement ("PPA") with the Operating Company to purchase the power generated by our Energy Servers at a specified rate per kilowatt hour for a specified term which can range from 10 to 21 years. In some cases, similar to direct purchases and leases, the standard one-year warranty and performance guaranties are included in the price of the product. The Operating Company also enters into a master services agreement with us following the first year of service to extend the warranty services and guaranties over the term of the PPA. In other cases, the master services agreements including warranties and guaranties are billed on a quarterly basis starting in the first quarter following the placed-in-service date of the Energy Server(s) and continuing over the term of the PPA. The first of such arrangements was considered a sales-type lease and the product revenue from that agreement was recognized upfront in the same manner as direct purchase and lease transactions. Substantially all of our subsequent PPAs have been accounted for as operating leases with the related revenue under those agreements recognized ratably over the PPA term as electricity revenue. We recognize the cost of revenue, primarily Energy Server depreciation and maintenance service costs, over the shorter of the estimated useful life of the Energy Server or the term of the PPA.
We and our third-party equity investors (together "Equity Investors") contribute funds into a limited liability investment entity ("Investment Company") that owns and is parent to the Operating Company (together, the "PPA Entities"). These PPA Entities constitute variable investment entities ("VIEs") under U.S. GAAP. We have considered the provisions within the contractual agreements which grant us power to manage and make decisions affecting the operations of these VIEs. We consider that the rights granted to the Equity Investors under the contractual agreements are more protective in nature rather than participating. Therefore, we have determined under the power and benefits criterion of ASC 810 - Consolidations that we are the primary beneficiary of these VIEs. As the primary beneficiary of these VIEs, we consolidate in our financial statements the financial position, results of operations and cash flows of the PPA Entities, and all intercompany balances and transactions between us and the PPA Entities are eliminated in the consolidated financial statements.
On June 14, 2019, we entered into a PPA II upgrade of Energy Servers transaction, and as a result we determined that we no longer retained a controlling interest in the Operating Company in PPA II and therefore, the Operating Company was no longer consolidated as a VIE into our consolidated financial statements as of June 30, 2019. See further discussion below. On November 27, 2019, we entered into a PPA IIIb upgrade of Energy Servers transaction where we bought out the equity interest of the third-party investor, decommissioned the Energy Servers in the Operating Company and sold new Energy Servers deployed at customer sites through our Managed Services financing option. The PPA IIIb Investment Company and Operating Company became wholly-owned by us but no longer met the definition of a VIE. However, we continue consolidating PPA IIIb in our consolidated financial statements. See further discussion below.
In accordance with our Power Purchase Agreement Programs, the Operating Company acquires Energy Servers from us for cash payments that are made on a similar schedule as if the Operating Company were a customer purchasing an Energy Server from us outright. In the consolidated financial statements, the sale of Energy Servers by us to the Operating Company
are treated as intercompany transactions and as a result eliminated in consolidation. The acquisition of Energy Servers by the Operating Company is accounted for as a non-cash reclassification from inventory to Energy Servers within property, plant and equipment, net on our consolidated balance sheets. In arrangements qualifying for sales-type leases, we reduce these recorded assets by amounts received from U.S. Treasury Department cash grants and from similar state incentive rebates.
The Operating Company sells the electricity to end customers under PPAs. Cash generated by the electricity sales, as well as receipts from any applicable government incentive program, are used to pay operating expenses (including the management and maintenance services we provide to maintain the Energy Servers over the term of the PPA) and to service the non-recourse debt with the remaining cash flows distributed to the Equity Investors. In transactions accounted for as sales-type leases, we recognize subsequent customer billings as electricity revenue over the term of the PPA and amortize any applicable government incentive program grants as a reduction to depreciation expense of the Energy Server over the term of the PPA. In transactions accounted for as operating leases, we recognize subsequent customer payments as electricity revenue and service revenue over the term of the PPA.
Upon sale or liquidation of a PPA Entity, distributions would occur in the order of priority specified in the contractual agreements.
We have established six different PPA Entities to date. The contributed funds are restricted for use by the Operating Company to the purchase of our Energy Servers manufactured by us in our normal course of operations. All six PPA Entities utilized their entire available financing capacity and have completed the purchase of their Energy Servers. Any debt incurred by the Operating Companies is non-recourse to us. Under these structures, each Investment Company is treated as a partnership for U.S. federal income tax purposes. Equity Investors receive investment tax credits and accelerated tax depreciation benefits. In 2016, we purchased the tax equity investor’s interest in PPA I, which resulted in a change in our ownership interest in PPA I while we continued to hold the controlling financial interest in this company. In 2019, we bought out the tax equity investors' interest in DSGH, the PPA II Investment Company, and admitted two new equity investors as a member of the PPA II Operating Company, retaining only a minor contingent future equity interest in the Operating Company. One of the new equity investors became the managing member which resulted in a change in our ownership interest in the Operating Company and discontinued our controlling financial interest in the PPA II Operating Company. In December 2019, we purchased the tax equity investors' interest in PPA IIIb, which resulted in a change in the ownership structure from a variable interest entity to a wholly owned subsidiary indirectly owned by us.
PPA II Upgrade of Energy Servers
Original Transaction
A wholly-owned subsidiary of Bloom and a wholly-owned subsidiary of Credit Suisse Group AG (“Mehetia”) jointly owned Diamond State Generation Holdings, LLC (“Class A Holdco”). Class A Holdco owned 100% of the membership interests in Diamond State Generation Partners, LLC ("DSGP"). Pursuant to an earlier transaction, DSGP owned and operated 30 megawatts of Energy Servers across two sites in Delaware that achieved operations in 2012 and 2013 and provided alternative energy generation for state tariff rate payers (the “Original Project”). The Original Project had been financed in part by the issuance of non-recourse promissory notes to DSGP (the “Project Debt”).
Overall Upgrade
We upgraded the existing 30 megawatts of Energy Servers used in the Original Project by replacing them with 27.5 megawatts of new Energy Servers. To effect the full upgrade we repurchased all of existing Energy Servers, the proceeds of which were used by DSGP to pay down the Project Debt and to enable Class A Holdco to buy out Mehetia’s interests. To finance the new Energy Servers used in the upgrade, DSGP raised capital from two new members: SP Diamond State Class B Holdings, LLC (“Class B Holdco”), a wholly owned subsidiary of Southern Power Company (“Southern”) and Assured Guaranty Municipal Corporation (“Class C Holdco”). The existing Energy Servers were removed after we repurchased them from DSGP, prior to selling and installing the new Energy Servers. The upgrade was done across two phases and was completed during December 2019.
Commercial Documents
We also entered into an operations and maintenance agreement for the ongoing care of all of the new Energy Servers (the “O&M Agreement”). The operations and maintenance fees under the O&M Agreement are paid on a fixed dollar per kilowatt basis.
The terms and conditions of the EPC Agreement and the O&M Agreement, including the suite of guaranties and warranties provided with respect to the performance of the Energy Servers are customary for our transactions of this type. The
performance related guaranty and warranty were provided for each investor’s Energy Servers, while the efficiency guaranties and warranties were measured across the entire 27.5 megawatts of Energy Servers.
PPA IIIb Upgrade of Energy Servers
Transaction Overview
As part of the PPA IIIb project established in 2013, Bloom, 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 5.4 megawatts of Energy Servers. On November 27, 2019, we entered into certain agreements through a wholly-owned subsidiary to (i) buy out the existing debt and equity investors in Project Company such that Project Company became indirectly wholly-owned by us, and (ii) upgrade 5.4 megawatts of the existing Energy Servers owned and managed by Project Company by selling and installing new Energy Servers. As of December 31, 2019, 5 megawatts of the PPA IIIb project had been decommissioned and written-off by us, with the remaining 0.4 megawatts decommissioned during the three months ended March 31, 2020.
PPA Entities' Activities Summary
The table below shows the details of the three Investment Companies' VIEs that were active during the first quarter of 2020 and their cumulative activities from inception to the periods indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PPA IIIa
|
|
PPA IV
|
|
PPA V
|
Overview:
|
|
|
|
|
|
|
Maximum size of installation (in megawatts)
|
|
10
|
|
21
|
|
40
|
Installed size (in megawatts)
|
|
10
|
|
19
|
|
37
|
Term of power purchase agreements (in years)
|
|
15
|
|
15
|
|
15
|
First system installed
|
|
Feb-13
|
|
Sep-14
|
|
Jun-15
|
Last system installed
|
|
Jun-14
|
|
Mar-16
|
|
Dec-16
|
Income (loss) and tax benefits allocation to Equity Investor
|
|
99%
|
|
90%
|
|
99%
|
Cash allocation to Equity Investor
|
|
99%
|
|
90%
|
|
90%
|
Income (loss), tax and cash allocations to Equity Investor after the flip date
|
|
5%
|
|
No flip
|
|
No flip
|
Equity Investor 1
|
|
US Bank
|
|
Exelon Corporation
|
|
Exelon Corporation
|
Put option date 2
|
|
1st anniversary of flip point
|
|
N/A
|
|
N/A
|
Company cash contributions
|
|
$
|
32,223
|
|
|
$
|
11,669
|
|
|
$
|
27,932
|
|
Company non-cash contributions 3
|
|
$
|
8,655
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity Investor cash contributions
|
|
$
|
36,967
|
|
|
$
|
84,782
|
|
|
$
|
227,344
|
|
Debt financing
|
|
$
|
44,968
|
|
|
$
|
99,000
|
|
|
$
|
131,237
|
|
Activity as of March 31, 2020:
|
|
|
|
|
|
|
Distributions to Equity Investor
|
|
$
|
4,804
|
|
|
$
|
7,052
|
|
|
$
|
74,128
|
|
Debt repayment—principal
|
|
$
|
8,736
|
|
|
$
|
18,745
|
|
|
$
|
10,419
|
|
Activity as of December 31, 2019:
|
|
|
|
|
|
|
Distributions to Equity Investor
|
|
$
|
4,803
|
|
|
$
|
6,692
|
|
|
$
|
70,591
|
|
Debt repayment—principal
|
|
$
|
6,631
|
|
|
$
|
18,012
|
|
|
$
|
9,453
|
|
|
1 Investor name represents ultimate parent of subsidiary financing the project.
|
2 Investor right on the certain date, upon giving us advance written notice, to sell the membership interests to us or resign or withdraw from the investment partnership.
|
3 Non-cash contributions consisted of warrants that were issued by us to respective lenders to each PPA Entity, as required by such entity’s credit agreements. The corresponding values are amortized using the effective interest method over the debt term.
|
Some of our PPA Entities contain structured provisions whereby the allocation of income and equity to the Equity Investors changes at some point in time after the formation of the PPA Entity. The change in allocations to Equity Investors (or the "flip") occurs based either on a specified future date or once the Equity Investors reaches its targeted rate of return. For PPA Entities with a specified future date for the flip, the flip occurs January 1 of the calendar year immediately following the year that includes the fifth anniversary of the date the last site achieves commercial operation.
The noncontrolling interests in PPA IIIa are redeemable as a result of the put option held by the Equity Investors as of March 31, 2020 and December 31, 2019. At March 31, 2020, and December 31, 2019, the carrying value of redeemable noncontrolling interests of $0.1 million and $0.4 million, respectively, exceeded the maximum redemption value.
PPA Entities’ Aggregate Assets and Liabilities
Generally, Operating Company assets can be used to settle only the Operating Company obligations and Operating Company creditors do not have recourse to us. The aggregate carrying values of our VIEs, including PPA IIIa, PPA IV and PPA V, for their assets and liabilities in our consolidated balance sheets, after eliminations of intercompany transactions and balances, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,104
|
|
|
$
|
1,894
|
|
Restricted cash
|
|
2,208
|
|
|
2,244
|
|
Accounts receivable
|
|
4,207
|
|
|
4,194
|
|
Customer financing receivable
|
|
5,170
|
|
|
5,108
|
|
Prepaid expenses and other current assets
|
|
2,212
|
|
|
3,587
|
|
Total current assets
|
|
16,901
|
|
|
17,027
|
|
Property and equipment, net
|
|
269,680
|
|
|
275,481
|
|
Customer financing receivable, non-current
|
|
49,446
|
|
|
50,747
|
|
Restricted cash
|
|
15,172
|
|
|
15,045
|
|
Other long-term assets
|
|
301
|
|
|
607
|
|
Total assets
|
|
$
|
351,500
|
|
|
$
|
358,907
|
|
Liabilities
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other current liabilities
|
|
2,058
|
|
|
1,391
|
|
Deferred revenue and customer deposits
|
|
662
|
|
|
662
|
|
Current portion of debt
|
|
11,109
|
|
|
12,155
|
|
Total current liabilities
|
|
13,829
|
|
|
14,208
|
|
Derivative liabilities
|
|
15,470
|
|
|
8,459
|
|
Deferred revenue
|
|
6,570
|
|
|
6,735
|
|
Long-term portion of debt
|
|
220,892
|
|
|
223,267
|
|
Other long-term liabilities
|
|
2,492
|
|
|
2,355
|
|
Total liabilities
|
|
$
|
259,253
|
|
|
$
|
255,024
|
|
As stated above, we are a minority shareholder in the PPA Entities for the administration of our Bloom Electrons program. PPA Entities contain debt that is non-recourse to us. The PPA Entities also own Energy Server assets for which we do not have title. Although we will continue to have Power Purchase Agreement Program entities in the future and offer customers the ability to purchase electricity without the purchase of our Energy Servers, we do not intend to be a minority investor in any new Power Purchase Agreement Program entities.
We believe that by presenting assets and liabilities separate from the PPA Entities, we provide a better view of the true operations of our core business. The table below provides detail into the assets and liabilities of Bloom Energy separate from the PPA Entities. The following table shows Bloom Energy's stand-alone, the PPA Entities combined and these consolidated balances as of March 31, 2020, and December 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
Bloom Energy
|
|
PPA Entities
|
|
Consolidated
|
|
Bloom Energy
|
|
PPA Entities
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
445,994
|
|
|
$
|
16,901
|
|
|
$
|
462,895
|
|
|
$
|
455,680
|
|
|
$
|
17,027
|
|
|
$
|
472,707
|
|
Long-term assets
|
|
515,114
|
|
|
334,599
|
|
|
849,713
|
|
|
508,004
|
|
|
341,880
|
|
|
849,884
|
|
Total assets
|
|
$
|
961,108
|
|
|
$
|
351,500
|
|
|
$
|
1,312,608
|
|
|
$
|
963,684
|
|
|
$
|
358,907
|
|
|
$
|
1,322,591
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
256,798
|
|
|
$
|
2,720
|
|
|
$
|
259,518
|
|
|
$
|
234,328
|
|
|
$
|
2,053
|
|
|
$
|
236,381
|
|
Current portion of debt
|
|
15,117
|
|
|
11,109
|
|
|
26,226
|
|
|
325,428
|
|
|
12,155
|
|
|
337,583
|
|
Long-term liabilities
|
|
591,722
|
|
|
24,532
|
|
|
616,254
|
|
|
599,709
|
|
|
17,549
|
|
|
617,258
|
|
Long-term portion of debt
|
|
448,883
|
|
|
220,892
|
|
|
669,775
|
|
|
75,962
|
|
|
223,267
|
|
|
299,229
|
|
Total liabilities
|
|
$
|
1,312,520
|
|
|
$
|
259,253
|
|
|
$
|
1,571,773
|
|
|
$
|
1,235,427
|
|
|
$
|
255,024
|
|
|
$
|
1,490,451
|
|
14. Commitments and Contingencies
Commitments
Facilities Leases
We lease most of our facilities, office buildings and equipment under operating leases that expire at various dates through December 2028. Our lease for our former corporate offices in Sunnyvale, California expired in December 2018. We entered into a lease for our corporate headquarters located in San Jose, California, for 181,000 square feet of office space commencing January 2019 and expiring in December 2028. Our headquarters is used for administration, research and development and sales and marketing.
Additionally, we lease various manufacturing facilities in Sunnyvale, California and Mountain View, California. Our current lease for our Sunnyvale manufacturing facilities, entered into in April 2005, expires in 2020. Our current lease for our manufacturing facilities at Mountain View, entered into in December 2011, expired in December 2019 and is extended on a month to month arrangement. These plants together comprise approximately 281,265 square feet of space. We lease additional office space as field offices in the United States and around the world including in India, the Republic of Korea, China and Taiwan.
During the quarters ended March 31, 2020 and 2019, rent expense for all occupied facilities was $2.1 million and $2.0 million, respectively.
Equipment Leases
Beginning in December 2015, we are a party to master lease agreements that provide for the sale of our Energy Servers to third parties and the simultaneous leaseback of the systems which we then sublease to customers. The lease agreements expire on various dates through 2025 and there was no recorded rent expense for the three months ended March 31, 2020 and 2019.
At March 31, 2020, future minimum lease payments under operating leases and financing obligations were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases Obligations
|
|
Financing Obligations
|
|
Sublease Payments1
|
Remainder of 2020
|
$
|
5,457
|
|
|
$
|
28,487
|
|
|
$
|
(28,487
|
)
|
2021
|
5,495
|
|
|
38,726
|
|
|
(38,726
|
)
|
2022
|
4,168
|
|
|
39,680
|
|
|
(39,680
|
)
|
2023
|
4,230
|
|
|
40,582
|
|
|
(40,582
|
)
|
2024
|
4,356
|
|
|
38,442
|
|
|
(38,442
|
)
|
Thereafter
|
17,913
|
|
|
117,592
|
|
|
(117,592
|
)
|
Total lease payments
|
$
|
41,619
|
|
|
303,509
|
|
|
$
|
(303,509
|
)
|
Less: imputed interest
|
|
|
(177,345
|
)
|
|
|
Total lease obligations
|
|
|
126,164
|
|
|
|
Less: current obligations
|
|
|
(11,248
|
)
|
|
|
Long-term lease obligations
|
|
|
$
|
114,916
|
|
|
|
1 Sublease Payments primarily represents the fees received by the bank from our end customer for the electricity generated by our Energy Servers leased under our Managed Services and other similar arrangements, which also pay down our financing obligation to the bank.
Managed Services Financing Obligations - Our managed services arrangements are classified as capital leases and are recorded as financing transactions, while the sublease arrangements with the end customer are classified as operating leases. Payments received from the financier are recorded as financing obligations. These obligations are included in each agreements' contract value and are recorded as short-term or long-term liabilities based on the estimated payment dates. The long-term financing obligations were $443.4 million and $446.2 million as of March 31, 2020 and December 31, 2019, 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. We recognize revenue for the electricity generated by allocating the total proceeds of the sublease payments based on the relative standalone selling prices to electricity revenue and to service revenue.
Purchase Commitments with Suppliers and Contract Manufacturers - In order to reduce manufacturing lead-times and to ensure 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 its forecasts. We can generally give notice of order cancellation at least 90 days prior to the delivery date. However, we issue purchase orders to our component suppliers and third-party manufacturers that may not be cancelable. As of March 31, 2020 and December 31, 2019, we had no material open purchase orders with our component suppliers and third-party manufacturers that are not cancelable.
Power Purchase Agreement Program - Under the terms of the Bloom Electrons program (see Note 13, Power Purchase Agreement Programs), customers agree to purchase power from our Energy Servers at negotiated rates, generally for periods of up to twenty-one years. We are responsible for all operating costs necessary to maintain, monitor and repair the Energy Servers, including the fuel necessary to operate the systems under certain PPA contracts. The risk associated with the future market price of fuel purchase obligations is mitigated with commodity contract futures.
The PPA Entities guarantee the performance of Energy Servers at certain levels of output and efficiency to its customers over the contractual term. The PPA Entities 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 in cost of service revenue in the consolidated statements of operations. We paid $5.7 million and $3.5 million for the quarter ended March 31, 2020 and 2019, respectively.
In June 2015, PPA V entered into a $131.2 million credit agreement to fund the purchase and installation of our Energy Servers. The lenders have commitments to a letter of credit ("LC") facility with the aggregate principal amount of $6.2 million. The LC facility is to fund the Debt Service Reserve Account. The amount reserved under the LC as of March 31, 2020 and December 31, 2019 was $5.0 million.
In 2019, pursuant to the PPA II upgrade of Energy Servers, we agreed to indemnify SPDS for losses that may be incurred in the event of certain regulatory, legal or legislative development and established a cash-collateralized letter of credit for this purpose. As of March 31, 2020, the balance of this cash-collateralized letter of credit was $108.7 million.
In 2019, pursuant to the PPA IIIb upgrade of Energy Servers, we have restricted cash of $20.0 million which has 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. All 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 Servers continue to perform in compliance with our warranty obligations.
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 to provide a grant of $16.5 million 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 grant contains two types of milestones that we must complete to retain the entire amount of the grant proceeds. The first milestone was to provide employment for 900 full time workers in Delaware by the end of the first recapture period of September 30, 2017. The second milestone was to pay these full-time workers a cumulative total of $108.0 million in compensation by September 30, 2017. There are two additional recapture periods at which time we must continue to employ 900 full time workers and the cumulative total compensation paid by us is required to be at least $324.0 million by September 30, 2023. As of March 31, 2020, we had 346 full time workers in Delaware and paid $127.8 million in cumulative compensation. As of December 31, 2019, we had 323 full time workers in Delaware and paid $120.1 million in cumulative compensation. We have so far received $12.0 million of the grant which is contingent upon meeting the milestones through September 30, 2023. In the event that we do not meet the milestones, we may have to repay the Delaware Economic Development Authority, including up to $3.1 million on September 30, 2021 and up to an additional $2.5 million on September 30, 2023. As of March 31, 2020, we paid $1.5 million for recapture provisions and have recorded $10.5 million in other long-term liabilities for potential recapture.
Self-Generation Incentive Program ("SGIP") - Our PPA Entities’ customers receive payments under the SGIP which is a program specific to the State of California that provides financial incentives for the installation of qualifying new self-generation equipment that we own. The SGIP program issues 50% of the fully anticipated amount in the first year the equipment is placed into service. The remaining incentive is then paid based on the size of the equipment (i.e., nameplate kilowatt capacity) over the subsequent five years.
The SGIP program has operational criteria primarily related to fuel mixture and minimum output for the first five years after the qualified equipment is placed in service. If the operational criteria are not fulfilled, it could result in a partial refund of funds received. However, for certain PPA Entities, we make SGIP reservations on behalf of the PPA Entity and, therefore, the PPA Entity bears the risk of loss if these funds are not paid.
Investment Tax Credits ("ITCs") - Our Energy Servers are eligible for federal ITCs that accrued to qualified property under Internal Revenue Code Section 48 when placed into service. However, the ITC program has operational criteria that extend for five years. If the energy property is disposed 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. Our purchase of Energy Servers were by the PPA Entities and, therefore, the PPA Entities bear the risk of repayment if the assets placed in service do not meet the ITC operational criteria in the future.
Legal Matters - From time to time, we are involved in disputes, claims, litigation, investigations, proceedings and/or other legal actions consisting of commercial, securities and employment matters that arise in the ordinary course of business. We review all legal matters at least quarterly and assesses whether an accrual for loss contingencies needs to be recorded. The assessment reflects the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular situation. 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 consolidated financial condition, results of operations or cash flows for the period in which the resolution occurs or on future periods.
In July 2018, two former executives of Advanced Equities, Inc., Keith Daubenspeck and Dwight Badger, filed a Statement of Claim with the American Arbitration Association in Santa Clara, CA, against us, Kleiner Perkins, Caufield & Byers, LLC (“KPCB”), New Enterprise Associates, LLC (“NEA”) and affiliated entities of both KPCB and NEA seeking to compel arbitration and alleging a breach of a confidential agreement executed between the parties on June 27, 2014 (the
“Confidential Agreement”). On May 7, 2019, KPCB and NEA were dismissed with prejudice. On June 15, 2019, a Second Amended Statement of Claim was filed against us alleging securities fraud, fraudulent inducement, a breach of the Confidential Agreement, and violation of the California unfair competition law. On July 16, 2019, we filed our Answering Statement and Affirmative Defenses. On September 27, 2019, we filed a motion to dismiss the Statement of Claim. On March 24, 2020, the Tribunal denied our motion to dismiss in part, and ordered that Claimant’s relief is limited to rescission of the Confidential Agreement or remedies consistent with rescission, and not expectation damages. We do not believe Claimant’s claims supporting rescission have merit nor that Claimants can remit to us the monetary benefits they already obtained under the Confidential Agreement. We have recorded no loss contingency related to this claim.
In June 2019, Messrs. Daubenspeck and Badger filed a complaint against our CEO and our former CFO in the United States District Court for the Northern District of Illinois, Case No. 1:19-cv-04305, asserting nearly identical claims as those in the pending arbitration discussed above. The lawsuit has been stayed pending the outcome of the arbitration. We believe the complaint to be without merit and, as a result, we have recorded no loss contingency related to this claim.
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 initial public offering alleging violations under Sections 11 and 15 of the Securities Act of 1933, as amended, for alleged misleading statements or omissions in our Form S-1 Registration Statement filed with the Securities and Exchange Commission in connection with our July 25, 2018 initial public offering. 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' 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 we intend to vigorously defend.
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 Section 11 and 15 of the Securities Act of 1933, as amended, for alleged misleading statements or omissions in our Form S-1 Registration Statement filed with the Securities and Exchange Commission in connection with our July 25, 2018 initial public offering. On September 3, 2019, James Hunt was appointed as lead plaintiff and Levi & Korsinsky was appointed as plaintiff’s counsel. On November 4, 2019, plaintiffs filed an amended complaint adding the underwriters in our initial public offering, claims under Sections 10b and 20a of the Securities Exchange Act of 1934 and extending the class period to September 16, 2019. On April 21, 2020, plaintiffs filed a second amended complaint adding claims under the Securities Act of 1933. The Second Amended complaint also adds allegations pertaining to the Restatement and, as to claims under the Securities Exchange Act of 1934, extends the class period through February 12, 2020. We believe the complaint to be without merit and we intend to vigorously defend.
In November 2019, Michael Bolouri filed a class action complaint in the federal district court for the Northern District of California against us, certain members of our senior management, certain of our directors and the underwriters in our initial public offering, alleging violations under Section 11 and 15 of the Securities Act of 1933, as amended, and violations under Sections 10b and 20a of the Securities Exchange Act of 1934 for alleged misleading statements or omissions in our Form S-1 Registration Statement filed with the Securities and Exchange Commission in connection with our July 25, 2018 initial public offering and continuing through September 16, 2019. On December 11, 2019, a notice of voluntary dismissal was filed by the plaintiff and the case has now been dismissed.
In September 2019, we received a books and records demand from purported Company 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 from the same law firm on behalf of purported Company stockholder Michael Bolouri (“Bolouri Demand” and, together with the Jacob Demand, the “Demands”). On January 13, 2020, Messrs. Jacob and Bolouri filed a complaint in the Delaware Court of Chancery to enforce the Demands in the matter styled Jacob 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. A trial date for this matter has been set for December 7, 2020. We believe the complaint to be without merit.
In March 2020, Francisco Sanchez filed a class action complaint in Santa Clara County Superior Court against us alleging certain wage and hour violations under the California Labor Code and Industrial Welfare Commission Wage Orders and that we engaged in unfair business practices under the California Business and Professions Code. We are still investigating the allegations but believe the complaint to be without merit and, as a result, we have recorded no loss contingency related to this claim.
15. Segment Information
Segment and the Chief Operating Decision Maker
Our chief operating decision makers ("CODMs"), our Chief Executive Officer and the Chief Financial Officer, review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The CODMs allocate resources and make operational decisions based on direct involvement with our operations and product development efforts. We are managed under a functionally-based organizational structure with the head of each function reporting to the Chief Executive Officer. The CODMs assess performance, including incentive compensation, based upon consolidated operations performance and financial results on a consolidated basis. As such, we have a single operating unit structure and are a single reporting segment.
16. Related Party Transactions
Our operations included the following related party transactions (in thousands):
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|
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|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Total revenue from related parties
|
|
$
|
1,049
|
|
|
$
|
813
|
|
Interest expense to related parties
|
|
1,366
|
|
|
1,612
|
|
Bloom Energy Japan Limited
In May 2013, we entered into a joint venture with Softbank Corp., which is accounted for as an equity method investment. Under this arrangement, we sell Energy Servers and provide maintenance services to the joint venture. For the quarter ended March 31, 2020 and 2019, we recognized related party total revenue of $1.0 million and $0.8 million, respectively. Accounts receivable from this joint venture was $0.4 million as of March 31, 2020 and $2.7 million as of December 31, 2019.
Debt to Related Parties
The following is a summary of our debt and convertible notes from investors considered to be related parties as of March 31, 2020 (in thousands):
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|
|
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|
|
|
|
|
|
|
|
|
|
Unpaid
Principal
Balance
|
|
Net Carrying Value
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|
|
|
Current
|
|
Long-
Term
|
|
Total
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|
|
|
|
|
|
|
|
|
Recourse debt from related parties:
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|
|
|
|
|
|
|
|
10% convertible promissory notes due December 2021 from related parties
|
|
$
|
50,801
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|
|
$
|
—
|
|
|
$
|
52,786
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|
|
$
|
52,786
|
|
Non-recourse debt from related parties:
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|
|
|
|
|
|
|
|
7.5% term loan due September 2028 from related parties
|
|
36,232
|
|
|
2,439
|
|
|
30,597
|
|
|
33,036
|
|
Total debt from related parties
|
|
$
|
87,033
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|
|
$
|
2,439
|
|
|
$
|
83,383
|
|
|
$
|
85,822
|
|
The following is a summary of our debt and convertible notes from investors considered to be related parties as of December 31, 2019 (in thousands):
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|
|
|
|
|
|
|
|
Unpaid
Principal
Balance
|
|
Net Carrying Value
|
|
|
|
Current
|
|
Long-
Term
|
|
Total
|
|
|
|
|
|
|
|
|
|
Recourse debt from related parties:
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|
|
|
|
|
|
|
|
6% convertible promissory notes due December 2020 from related parties
|
|
$
|
20,801
|
|
|
$
|
20,801
|
|
|
$
|
—
|
|
|
$
|
20,801
|
|
Non-recourse debt from related parties:
|
|
|
|
|
|
|
|
|
7.5% term loan due September 2028 from related parties
|
|
38,337
|
|
|
3,882
|
|
|
31,088
|
|
|
34,970
|
|
Total debt from related parties
|
|
$
|
59,138
|
|
|
$
|
24,683
|
|
|
$
|
31,088
|
|
|
$
|
55,771
|
|
In November 2019, one related party note holder exchanged $6.9 million of their 6% Convertible Notes at the conversion price of $11.25 per share into 616,302 shares of common stock. On March 31, 2020, we issued $30.0 million new 10% Convertible Notes to two related party note holders. We repaid $2.1 million and $0.8 million of the non-recourse 7.5% term loan principal balance in the quarters ended March 31, 2020 and 2019, respectively, and we paid $0.7 million and $0.8 million of interest in the quarters ended March 31, 2020 and December 31, 2019, respectively. See Note 7, Outstanding Loans and Security Agreements for additional information on our debt facilities.
17. Subsequent Events
Senior Secured Notes Private Placement
On May 1, 2020, we issued $70.0 million of 10.25% Senior Secured Notes due 2027 (the “10.25% Senior Secured Notes”) in a private placement (the “Senior Secured Notes Private Placement”). The 10.25% Senior Secured Notes are governed by an indenture (the “Senior Secured Notes Indenture”) entered into among us, the guarantors party thereto and U.S. Bank National Association, in its capacity as trustee and collateral agent. The 10.25% Senior Secured Notes are secured by certain of our operations and maintenance agreements that previously were part of the security for the 6% Convertible Notes. We used the proceeds of this issuance to repay $70.0 million of our 10% Convertible Notes on May 1, 2020. The 10.25% Senior Secured Notes are supported by a $150.0 million Indenture between us and US Bank National Association which contains an accordion feature under for an additional $80.0 million of notes that can be issued within the next eighteen months.
Interest on the 10.25% Senior Secured Notes is payable on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 2020. The 10.25% Senior Secured Notes Indenture contains customary events of default and covenants relating to, among other things, the incurrence of debt, affiliate transactions, liens and restricted payments. On or after March 27, 2022, we may redeem all of the 10.25% Senior Secured Notes at a price equal to 108% of the principal amount of the 10.25% Senior Secured Note plus accrued and unpaid interest, with such optional redemption prices decreasing to 104% on and after March 27, 2023, 102% on and after March 27, 2024 and 100% on and after March 27, 2026. Before March 27, 2022, we may redeem the 10.25% Senior Secured Note upon repayment of a make-whole premium. If we experience a change of control, we must offer to purchase for cash all or any part of each holder’s 10.25% Senior Secured Note at a purchase price equal to 101% of the principal amount of the 10.25% Senior Secured Note, plus accrued and unpaid interest.
The amended 6% Convertible Notes and the $30.0 million new 10% Convertible Notes were all memorialized in the Amended and Restated Indenture between the Company and US National Bank dated April 20, 2020.
Other Events
There have been no other subsequent events that occurred during the period subsequent to the date of these financial statements that would require adjustment to our disclosure in the financial statements as presented.