- Fourth quarter gross billings of $62.1 million versus $32.9 million gross billings in fourth quarter 2017. The Company in 2018 had total gross billings of $184.8 million, a 42% increase versus 2017.
- Positive adjusted EBITDA for fourth quarter 2018, the first in the Company’s history
- GAAP loss per share of $0.08; adjusted loss per share of $0.07
- Delivered fuel cell systems to power over 1,900 zero emission electric vehicles
Plug Power’s record setting quarter is a result of technical leadership and continued new product deployment, coupled with constant attention to improving service. These focal points were key to delivering positive adjusted EBITDA for the first time in Company history. The organization successfully enhanced the reliability of our technology while serving a loyal customer base that allowed us to spend the year further cementing our position as the industry’s global leader in hydrogen powered electric mobility.
Long-Term Success in Material Handling
In the fourth quarter of 2018, the Company sold over 1,900 GenDrive fuel cell units, dispensed 1.2 million tons of hydrogen into electric vehicles, built and commissioned three GenFuel hydrogen fueling stations, and delivered products to 15 different customers. These customers included Amazon, Walmart, Supervalu, Whole Foods and BMW. The breakthrough achievement of positive adjusted EBITDA in fourth quarter of 2018 is a direct result of the progress made by the Company on sales, market penetration, service improvement, and cost management.
Today, Plug Power has deployed over 25,000 GenDrive fuel cell units with some of the world’s largest companies and built more than 80 GenFuel fueling stations. These Plug Power designed and constructed stations deliver over 16 tons of hydrogen daily to electric vehicles. These accomplishments have defined the benchmarks around the world for electric vehicle deployment and hydrogen fueling stations.
In 2018, we emphasized our focus on building a profitable material handling business, a market quantified by currently having over 6 million forklift trucks in the field. These efforts continue in 2019 as we innovate more efficient and cost-reduced solutions to increase the ease and efficiency of using hydrogen fuel cell solutions in mobility applications – such as leveraging the IoT (Internet of Things) to perform data/real time monitoring to provide seamless service to customers while improving the profitability of our business.
ProGen Engines: Changing the Way the World Moves
KPMG’s 2018 industry market study stated that hydrogen fuel cell vehicles (HFCV) have replaced battery powered electric vehicles (BEV) as the number one trend through 2025 (KPMG’s 19th Global Automotive Executive Survey 2018). Plug Power’s ProGen line of OEM hydrogen engines are designed specifically to capitalize on this strategic trend and position the Company for continued growth over the coming years.
ProGen is a range of hydrogen fuel-cell engines, geared towards a variety of mobility and stationary applications. ProGen offers a modular and scalable architecture that makes it simple for customers to deploy in a wide variety of applications, including on-road vehicles (e.g. delivery vans), material handling, AGV’s, ground support equipment, drones, and wireless 5G telecom gear.
The electric vehicle (EV) use-case demands solutions that support high utilization and extended runtimes, require reliable performance in harsh environments, allow rapid fueling, and emit zero emissions. We’ve already created the first commercially viable market for fuel cells in material handling, an industry with these same demands. Plug Power, through its ProGen engine offering, is leveraging our years of real-world experience to enable electric mobility through the power of hydrogen fuel cells.
ProGen Metal Stack Development
Plug Power shipped a record 10,000 stacks to customers in 2018. During 2019, the Company is focused on continuing to lead the charge in both MEA and PEM fuel cell stack design and manufacturing. MEA capability was vertically integrated into Plug Power with the strategic technology acquisition of American Fuel Cell (AFC) in 2018.
Combining our MEA design expertise with high-tech production equipment, such as Kodak’s digital high-speed coating technology, we’ve been able to ramp up production, manufacturing more than 10,000 Plug Power MEAs to date, with plans to ramp to an annualized run rate of 400,000 in 2019. Not only are we thrilled with the speed and quality of production, Plug Power takes pride in bringing the production of a key technology product back to the United States. At the start of the fourth quarter of 2018, the Company began shipping production stacks to customers utilizing this in-house MEA technology. Based on numbers put forth in 2018 and our aggressive ramp in 2019, we expect Plug Power to be the largest US MEA supplier by year end.
Plug Power’s proprietary MEA technology is a key component of the new ProGen metal stacks, the heart of our ProGen hydrogen engines. Our recently launched ProGen stack, based on metal plate technology, provides Plug Power with a competitive edge over other conventional graphite-based plate stack designs.
This powerful combination produces a best-in-class automotive stack design for electric mobility applications. These stacks are two and a half times denser than our prior technology and offer a 25% cost reduction at volume.
With the launch of this new ProGen stack, Plug Power continues its commitment to innovation and its goal of accelerating the adoption of zero emission hydrogen fuel cell electric vehicles (FCEVs).
Fuel Cell Electric Vehicles for Fleet Applications
The world is going electric, and hydrogen fuel cells are ideal for commercial electric vehicle applications that demand high-asset utilization or extended range, such as delivery vans, taxis, buses, and municipal/government fleet vehicles. The value proposition for FCEVs includes 10x higher power density than traditional BEVs, greater vehicle range, fast fueling, and the ease of using a simple centralized fueling n infrastructure.
Plug Power delivered the first ProGen-powered delivery van to FedEx at the start of 2018 – today, the vehicle has covered over 14,000 miles delivering packages and has performed flawlessly.
Fuel cells bring significant value to this tethered vehicle market and on-road fleet vehicles are a key area of growth for our ProGen engine line. Turnkey, “plug and play” ProGen engines are designed to allow rapid integration into OEM vehicle platforms. In 2019, Plug Power expects to make further progress with a variety of EV partners across the globe.
Fourth Quarter Operational Performance and Financial Results
Net revenue for the fourth quarter of 2018 was $59.8 million, versus net revenue of $31.1 million for fourth quarter of 2017. Included in our financial results is a $2.3 million provision for common stock warrants reported as a reduction of revenue in fourth quarter of 2018, versus a $1.8 million provision recorded in fourth quarter of 2017. As reported previously, these charges are associated with accounting for warrants stemming from our customer agreements with Amazon and Walmart. Future revenue reductions will occur over time until each of the customers reaches a cumulative $600 million of qualified purchases.
Key operating metrics for the fourth quarter of 2018 include:
• Approximately 1,700 GenDrive units shipped in the quarter (1,900 recognized as revenue), versus 1,200 GenDrive units shipped in fourth quarter of 2017 (700 recognized as revenue).
• Three GenFuel sites sold in the quarter, versus zero for fourth quarter of 2017.
• Approximately 20,000 GenDrive units under service or PPA contract at December 31, 2018, versus approximately 16,000 at December 31, 2017.
• 72 sites under fuel delivery contract at December 31, 2018, versus 58 sites at December 31, 2017.
GAAP gross profit for the fourth quarter of 2018 was $4.5 million, compared to negative $0.7 million for the prior year. Adjusted gross profit for the fourth quarter of 2018 was $6.1 million, or 10% of net revenue.
Adjusted gross profit excludes the interest component of operating leases associated with project financings. Adjusted gross profit for the fourth quarter of 2017 on a comparable basis was $0.8 million, or 3% of net revenue. The improvement in gross margins versus the prior year stems from ongoing volume leverage, product cost downs, and reliability investments in the service and fuel product lines.
GAAP net loss attributable to common shareholders for the fourth quarter of 2018 was $16.9 million, or $0.08 loss per share. The GAAP net loss attributable to common shareholders in the fourth quarter of 2017 was $19.5 million, or $0.09 loss per share on a diluted basis. Adjusted loss per share in the fourth quarter 2018 was $0.07, which excludes certain one-time charges.
Net cash used by operating activities for the fourth quarter of 2018 was $16.0 million, compared to net cash provided of $21.1 million in 2017 (variation mainly due to working capital conversion timing). Adjusted EBITDA for the fourth quarter of 2018 was $0.5 million, compared to negative $7.6 million for the fourth quarter of 2017.
Plug Power has historically financed its Power Purchase Agreement deployments via operating and finance leases, and, as a result, the Company’s financial results are significantly influenced by relevant lease accounting standards. As previously reported, the Company adopted a new lease accounting standard in the third quarter of 2018, effective January 1, 2018. The most significant impact was the recognition of right of use assets and finance obligations for operating leases now reflected in the Consolidated Balance Sheets. The Company recorded the present value of its future minimum operating lease payments as a liability and recognized an amortizing asset for its “right-of-use”. Operating rent expense, included in cost of goods sold going forward, will include the interest component on the Company’s operating lease liability and amortization of its right-of-use asset. In effect, this will align these operating leases more closely with how the Company accounts for finance leases.
Although it appears the level of expense for these operating leases will be consistent with the previous accounting standard, the future financial statement presentation driven from the new standard highlights the commonality that both operating and finance leases are fundamentally means to finance these deployments. Given there is and will continue to be an interest component within operating rent expense reported in GAAP cost of goods sold, Plug Power has excluded it when calculating adjusted gross profit; as is done for finance leases on a GAAP basis. Likewise, since leased asset depreciation and interest on finance leases have been excluded from adjusted EBITDA historically, Plug Power has excluded the similar amounts currently included as operating lease expense when calculating adjusted EBITDA. Both adjustments have been reflected in reported periods to separate financing from the ongoing traditional metrics used to measure true operational performance.
Cash and Liquidity
Operating cash flow used by operating activities for full year 2018 was $57.6 compared to $60.2 million for full year 2017. Overall the Company has recognized improvement in margin expansion and project financing programs with financial institutions that have been structured during the year. The Company anticipates these trends to continue improving its operating cash flow trends.
As of December 31, 2018, Plug Power had a total cash position of $110.2 million, including cash and cash equivalents of $38.6 million and restricted cash of $71.6 million.
As we close 2018 and move into 2019, we see continued traction in the material handling market and expect four major business announcements in 2019 in varied adjacent markets, affirming our confidence with 2019 forecasts for $235 to $245 million in gross billings and adjusted EBITDA positive in 2019. We look forward to sharing more as we progress through 2019.
About Plug Power Inc.
The architect of modern hydrogen and fuel cell technology, Plug Power is the innovator that has taken hydrogen and fuel cell technology from concept to commercialization. Plug Power has revolutionized the material handling industry with its full-service GenKey solution, which is designed to increase productivity, lower operating costs and reduce carbon footprints in a reliable, cost-effective way. The Company’s GenKey solution couples together all the necessary elements to power, fuel and serve a customer. With proven hydrogen and fuel cell products, Plug Power replaces lead acid batteries to power electric industrial vehicles, such as the lift trucks customers use in their distribution centers.
Extending its reach into the on-road electric vehicle market, Plug Power’s ProGen platform of modular fuel cell engines empowers OEMs and system integrators to rapidly adopt hydrogen fuel cell technology. ProGen engines are proven today, with thousands in service, supporting some of the most rugged operations in the world. Plug Power is the partner that customers trust to take their businesses into the future. www.plugpower.com.