Bloom Energy Corp

Previous wording

This Quarterly Report on Form 10-Q contains“forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by management. For example, forward-looking statements include, but are not limited to, our expectations regarding our products and services, including our aim to provide resilient products, business strategies, including capital expenditures to expand production capacity and sources of funding for capital expenditures, our expanded strategic partnership with SK ecoplant, operations, supply chain (including any direct or indirect effects from the Russia-Ukraine war or geopolitical developments in China), new markets, government incentive programs including the scheduled expiration of the Investment Tax Credit at the end of 2024, impact of the Inflation Reduction Act of 2022 (the “IRA”) and transferability of tax credits on our business and the financing market for installations of our products, impact of new foreign tax rules on our financial statements, growth of the hydrogen market, sufficiency of our cash and our liquidity, the potential to engage in equity or debt financing transactions, future capital requirements and use of proceeds, our commitments or contingencies, and statements under “Key Macro Trends.” All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact are forward-looking statements. Forward-looking statements may be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “designs,” “plans,”“predicts,” “targets,” “forecasts,” “will,” “would,” “could,” “can,” “may,” “aim,” “potential,” “mission,” “commit” and similar terms. These statements are based on the beliefs and assumptions of our management based on information currently available to management at the time they are made. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results, outcomes and the timing of certain events to differ materially from future results or outcomes expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed in the section titled “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect …

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains“forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by management. For example, forward-looking statements include, but are not limited to, our expectations regarding our products and services, including our aim to provide resilient products, business strategies, including capital expenditures to expand production capacity and sources of funding for capital expenditures, our expanded strategic partnership with SK ecoplant, operations, supply chain (including any direct or indirect effects from the Russia-Ukraine war, armed conflict in the Middle East, or geopolitical developments in China), new markets, government incentive programs including the scheduled expiration of the Investment Tax Credit at the end of 2024, impact of the Inflation Reduction Act of 2022 (the “IRA”) and transferability of tax credits on our business and the financing market for installations of our products, impact of new foreign tax rules on our financial statements, growth of the hydrogen market, sufficiency of our cash and our liquidity, the potential to engage in equity or debt financing transactions, future capital requirements and use of proceeds, our commitments or contingencies, and statements under “Key Macro Trends.” All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact are forward-looking statements. Forward-looking statements may be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “designs,” “plans,”“predicts,” “targets,” “forecasts,” “will,” “would,” “could,” “can,” “may,” “aim,” “potential,” “mission,” “commit” and similar terms. These statements are based on the beliefs and assumptions of our management based on information currently available to management at the time they are made. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results, outcomes and the timing of certain events to differ materially from future results or outcomes expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed in the section titled “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. Such forward-looking statements speak only as of the date of this report. We disclaim any obligation to update any forward-looking statements made in this Quart…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We continue to innovate our products to offer energy solutions to our customers. In February 2024, we announced our Be Flexible TM offering which introduced load following capabilities to enable customers and utilities to meet variable electricity load and demand. Our Bloom Energy Servers allow us to provide energy solutions for customers, as our products are designed to work with existing carbon capture utilization and storage (“CCUS”) and combined heat and power (“CHP”) technologies. CCUS can mitigate emissions from natural gas as the Energy Server generates a relatively pure stream of CO 2 that can be used or sequestered. CHP allows the exhaust heat generated by the Energy Server to be channeled and available for use, further increasing efficiency of the system.

Current wording

We continue to innovate our products to offer energy solutions to our customers. In February 2024, we announced our Be Flexible TM offering which introduced load following capabilities to enable customers and utilities to meet variable electricity load and demand. Our Bloom Energy Servers allow us to provide energy solutions for customers, as our products are designed to work with existing carbon capture utilization and storage (“CCUS”) and combined heat and power (“CHP”) technologies. CCUS can mitigate emissions from natural gas as the Energy Server generates a relatively pure stream of CO 2 that can be used or sequestered. CHP allows the exhaust heat generated by the Energy Server to be channeled and made available for use, further increasing the efficiency of the system.

Previous wording

The rising cost of natural gas, increases in gas distribution rates, limited availability of natural gas supply, as well as disruptions to the world gas markets, has increased the cost of our power solutions for customers and, in certain cases where there is a lack of fuel supply, a complete inability to operate the systems. In the U.S., the lack or slow development of pipeline infrastructure is impacting the timing of customers being able to take advantage of our power solution opportunities. In certain jurisdictions in the U.S. and Europe, natural gas bans prevent the use of our power solutions unless alternative fuels are available.

Current wording

Many data center customers and other large power users have signed exclusivity arrangements with their utilities, and this often creates a more complicated dynamic for them to move to a behind-the-meter solution. The rising cost of natural gas, increases in gas distribution rates, limited availability of natural gas supply, as well as disruptions to the world’s gas markets, has increased the cost of our power solutions for customers and, in certain cases where there is a lack of fuel supply, a complete inability to operate the systems. In the U.S., the lack or slow development of pipeline infrastructure is impacting the timing of customers being able to take advantage of our power solution opportunities. In certain jurisdictions in the U.S. and Europe, natural gas bans prevent the use of our power solutions unless alternative fuels are available.

Previous wording

In addition, many of our potential data center and industrial customers are pursuing greenfield opportunities where the development cycle is long and laden with permitting requirements, and the uncertainty of these factors is leading to a more difficult customer decision-making process and longer sales cycles.

Current wording

In addition, many of our potential data center and industrial customers are pursuing greenfield opportunities where the development cycle is long and laden with permitting requirements, and the uncertainty of these factors is leading to a more difficult customer decision-making process and longer sales cycles. Data center greenfield projects require significant investments in real estate, facility costs, and technology, among other elements, in addition to the investment in our power solutions, and the timing and sequencing of those investments is largely outside of our control.

Previous wording

Demand for power has continued to significantly outpace available power generation supply from the grid. The transition towards the electrification of everything, including in a wide range of commercial and consumer products, has strained aging and unreliable power grids across the globe. The expanding use of AI has led to the expansion of existing data centers and plans for new greenfield data centers. The resulting increase in demand for power from Al-related companies has further reduced available supply from the grid and has led non-AI-related companies to consider on-site distributed power, including Bloom Energy Servers, to meet their power needs.

Current wording

Demand for power has continued to significantly outpace available power generation supply from the grid, with the need for power becoming more acute in 2024. The transition towards the electrification of everything, including in a wide range of commercial and consumer products, has strained aging and unreliable power grids across the globe. The expanding use of AI has led to the expansion of existing data centers and plans for new greenfield data centers. The resulting increase in demand for power from Al-related companies has further reduced available supply from the grid and has led non-AI-related companies to consider on-site distributed power, including Bloom Energy Servers, to meet their power needs.

Previous wording

In part because of the increases in demand for power, time to power has increased for companies seeking to connect new projects to the grid. According to the Lawrence Berkeley National Lab, U.S. interconnection queue delays have experienced significant growth, with a forty percent year over year increase in 2022. The typical project interconnection process for large scale projects grew to five years in 2022 compared to three years in 2015 and two years in 2008. Bloom Energy Servers can be configured as fully-islanded, microgrid solutions that are not interconnected to the grid, which can often provide a customer power in months instead of years. Our fully-islanded microgrid solutions can provide power on-site, without the need for costly transmission and distribution systems required by electrical grids. If a customer desires back up power or a “grid parallel” solution in combination with the Bloom microgrid, required interconnection studies and lengthy interconnection queues remain, eroding the time to power value proposition.

Current wording

In part because of the increases in demand for power, time to power has increased for companies seeking to connect new projects to the grid. According to the Lawrence Berkeley National Lab, U.S. interconnection queue delays have experienced significant growth, with a forty percent year over year increase in 2022. The typical project interconnection process for large scale projects grew to five years in 2022 compared to three years in 2015 and two years in 2008. Bloom Energy Servers can be configured as fully-islanded, microgrid solutions that are not interconnected to the grid, which can often provide a customer power in months instead of years. Our fully-islanded microgrid solutions can provide power on-site, without the need for costly transmission and distribution systems required by electrical grids. We are seeing greater interest in fully-islanded microgrid solutions among data center customers because of these interconnection-related delays. If a customer desires back up power or a “grid parallel” solution in combination with the Bloom microgrid, required interconnection studies and lengthy interconnection queues remain, eroding the time to power value proposition.

Previous wording

In the fourth quarter of 2022, we entered into a Power Purchase Agreement (“PPA”) contract for the sale of electricity to a customer for three greenfield sites that were at various stages of development (the “Project”). The first site was expected to be operational with power by the third quarter of 2024. We sold 73 megawatts of the Energy Servers to a distributor with the expectation that the distributor would support installation on the Project and install the Energy Servers at the three Project sites. For site specific reasons, in the first quarter of 2024, the end customer decided not to deploy the Energy Servers at the originally selected sites and is looking at alternative sites for deployment. In the interim, the end customer has commenced payments under the PPA and has agreed to continue such payments for the earlier of the full term of the PPA or deployment of the Energy Servers. We will continue to assist the distributor to deploy the Energy Servers at the alternative installation sites selected by the end customer. Notwithstanding this, depending on the length of the installation delay, the distributor may decide to reduce future orders or cancel existing orders until the Energy Servers are deployed, and either action could materially and adversely affect our product revenue and the timing of the associated cash flows in 2024.

Current wording

In the fourth quarter of 2022, we entered into a Power Purchase Agreement (“PPA”) contract for the sale of electricity to a customer for three greenfield sites that were at various stages of development (the “Project”). The first site was expected to be operational with power by the third quarter of 2024. We sold 73 megawatts of the Energy Servers to a distributor with the expectation that the distributor would support installation on the Project and install the Energy Servers at the three Project sites. For site specific reasons, in the first quarter of 2024, the end customer decided not to deploy the Energy Servers at the originally selected sites and is looking at alternative sites for deployment. In the interim, the end customer has commenced payments under the PPA and has agreed to continue such payments for the earlier of the full term of the PPA or deployment of the Energy Servers. We will continue to assist the distributor in its efforts to deploy the Energy Servers at the alternative installation sites selected by the end customer. Notwithstanding this, depending on the length of the installation delay, the distributor may decide to reduce future orders or cancel existing orders until the Energy Servers are deployed, and either action could materially and adversely affect our product revenue and the timing of the associated cash flows in 2024.

Previous wording

In 2023, the South Korean government moved to a new, government-run bidding process for fuel cell purchases, which has impacted and may continue to impact demand for our power solutions. In the U.S., absent Congressional action, the Investment Tax Credit (“ITC”) for fuel cells running on a non-zero carbon fuel is currently scheduled to expire at the end of fiscal year 2024. To date, Congress has not renewed the ITC. Because 2024 is a presidential election year in the U.S., it is possible Congress may be unable to achieve an extension of the ITC for commercial fuel cell purchasers this year. If the ITC is not extended for fuel cells, U.S. bookings, revenue and gross margins could be materially impacted. In 2024, the expiration of the ITC could increase demand for ITC-compliant sales of our Energy Servers due to customer desire to secure ITC for their projects through safe harboring. However, if our customers or project-level investors prove reluctant to make sufficient cash outlays in 2024 for purchases of Energy Servers for future projects, our sales could be negatively impacted. The Inflation Reduction Act of 2022 (“IRA”) established a new clean electricity production credit and a clean electricity investment credit. There is considerable uncertainty around whether, or the conditions under which, such credits will be available for transactions involving our Energy Servers. In addition, delays in adoption of Renewable Fuel Standard regulations in the U.S. for the use of biogas to generate electricity for electric vehicles, along with minimal governmental focus on utilization of biogas outside of use by methane-fueled vehicles, have created uncertainty in prospects for broader biogas availability for industrial uses, including our power solutions. In addition, in most jurisdictions, air permits and various land use permits are required for installation of our solutions over a certain amount of mega-watts, and generally the length of time to obtain these permits increased, while the level of certainty of issuance has decreased and if issued, the cost of compliance requirements can be cost prohibitive. We have experienced a reluctance in certain states to issue permits for gas generation equipment. Even if issued, states may require a blend of costly renewable fuels or other measures to advance climate goals. In Ireland, which is a large data center market, a directive from the Minister of the Department of the Environment, Climate and Communications to restrict grid connections to data centers and other large power users, along with a halt in high-pressure gas installations has delayed our selling activities. This has adversely impacted our selling activities.

Current wording

In 2023, the South Korean government moved to a new, government-run bidding process for fuel cell purchases, which has impacted and may continue to impact demand for our power solutions. In the U.S., absent Congressional action, the Investment Tax Credit (“ITC”) for fuel cells running on a non-zero carbon fuel is currently scheduled to expire at the end of fiscal year 2024. To date, Congress has not renewed the ITC. Because 2024 is a presidential election year in the U.S., it is possible Congress may be unable to achieve an extension of the ITC for commercial fuel cell purchasers this year. If the ITC is not extended for fuel cells, U.S. bookings, revenue and gross margins could be materially impacted. In 2024, the expiration of the ITC could increase demand for ITC-compliant sales of our Energy Servers due to customer desire to secure ITC for their projects through safe harboring. However, if our customers or project-level investors prove reluctant to make sufficient cash outlays in 2024 for purchases of Energy Servers for future projects, our sales could be negatively impacted. The Inflation Reduction Act of 2022 (“IRA”) established a new clean electricity production credit and a clean electricity investment credit. There is considerable uncertainty around whether, or the conditions under which, such credits will be available for transactions involving our Energy Servers. In addition, delays in adoption of Renewable Fuel Standard regulations in the U.S. for the use of biogas to generate electricity for electric vehicles, along with minimal governmental focus on utilization of biogas outside of use by methane-fueled vehicles, have created uncertainty in prospects for broader biogas availability for industrial uses, including our power solutions. In addition, in most jurisdictions, air permits and various land use permits are required for installation of our solutions over a certain amount of megawatts, and generally the length of time to obtain these permits increased, while the level of certainty of issuance has decreased and if issued, the cost of compliance requirements can be cost prohibitive. We have experienced a reluctance in certain states to issue permits for gas generation equipment. Even if issued, states may require a blend of costly renewable fuels or other measures to advance climate goals. In Ireland, which is a large data center market, a directive from the Minister of the Department of the Environment, Climate and Communications to restrict grid connections to data centers and other large power users, along with a halt in high-pressure gas installations has delayed our selling activities.

Previous wording

In the second quarter of 2024, we entered into an agreement to sell Bloom Electrolyzers in the European market. The significant governmental interest, investment, and stimulation of clean hydrogen in the U.S., Europe and in many other regions across the globe have not yet had significant impacts on the supply of hydrogen. To date, while the number of proposed hydrogen production projects has grown rapidly, only a small fraction has reached the final investment decision stage, and an even smaller fraction have been deployed. In addition, the infrastructure needed to transport hydrogen, whether through pipelines or maritime or land-based tankers, is currently only sufficient for existing uses, and has not begun to be significantly extended for anticipated future uses, with hydrogen blending and other approaches remaining at pilot stages. It remains unclear whether regulators in some jurisdictions will allow hydrogen to be introduced into gas distribution systems, which could limit our customers’ ability to transport hydrogen from the point of production to the point of consumption. Additionally, U.S. Treasury Department rules surrounding the use of market-based renewable energy could make it more difficult for hydrogen projects to acquire energy needed to access the Production Tax Credit.

Current wording

The significant governmental interest, investment, and stimulation of clean hydrogen in the U.S., Europe and in many other regions across the globe have not yet had significant impacts on the supply of hydrogen. To date, while the number of proposed hydrogen production projects has grown rapidly, only a small fraction has reached the final investment decision stage, and an even smaller fraction have been deployed. In addition, the infrastructure needed to transport hydrogen, whether through pipelines or maritime or land-based tankers, is currently only sufficient for existing uses, and has not begun to be significantly extended for anticipated future uses, with hydrogen blending and other approaches remaining at pilot stages. It remains unclear whether regulators in some jurisdictions will allow hydrogen to be introduced into gas distribution systems, which could limit our customers’ ability to transport hydrogen from the point of production to the point of consumption. Additionally, U.S. Treasury Department rules surrounding the use of market-based renewable energy could make it more difficult for hydrogen projects to acquire energy needed to access the Production Tax Credit.

Previous wording

We continue to see effects from global supply chain tightness due to the current inflationary environment, war in Ukraine, and trade tensions between the U.S. and China. We are not aware of, and do not expect any significant direct impact on our business or supply chain from the Israel-Gaza Strip armed conflict. While we have not experienced any significant component shortages to date, we are facing pressures from inflation. These dynamics could worsen as a result of continued geopolitical instability. We are also reliant on third party providers of storage equipment, infrastructure equipment and pipelines, and other materials and technologies that work with our products to provide an energy solution for customers. In the event we are unable to mitigate the impacts of delays and/or price increases in raw materials and components, it could delay the manufacturing and installation of, and increase the costs of, our products, which would adversely impact our cash flows and results of operations, including our revenues and gross margin. We expect these supply chain challenges to continue in the short term.

Current wording

We continue to see effects from global supply chain tightness due to the current inflationary environment, war in Ukraine, and trade tensions between the U.S. and China. We are not aware of, and do not expect any significant direct impact on our business or supply chain from the armed conflict in Israel and neighboring areas. While we have not experienced any significant component shortages to date, we are facing pressures from inflation. These dynamics could worsen as a result of continued geopolitical instability or escalation of current military conflicts or trade tensions. We are also reliant on third party providers of storage equipment, infrastructure equipment and pipelines, and other materials and technologies that work with our products to provide an energy solution for customers. In the event we are unable to mitigate the impacts of delays and/or price increases in raw materials and components, it could delay the manufacturing and installation of, and increase the costs of, our products, which would adversely impact our cash flows and results of operations, including our revenues and gross margin. We expect these supply chain challenges to continue in the short term.

Previous wording

If we are delayed in or unable to perform maintenance, our previously installed Energy Servers would likely experience adverse performance impacts, including reduced output and/or efficiency, which could result in warranty and/or guaranty claims by our customers. Further, due to the nature of our Energy Servers, if we are unable to replace worn parts in accordance with our standard maintenance schedule, we may incur higher costs in the future. During the six months ended June 30, 2024, we experienced no significant delays in servicing our Energy Servers.

Current wording

In the third quarter of 2024, our installation projects experienced some delays relating to, among other things, permitting, utility delays, and access to customer facilities. However, these delays did not significantly impact our revenue. If we are delayed in or unable to perform maintenance, our previously installed Energy Servers would likely experience adverse performance impacts, including reduced output and/or efficiency, which could result in warranty and/or guaranty claims by our customers. As we seek larger projects with sophisticated counterparties, customers have sought to impose more stringent performance requirements on us. If we experience a significant increase of product failure in the future, our service expense may increase and we may fail to achieve the performance commitments to our customers, which could result in warranty and/or guaranty claims. Additionally, product failure and service costs may increase as we initially deploy new applications for our Energy Server, including Be Flexible load following, CCUS, and CHP. Further, due to the nature of our Energy Servers, if we are unable to replace worn parts in accordance with our standard maintenance schedule, we may incur higher costs in the future. During the nine months ended September 30, 2024, we experienced no significant delays in servicing our Energy Servers.

Previous wording

On March 27, 2024, Bloom, Bloom SK Fuel Cell, LLC, a joint venture in the Republic of Korea with SK ecoplant (the “Korean JV”), and SK ecoplant entered into the Third Amendment to the Amended and Restated Preferred Distribution Agreement (the “Third ARPDA”). The Third ARPDA adds SK Eternix Co., Ltd., as an additional distributor of Bloom products and ancillary equipment in the Republic of Korea.

Current wording

On March 27, 2024, Bloom, Bloom SK Fuel Cell, LLC, a joint venture in the Republic of Korea with SK ecoplant (the “Korean JV”), and SK ecoplant entered into the Third Amendment to the Amended and Restated Preferred Distribution Agreement, as amended (the “Third ARPDA”). The Third ARPDA adds SK Eternix Co., Ltd., as an additional distributor of Bloom products and ancillary equipment in the Republic of Korea.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $581.7 million. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds of $548.7 million. We seek to maintain these balances with high credit quality counterparties, regularly monitor the amount of our credit exposure to any one issuer and diversify our investments in order to minimize our exposure.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $495.7 million. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds of $466.7 million. We seek to maintain these balances with high credit quality counterparties, regularly monitor the amount of our credit exposure to any one issuer and diversify our investments in order to minimize our exposure.

Previous wording

As of June 30, 2024, we had $1,121.0 million of recourse debt, $4.3 million of non-recourse debt and $8.5 million of other long-term liabilities. As of June 30, 2024, all of our debt was classified as long-term. For a complete description of our outstanding debt, please see Part I, Item 1, Note 7 —Outstanding Loans and Security Agreements.

Current wording

As of September 30, 2024, we had $1,122.9 million of recourse debt, $4.6 million of non-recourse debt, and $8.8 million of other long-term liabilities. As of September 30, 2024, $114.1 million and $1,013.3 million of our debt was classified as short-term and long-term, respectively. For a complete description of our outstanding debt, please see Part I, Item 1, Note 7 —Outstanding Loans and Security Agreements.

Previous wording

The combination of our cash and cash equivalents and cash flow to be generated by our operations is expected to be sufficient to meet our anticipated cash flow needs for at least the next 12 months. If these sources of cash are insufficient or are not received in a timely manner to satisfy our near-term or future cash needs, we may require additional capital from equity or debt financings to fund our operations, our manufacturing capacity, product development, and market expansion requirements and to timely respond to competitive market pressures or strategic opportunities, among other things. We may, from time to time, engage in a variety of financing transactions for such purposes, including factoring our accounts receivable. During the six months ended June 30, 2024, we factored $102.3 million of accounts receivable. However, we may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. Although currently we do not have any floating-rate notes on our balance sheet, rising interest rates may increase our overall cost of capital. If we raise additional funds through further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock.

Current wording

The combination of our cash and cash equivalents and cash flow to be generated by our operations is expected to be sufficient to meet our anticipated cash flow needs for at least the next 12 months. If these sources of cash are insufficient or are not received in a timely manner to satisfy our near-term or future cash needs, we may require additional capital from equity or debt financings to fund our operations, our manufacturing capacity, product development, and market expansion requirements and to timely respond to competitive market pressures or strategic opportunities, among other things. We may, from time to time, engage in a variety of financing transactions for such purposes, including factoring our accounts receivable. During the nine months ended September 30, 2024, we factored $184.2 million of accounts receivable. However, we may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. Although currently we do not have any floating-rate notes on our balance sheet, rising interest rates may increase our overall cost of capital. If we raise additional funds through further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock.

Previous wording

Our operating activities consisted of net loss adjusted for certain non-cash items plus changes in our operating assets and liabilities or working capital. Net cash used in operating activities during the six months ended June 30, 2024, was $322.8 million, a decrease of $38.4 million compared to the prior year period. The decrease in cash used in operating activities during the six months ended June 30, 2024, as compared to the prior year period, was primarily driven by changes in our working capital of $305.7 million due to (1) an increase in accounts receivable and contract assets by $183.3 million and $49.0 million, respectively, triggered by the timing of revenue transactions, corresponding collections and billing milestones, (2) an increase in inventory levels by $19.1 million to support future demand, and (3) the timing of payments to vendors.

Current wording

Our operating activities consisted of net loss adjusted for certain non-cash items plus changes in our operating assets and liabilities or working capital. Net cash used in operating activities for the nine months ended September 30, 2024 related primarily to the changes in our working capital of $398.5 million predominantly due to (1) an increase in accounts receivable and contract assets by $250.3 million and $79.7 million, respectively, triggered by the timing of revenue transactions, corresponding collections and billing milestones, (2) an increase in inventory levels by $83.2 million to support future demand, and (3) the timing of payments to vendors.

Previous wording

Our investing activities have consisted of capital expenditures, including investments to increase our production capacity. Cash used in investing activities during the six months ended June 30, 2024, was $33.4 million, a decrease of $12.7 million compared to the prior year period and was primarily due to the decrease in expenditures on tenant improvements for a newly leased engineering and manufacturing building in Fremont, California, which opened in July 2022. We expect to continue to make capital investments over the next few quarters to expand production capacity at our new manufacturing facility in Fremont, California, which includes the purchase of new equipment and other tenant improvements. We intend to fund these capital expenditures from cash on hand as well as cash flow to be generated from operations. We may also evaluate and arrange equipment lease financing to fund these capital expenditures.

Current wording

Our investing activities have consisted of capital expenditures, including investments to increase our production capacity. Cash used in investing activities during the nine months ended September 30, 2024, was $47.7 million, a decrease of $19.8 million compared to the prior year period, and was primarily due to the decrease in expenditures on tenant improvements for a newly leased engineering and manufacturing building in Fremont, California, which opened in July 2022. We expect to continue to make capital investments over the next few quarters to expand production capacity at our new manufacturing facility in Fremont, California, which includes the purchase of new equipment and other tenant improvements. We intend to fund these capital expenditures from cash on hand as well as cash flow to be generated from operations. We may also evaluate and arrange equipment lease financing to fund these capital expenditures.

Previous wording

Our financing activities consist of borrowings and repayments of debt, proceeds and repayments of financing obligations, distributions paid to noncontrolling interests, contributions from noncontrolling interests, payments of dividends, proceeds from the issuances of our common stock, and other financing activities. Net cash provided by financing activities during the six months ended June 30, 2024 was $250.0 million, a decrease of $561.8 million compared to the prior year period, predominantly due to (1) a decrease in the proceeds from issuance of redeemable convertible preferred stock of $310.6 million, net of paid issuance costs of $0.4 million, as a result of the SK ecoplant Second Tranche Closing in the six months ended June 30, 2023 (please refer to Part II, Item 8, Note 17 —SK ecoplant Strategic Investmentin our Annual Report on Form 10-K for the fiscal year ended December 31, 2023), (2) a decrease in proceeds from the issuance of debt by $231.5 million, and (3) an increase in the repayment of debt by $68.1 million. The decrease was partially offset by the purchase in fiscal year 2023 of the capped call of $54.5 million related to the 3% Green Notes due June 2028 issued in the second quarter of fiscal year 2023.

Current wording

Our financing activities consist of borrowings and repayments of debt, proceeds and repayments of financing obligations, distributions paid to noncontrolling interests, contributions from noncontrolling interests, payments of dividends, proceeds from the issuances of our common stock, and other financing activities. Net cash provided by financing activities during the nine months ended September 30, 2024 was $244.4 million, a decrease of $437.8 million compared to the prior year period, predominantly due to (1) a decrease in the proceeds from issuance of redeemable convertible preferred stock of $310.6 million, net of paid issuance costs of $0.4 million, as a result of the SK ecoplant Second Tranche Closing in the nine months ended September 30, 2023 (please refer to Part II, Item 8, Note 17 —SK ecoplant Strategic Investmentin our Annual Report on Form 10-K for the fiscal year ended December 31, 2023), and (2) a decrease in proceeds from the issuance of debt by $231.5 million. The decrease was partially offset by (1) the purchase in fiscal year 2023 of the capped call of $54.5 million related to the 3% Green Notes due June 2028 issued in the second quarter of fiscal year 2023, and (2) a decrease in the repayment of debt by $50.4 million.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2024, consisted of (1) the proceeds from issuance of the 3% Green Notes due June 2029 of $402.5 million, (2) the proceeds from issuance of common stock of $7.0 million, (3) the contribution from a noncontrolling interest of $4.0 million, (4) the proceeds from financing obligations of $1.3 million, (5) the partial repurchase of the 2.5% Green Notes of $141.0 million, (6) the repayment of debt issuance costs of $12.3 million pertaining to the 3% Green Notes due June 2029, (7) the repayment of financing obligations of $10.0 million, and (8) a dividend payment of $1.5 million. Our working capital was strengthened by the issuance of the 3% Green Notes due June 2029 and 3% Green Notes due June 2028 in May 2024 and May 2023, respectively, as well as financing activities with SK ecoplant in the first quarter of 2023, but we may still enter the equity or debt market as needed to support the expansion of our business. Please refer to Part I, Item 1, Note 7 —Outstanding Loans and Security Agreements of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors— Risks Related to Our Liquidity— Our indebtedness, and restrictions imposed by the agreements governing our outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for more information regarding the terms of and risks associated with our debt.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024, consisted of (1) the proceeds from issuance of the 3% Green Notes due June 2029 of $402.5 million, (2) the proceeds from issuance of common stock of $11.1 million, (3) the contribution from a noncontrolling interest of $4.0 million, (4) the proceeds from financing obligations of $1.8 million, (5) the partial repurchase of the 2.5% Green Notes of $141.0 million, (6) the repayment of financing obligations of $19.8 million, (7) the repayment of debt issuance costs of $12.8 million pertaining to the 3% Green Notes due June 2029, and (8) a dividend payment of $1.5 million. Our working capital was strengthened by the issuance of the 3% Green Notes due June 2029 and 3% Green Notes due June 2028 in May 2024 and May 2023, respectively, as well as financing activities with SK ecoplant in the first quarter of 2023, but we may still enter the equity or debt market as needed to support the expansion of our business. Please refer to Part I, Item 1, Note 7 —Outstanding Loans and Security Agreements of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors— Risks Related to Our Liquidity— Our indebtedness, and restrictions imposed by the agreements governing our outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for more information regarding the terms of and risks associated with our debt.

Previous wording

Our customers have several purchase alternatives for our Energy Servers. The portion of acceptances attributable to each purchase alternative in the three and six months ended June 30, 2024, and 2023 was as follows:

Current wording

Our customers have several purchase alternatives for our Energy Servers. The portion of total revenue attributable to each purchase option in the three and nine months ended September 30, 2024, and 2023 was as follows:

Previous wording

The portion of total revenue attributable to each purchase option in the three and six months ended June 30, 2024, and 2023 was as follows:

Current wording

The portion of acceptances attributable to each purchase alternative in the three and nine months ended September 30, 2024, and 2023 was as follows:

Previous wording

For O&M Agreements that are subject to renewal, our future service revenue from such agreements are subject to our obligations to make payments for underperformance against the performance guaranties, which are capped at an aggregate total of approximately $577.7 million (including $451.9 million related to portfolio financing entities and $125.8 million related to all other transactions, and include payments for both low output and low efficiency) and our aggregate remaining potential payment related to these underperformance obligations was approximately $489.1 million as of June 30, 2024. For the six months ended June 30, 2024, we made performance guarantee payments of $16.9 million.

Current wording

For O&M Agreements that are subject to renewal, our future service revenue from such agreements are subject to our obligations to make payments for underperformance against the performance guaranties, which are capped at an aggregate total of approximately $583.4 million (including $456.1 million related to portfolio financing entities and $127.3 million related to all other transactions, and include payments for both low output and low efficiency) and our aggregate remaining potential payment related to these underperformance obligations was approximately $491.1 million as of September 30, 2024. For the nine months ended September 30, 2024, we made performance guarantee payments of $18.8 million.

Previous wording

There were no significant changes in our international channel partners during the six months ended June 30, 2024. For information on international channel partners, see Part II, Item 7 —Management’s Discussion and Analysis of Financial Condition and Results of Operations, International Channel Partners section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

There were no significant changes in our international channel partners during the nine months ended September 30, 2024. For information on international channel partners, see Part II, Item 7 —Management’s Discussion and Analysis of Financial Condition and Results of Operations, International Channel Partners section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

The product and megawatt acceptances in the three and six months ended June 30, 2024, and 2023 were as follows:

Current wording

The product and megawatt acceptances in the three and nine months ended September 30, 2024, and 2023 were as follows:

Previous wording

Product accepted increased approximately by 33 systems, or 3.0%, for the six months ended June 30, 2024, as compared to the prior year period, which is equivalent to 3 megawatts. Acceptance volume increased as demand increased for our products, offset by the effect of a large transaction in the first quarter of fiscal year 2023 that did not repeat in fiscal 2024.

Current wording

Product accepted decreased approximately by 43 systems, or 2.2%, for the nine months ended September 30, 2024, as compared to the prior year period, which is equivalent to 4 megawatts. Acceptance volume decrease was driven by (1) the repowering of PPA V, which was sold in the third quarter of fiscal year 2023, and (2) the effect of a large transaction in the first and the second quarter of fiscal year 2023 that did not repeat in fiscal year 2024.

Previous wording

The increase in acceptances of 115 megawatts achieved for the six months ended June 30, 2024, was added to our installed base and, therefore, increased our total megawatts accepted, net, from 1,241 megawatts to 1,356 megawatts.

Current wording

The increase in acceptances of 189 megawatts achieved for the nine months ended September 30, 2024, was added to our installed base and, therefore, increased our total megawatts accepted, net, from 1,241 megawatts as of December 31, 2023, to 1,430 megawatts as of September 30, 2024.

Previous wording

Total product related costs for the three and six months ended June 30, 2024, and 2023 was as follows:

Current wording

Total product related costs for the three and nine months ended September 30, 2024, and 2023 was as follows:

Previous wording

Product costs of product accepted decreased by $62 per kilowatt, or 2.8%, for the six months ended June 30, 2024, as compared to the prior year period. The decrease in costs was primarily driven by our continued efforts to reduce material costs, implement cost reduction programs with our vendors, improved processes, and automation at our manufacturing facilities, and reduced labor and overhead costs through restructuring programs executed in fiscal year 2023. The decrease was partially offset by changes in mix of the solutions delivered.

Current wording

Product costs of product accepted decreased by $58 per kilowatt, or 2.8%, and by $55 per kilowatt, or 2.6%, for the three and nine months ended September 30, 2024, respectively, as compared to the prior year period. The decrease in costs was primarily driven by our continued efforts to reduce material costs, implement cost reduction programs with our vendors, improved processes, automation at our manufacturing facilities, and reduced labor and overhead costs through restructuring programs executed in fiscal year 2023. The decrease was partially offset by changes in the mix of the solutions delivered.

Previous wording

Period costs of manufacturing related expenses decreased by $2.6 million, or 14.7%, for the three months ended June 30, 2024, as compared to the prior year period. Our period costs of manufacturing related expenses decreased primarily as a result of ongoing cost reduction efforts and manufacturing efficiencies.

Current wording

Period costs of manufacturing related expenses decreased by $8.1 million, or 47.2%, and by $5.6 million, or 11.9%, for the three and nine months ended September 30, 2024, respectively, as compared to the prior year period. Our period costs of manufacturing-related expenses decreased primarily as a result of ongoing cost reduction efforts and manufacturing efficiencies.

Previous wording

Installation costs on product accepted increased by $215 per kilowatt, or 48.5%, and by $56 per kilowatt, or 12.1%, for the three and six months ended June 30, 2024, respectively, as compared to the prior year period. Each customer site is unique and installation costs can vary due to a number of factors, including site complexity, size, and location of gas, among other factors. As such, installation on a per kilowatt basis can vary significantly from period to period. For the three and six months ended June 30, 2024, this increase in cost was primarily driven by the change in the mix of sites requiring Bloom installation.

Current wording

Installation costs on product accepted increased by $165 per kilowatt, or 51.7%, and by $102 per kilowatt, or 25.3%, for the three and nine months ended September 30, 2024, respectively, as compared to the prior year period. Each customer site is unique, and installation costs can vary due to a number of factors, including site complexity, size, and location of gas, among other factors. As such, installation on a per kilowatt basis can vary significantly from period to period. For the three and nine months ended September 30, 2024, this increase in cost was primarily driven by the change in the mix of sites requiring Bloom installation.

Previous wording

A discussion regarding the comparison of our financial condition and results of operations for the three and six months ended June 30, 2024, and 2023 is presented below.

Current wording

A discussion regarding the comparison of our financial condition and results of operations for the three and nine months ended September 30, 2024, and 2023 is presented below.

Previous wording

Total revenue decreased by $5.2 million, or 0.9%, for the six months ended June 30, 2024, as compared to the prior year period. This decrease was driven by a $28.8 million decrease in product revenue and a $11.8 million decrease in electricity revenue, partially offset by a $26.0 million increase in service revenue and a $9.3 million increase in installation revenue.

Current wording

Total revenue decreased by $69.9 million, or 17.5%, for the three months ended September 30, 2024, as compared to the prior year period. This decrease was driven by a $71.2 million decrease in product revenue, and a $12.0 million decrease in electricity revenue, partially offset by a $10.1 million increase in installation revenue, and a $3.2 million increase in service revenue.

Previous wording

Total revenue increased by $34.7 million, or 11.5%, for the three months ended June 30, 2024, as compared to the prior year period. This increase was driven by a $18.4 million increase in installation revenue, a $11.6 million increase in product revenue, and a $10.2 million increase in service revenue, partially offset by a $5.6 million decrease in electricity revenue.

Current wording

Total revenue decreased by $75.1 million, or 7.7%, for the nine months ended September 30, 2024, as compared to the prior year period. This decrease was driven by a $100.0 million decrease in product revenue, and a $23.8 million decrease in electricity revenue, partially offset by a $29.3 million increase in service revenue, and a $19.5 million increase in installation revenue.

Previous wording

Electricity revenue decreased by $5.6 million, or 28.2%, and by $11.8 million, or 29.5%, for the three and six months ended June 30, 2024, respectively, as compared to the prior year period. The decrease for each period was predominantly due to the decrease in installed units, primarily driven by the upgrade of 2015 ESA Project Company, LLC (“PPA V”), which was sold in the third quarter of fiscal year 2023.

Current wording

Electricity revenue decreased by $12.0 million, or 46.5%, and by $23.8 million, or 36.2%, for the three and nine months ended September 30, 2024, respectively, as compared to the prior year period. The decrease for each period was predominantly due to the decrease in installed units, primarily driven by the PPA V repowering, which commenced in the third quarter of fiscal year 2023.

Previous wording

Cost of service revenue increased by $0.4 million, or 0.4%, for the six months ended June 30, 2024, as compared to the prior year period. This increase was primarily due to (1) an increase in the deployment of field replacement units, contributing an increase of $4.2 million, and (2) an increase in maintenance material and labor and overhead costs of $5.4 million. The increase was partially offset by (1) repair and overhaul cost reductions of $6.2 million and (2) our cost reduction efforts to proactively manage fleet optimizations.

Current wording

Cost of service revenue decreased by $6.0 million, or 10.5%, for the three months ended September 30, 2024, as compared to the prior year period. This decrease was primarily due to (1) a decrease in the deployment of field replacement units, contributing a decrease of $4.8 million, (2) repair and overhaul cost reductions of $4.0 million, and (3) our cost reduction efforts to proactively manage fleet optimizations. The decrease was partially offset by an increase in maintenance material and labor and overhead costs of $3.3 million.

Previous wording

Cost of service revenue decreased by $4.9 million, or 8.5%, for the three months ended June 30, 2024, as compared to the prior year period. This decrease was primarily due to (1) repair and overhaul cost reductions of $3.5 million and (2) our cost reduction efforts to proactively manage fleet optimizations. The decrease was partially offset by an increase in maintenance material and labor and overhead costs of $2.7 million.

Current wording

Cost of service revenue decreased by $5.6 million, or 3.4%, for the nine months ended September 30, 2024, as compared to the prior year period. This decrease was primarily due to (1) repair and overhaul cost reductions of $10.1 million, and (2) our cost reduction efforts to proactively manage fleet optimizations. The decrease was partially offset by an increase in maintenance material and labor and overhead costs of $8.7 million.

Previous wording

Total gross profit improved by $12.2 million in the three months ended June 30, 2024, as compared to the prior year period. This change was predominantly due to a $15.1 million improvement in service gross profit (loss), due to our efforts to proactively manage fleet optimizations, and our ongoing efforts to reduce product costs. Total gross profit improvement was partially offset by a $4.6 million decrease in product gross profit, predominantly driven by the lower average selling price of our products attributable to a large transaction in the first quarter of fiscal year 2023 that did not repeat in fiscal year 2024.

Current wording

Total gross profit (loss) improved by $83.9 million in the three months ended September 30, 2024, as compared to the prior year period. This change was predominantly driven by (1) a $117.9 million improvement of electricity gross profit (loss), primarily due to a $123.7 million impairment charge that resulted from the PPA V repowering, which commenced in the third quarter of fiscal year 2023, and (2) a $9.2 million improvement in service gross loss, due to our efforts to proactively manage fleet optimizations, and our ongoing efforts to reduce product costs. Total gross profit (loss) improvement was partially offset by a $43.5 million decrease in product gross profit, predominantly driven by lower pricing and volume attributable to the PPA V repowering, which commenced in the third quarter of fiscal year 2023.

Previous wording

Total gross profit decreased by $4.0 million in the six months ended June 30, 2024, as compared to the prior year period. This decrease was predominantly due to a $31.1 million decrease in product gross profit, primarily driven by the lower average selling price of our products attributable to large transactions in the first half of fiscal year 2023 that did not repeat in fiscal year 2024. The decrease was partially offset by a $25.6 million improvement in service gross profit (loss), due to our efforts to proactively manage fleet optimizations, and our ongoing efforts to reduce product costs.

Current wording

Total gross profit increased by $79.9 million in the nine months ended September 30, 2024, as compared to the prior year period. This increase was predominantly driven by (1) a $117.7 million improvement of electricity gross profit (loss), primarily due to a $123.7 million impairment charge that resulted from the PPA V repowering, which commenced in the third quarter of fiscal year 2023, (2) a $34.9 million improvement in service gross loss, due to our efforts to proactively manage fleet optimizations, and our ongoing efforts to reduce product costs. and (3) a $2.0 million improvement in installation gross loss. The increase was partially offset by a $74.6 million decrease in product gross profit, predominantly driven by lower pricing and volume attributable to the PPA V repowering, which commenced in the third quarter of fiscal year 2023, and a large transaction in the first and second quarters of fiscal year 2023 that did not repeat in fiscal year 2024.

Previous wording

Installation gross loss improved by $1.0 million and $1.7 million in the three and six months ended June 30, 2024, respectively, as compared to the prior year period. The change for each period was primarily driven by the timing of achieving key project milestones on sites requiring installations by us in the three and six months ended June 30, 2024, and other site related factors such as site complexity, size, local ordinance requirements, and location of the utility interconnect.

Current wording

Installation gross loss improved by $0.4 million and $2.0 million in the three and nine months ended September 30, 2024, respectively, as compared to the prior year period. The change for each period was primarily driven by (1) the timing of achieving key project milestones on sites requiring installations by us in the three and nine months ended September 30, 2024, and (2) other site related factors such as site complexity, size, local ordinance requirements, and location of the utility interconnect.

Previous wording

Service gross profit (loss) improved by $15.1 million in the three months ended June 30, 2024, as compared to the prior year period. This was primarily due to (1) 159 megawatts of the Energy Servers reaching full power in the past twelve months, which contributed to a $5.6 million increase in revenue from maintenance contracts associated with our fleet of Energy Servers, (2) repair and overhaul cost reductions of $3.5 million, (3) the reduction of product performance guarantees of $4.7 million that resulted from the higher efficiency of our Energy Server, and (4) our cost reduction efforts to proactively manage fleet optimizations.

Current wording

Service gross loss improved by $34.9 million in the nine months ended September 30, 2024, as compared to the prior year period. This was primarily driven by (1) a $19.8 million increase in revenue from maintenance contracts associated with our fleet of Energy Servers, (2) a decrease of $10.1 million in product performance guarantees that resulted from improved fleet performance, (3) repair and overhaul cost reductions of $10.1 million, and (4) our cost reduction efforts to proactively manage fleet optimizations. The improvement was partially offset by an increase in maintenance material and labor and overhead costs of $8.7 million.