BloomEnergy

Corporation

Gigi Whitfield (400050039) September 25, 2019

Commerce 4FO3
Dr. Pitman
 2

INTRODUCTION
BloomEnergy began as an idea formulated by Dr. KR. Sridhar, an Aerospace and Mechanical Engineer with

a PH.D. in Nuclear Engineering. Sridhar was employed by the NASA Mars initiative; working with a team to create a

mechanism that could convert Martian atmospheric gasses into oxygen for the potential possibility for life sustainability

on Mars. During the research and development stage of this idea, Dr. Sridhar questioned why NASA was searching

for a way to implement this on Mars, when it would have a greater impact on Earth. (BloomEnergy). After the project

ended in 2001, the team (with Sridhar as their leader) decided to continue their research, modifying the newly

designed Fuel Cell to be feasible using Earth’s atmosphere. A year later, BloomEnergy secured their first investors,

Venture Capitalists John Doerr and Kleiner Perkins. With the necessary capital raised, the team worked diligently to

solve any and all major technological challenges enabling the deliver a working prototype. In 2006, the product was

ready for market implementation. (BloomEnergy). From a futuristic idea on Mars, to a feasible prototype, BloomEnergy

is now paving the way for sustainable energy.

REVIEW
BloomEnergy operates with the mission to “make clean, reliable, and affordable energy for everyone in the

world”. Through their innovative mechanism, called the BloomBox, customers are provided with electricity on-sight.

The outside of this box collects natural gas from your home and using technology, transforms the gas into electricity

as it passes through the device. Inside the box, there is a collection of wafer-thin Fuel Cells which take fuel on one

side and air on the other side to produce electricity with no flames or combustion required. As a result, pollution is

minimized, while efficiency and power, is maximized. Stacked together, these fuel cells can form a cube with equal

dimensions of four inches, with the ability to constantly power one average U.S. household for a year. (Refer to Exhibit

A). By creating a farm of these bricks, you have enough energy to power mass data centers and large communities.

With the implementation of this innovation into modern society, economies will thrive in a newly sustainable world;

this is the future of energy. (BloomEnergy).

STRATEGIC ANALYSIS

BloomEnergy’s current market position allows for the identification and analysis of the company’s active

internal strengths and weaknesses, as well as the external opportunities and threats. Discussed in this section are
 3

the most influential factors from each category; refer to Exhibit B for a broader analysis. The largest advantage gained

by BloomEnergy is a patent for the Fuel Cell (BloomEnergy); in doing so they have gained legal exclusivity in the

market. An additional strength is its’ sustainability factor- with the environmental stance taken by most, this product

is almost guaranteed to come in high demand by companies and homeowners looking to take on a green initiative.

On the other hand, production cost required to manufacture a Fuel Cell is dramatic, resulting in a negative operating

income. However, management believes that the Company will be able to succeed in securing additional financing,

expanding operations and profitability. Through the analysis of external factors, we identify several opportunities that

arise as a result of BloomEnergy. The greatest impact is the opportunity to mitigate the risk of power outages/surges

for consumers making electricity more reliable than ever (the Fuel Cell eliminates the need for electrical grids).

However, the natural resources used to manufacture the product are rare, with the primary suppliers being located in

Asia. Should the mineral increase in rarity, the Fuel Cell faces the potential to become extinct. (BloomEnergy

Corporation). In addition, if a trade disruption occurs between BloomEnergy and the supplier, the production of the

product could be significant impacted; resulting in a material adverse effect across all business functions.

FINANCIAL ANALYSIS

Provided with the proper financial statements, we now analyze the financial validity of an investment with

BloomEnergy. Looking at the Income Statement (Refer to Exhibit C), we compare and assess the ratios of profitability

and efficiency. The Gross Profit Margin indicates the financial health of the company and the efficiency in

manufacturing a product compared to sales. BloomEnergy’s Gross Profit Margin was calculated as 25.7%; a strong

result indicating safe margins. The operating profit margin is calculated as 3.36%; indicating a 3.36% return on every

dollar sold. This is considered to be a low return; however, given the industry and the fact that BloomEnergy is still

dedicating a vast amount of resources to its Research and Development stage, the risk of low returns is justifiable

and expected. The operating expenses account for 22.4% of the sales revenues, while production costs consume

74.2%- a necessary expenditure as the overall company’s value is dependent on delivering a high quality, working

product. We note that the company has experienced a high level of growth over the past fiscal year as indicated by

the 338.5% increase in revenues and the 106.8% increase in operating expenses; at these levels the company is

showing positive signs of sustainability. Despite the obvious fluctuations in financials across the 2016-2018 fiscal
 4

years, we predict the company’s financials to normalize as annual operations stabilize, and the number of unexpected

risks is limited. An important aspect to consider in any venture is the level of liquidity. To mitigate the risk of losing

your investment, we want a company that that is more liquid than not; should the company begin to fail, we need to

know that there are assets they can sell off reasonably fast to preserve cash amounts. This is rare for early-stage

ventures as funds are usually tied up in illiquid investments- such as R&D or capital assets. Using the data provided

on the Balance Sheet (Refer to Exhibit D), we turn to “traditional measures” for the assessment of BloomEnergy’s

Liquidity levels. The Current Ratio is calculated as 1.62; indicating that if all current assets could be converted into

cash, they would be adequate to pay all current liabilities. With a Quick Ratio valuation of 1.23, the liquidity of the

company is further validated as it too, measures the ability of the liquid assets to pay current liabilities. Now that we

are satisfied with the liquidity of the company, we move on to assess the financial leverage. Although there are several

tools one may use to measure this; we will be focusing on the Current Liabilities-to Total-Debt Ratio, as its calculation

will provide us with how quickly the venture faces payment or restructuring of its’ outstanding debt. This ratio is

important to analyze as it can have severe financial implications on the company if it fails to service. BloomEnergy’s

Current Liabilities-to Total-Debt Ratio is calculated as 0.26; a positive indication that the restructuring of outstanding

debt will not be required in the short-term.

CONCLUSION

From this analysis we conclude an investment with BloomEnergy to be a baseline risk with promising

opportunities. Although the financials appear to be in good standing, we categorize it as “baseline” as it is a new

venture competing in a relatively new industry where all the risks have yet to be identified. The product has received

great interest from a variety of companies and managed to obtain “A-list” clients in 2010, such as E-Bay, Walmart,

and Google. As of March 31st, 2018, BloomEnergy has completed several rounds of private financing with gross

proceeds totaling approximately $1.5 billion. (BloomEnergy Corporation). With the amount of cash injected into the

company this past year we are provided with additional comfort in investing. The level of ease attached to exiting the

investment is favorable as seen by the liquidity levels of the financials. Finally, we remind the potential investor that

the financial statements are not normalized as it remains in the early stages of its’ venture; however, the company

indicates high potential for future growth and promising returns in the years to come.
 5

BIBBLIOGRAPHY
BloomEnergy Corporation. Form S-1 Registration Statement. Washington, D.C: Securities & Exchange
Commission, 2018.
BloomEnergy. KR. Sridhar PHD. n.d. 25 September 2019. <https://www.bloomenergy.com/kr-sridhar-phd>.
—. Our Company: BloomEnergy. n.d. 25 September 2019. <https://www.bloomenergy.com/company>.
 6

APPENDIX

EXHIBIT A: How it Works

EXHIBIT B: SWOT ANALYSIS

EXHIBIT C: Income Statement

EXHIBIT D: Balance Sheet