Is Plug Power Finally Starting to Turn Things Around?

Plug Power (NASDAQ: PLUG) has struggled throughout its history. The leading hydrogen company hasn't been able to turn a profit, which has forced it to steadily raise outside capital to fund its operations and expansion. That has weighed heavily on its stock price.

However, Plug Power's recent first-quarter report showed some signs of progress. Here's a look at that report and whether it's a sign that the hydrogen stock is finally turning things around.

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Improved performance

Plug Power posted $133.7 million in revenue in Q1. That was up from $120.3 million in the year-ago period. The hydrogen company benefited from an increase in electrolyzer deliveries, continued materials-handling demand, and the ongoing deployments in its cryogenic platform.

However, the company still lost a lot of money. Its total net loss in the period was almost $197 million, which was more than its revenue. On a more positive note, that was an improvement from the nearly $296 million loss it posted in the year-ago period. Plug benefited from a significant improvement in its gross margin (though it was still a negative 55% in the period). Driving the improvement was the ongoing optimization of its supply chain, cost reductions, price increases, and progress in leveraging its leading hydrogen platform.

Those efforts helped slow the company's cash burn, which has fallen from $288.3 million in last year's Q1 to $152.1 million this year. That's still a concern, given that Plug ended the quarter with only $295.8 million in unrestricted cash on its balance sheet. The company would run out of money in two quarters at its current cash-burn rate.

Plug took a big step toward plugging up that hole by securing a $525 million secured credit facility with Yorkville Advisors earlier this month. It drew down $210 million of that facility to shore up its liquidity. It subsequently used $82.5 million to retire an existing convertible debenture with Yorkville. As a result of this financing, Plug doesn't expect to need to dilute existing investors this year by issuing more stock to fund its business.

The road to profitability

Plug expects further improvements in its financial results in the future. The company launched Project Quantum Leap earlier this year, which aims to deliver more than $200 million in annualized cost savings. That plan includes workforce reductions, facility consolidations, cuts in discretionary spending, and limiting capital spending to critical near-term requirements.

On top of that, Plug expects its investments in expanding its hydrogen business to drive sales growth. The company has an ambitious target of delivering 30% compound annual growth in its energy and applications businesses from 2025 to 2030.

That combination of falling costs and rising sales put Plug on a pathway toward profitability. However, it will take a while to reach that goal.

The company expects 2025 to be a transformational year where it aims to exit with a positive gross margin run rate. Plug aims to exit 2027 generating positive operating income. That would put it on pace to reach overall profitability by the end of 2028.

That ambitious plan requires a lot to go right for the company. Demand for hydrogen needs to grow briskly to support rising pricing and sales. The company must also deliver its expansion projects on time and on budget. It also needs to keep a tight lid on costs.

On top of everything, Plug will need to continue raising outside capital to fund its operations and expansion. Earlier this year, the company closed a nearly $1.7 billion loan guarantee from the U.S. Department of Energy, which would help fund the build-out of up to six low-carbon hydrogen plants. However, there are concerns that the Trump administration might cancel this loan. If that happens, Plug Power would have a big hole to plug. It might need to sell more stock to fund these projects, which would further dilute existing investors and weigh on the stock price.

Getting better, but there's a long road ahead

Plug Power's Q1 report showed some positive progress in its efforts to grow its business and reach profitability. However, the company hasn't turned the corner just yet. It needs to continue reducing costs and growing its business to finally start making money, which will enable it to become self-sufficient. Until it reaches that point, it might need to continue diluting existing shareholders by selling stock. Because of that, it remains a very high-risk investment that might never live up to its promise.

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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.