![]() ![]() So part of running a company properly is recording operating costs, which comprises two categories:ĬOGS and operating expenses (OpEx) each represent costs incurred by the daily operations of a business.ĬOGS and OpEx are both considered “operating costs,” which means that the expenses are related to the company’s core operations. Operating Expenses” will focus on the differences between the two types of costs, but we’ll start with the similarities. Operating Expenses is that COGS are direct costs from selling products/services while OpEx refers to indirect costs.Ĭost of Goods Sold vs. Operating Expenses?Ĭost of Goods Sold vs. ![]() After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.What is Cost of Goods Sold vs. When our analyst team has a stock tip, it can pay to listen. Investors should approach Plug Power cautiously until it can set up a credible path to profitability. If all goes well, Plug Power's faithful shareholders could see fantastic returns on their early investments.īut the company's large losses and high cash burn rate make me wonder whether that ideal outcome is in the cards, and I'm not sure this promise is worth so many sleepless nights in the meantime. That's an expensive and difficult project, aiming at a lofty and worthwhile goal. So Plug Power's revenue growth is impressive, and I get that the company is building a fuel cell infrastructure essentially from scratch. And even then, the cash burn seems likely to continue as Plug Power's operating costs (mainly in the selling, general, and administrative bucket) take away another $140 million per quarter. That's a positive development, but simply stating that goal is not the same as actually achieving it. Guidance targets suggest that the gross losses could turn into gross profits in the current fiscal year. The rich list of future and ongoing hydrogen production installations and fuel cell factories looks great on paper, but only as long as management can keep the lights on until the theoretical opportunity can deliver real-world results and revenue. Plug Power needs to find a concrete way to lower these costs in order to improve its profitability. A year ago, the total cost of revenue only exceeded top-line sales by 25%. In fact, the ink is only getting redder over time. In this case, Plug Power runs its business at a gross loss, both literally and figuratively. I'm sure you've seen net losses before, and operating losses may be painful but aren't unheard of. The company's cost of goods sold amounts to 133% of the incoming revenue. The infographic you saw earlier offers a visual explanation, but let me put it into words again. It's not easy to wrap your head around the magnitude of Plug Power's lack of profits. Until that happens, Plug Power's investors should worry about the company's financial future. The company's promising green hydrogen project pipeline tells a robust long-term growth story, but the company needs to set up a stronger balance sheet and a credible path to profitability. These are great projects, pointing to a strong financial future - but that's not the whole story. Plug Power is also completing the second stage of due diligence with the Department of Energy's Loan Program Office and evaluating asset-backed loan facilities from major banks. So Plug Power is currently evaluating several forms of low-cost and nondilutive capital as it continues to build out a global green hydrogen generation network. In other words, the company could be forced to ease the accelerator pedal back from the metal and accept slower sales growth unless it can finance its daily operations from other sources. Its cash cushion is running out of the green stuff and will soon need either a fresh cash infusion or a much lower burn rate. With that steep quarterly cash burn and just $475 million of cash on the balance sheet, Plug Power must soon make a difficult choice. ![]() I generally don't mind fast-growing businesses running at a loss for a while, prioritizing top-line growth over immediate profits, but this negative balance is extreme. That's more than the $207 million in net losses after tax, and far above the $210 million of top-line revenue. In the first quarter of 2023, the company consumed $277 million of cash from operations. Plug Power is a risky investment due to its high cash burn rate. Selling, general, and administrative expenses accounted for $104 million of those costs, leaving just $26.5 million to spend on research and development. As a result, the company posted a net loss of $207 million. On top of that, operating expenses increased 35% to $140 million. COGS was $350.4 million, resulting in a gross loss of $69.4 million. Actually, that expense is larger than the incoming revenue. ![]()
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