A leader in fuel-cell solutions, Plug Power (NASDAQ:PLUG) plans on releasing its second-quarter earnings on Aug. 9. Charged up about the company's near-term prospects, management, in its first-quarter letter to shareholders, stated that 2018 will be a "milestone year" for the company. In one respect, the company is off to a good start, beating its revenue forecast in the first quarter of 2018. Tempering the good news, however, the company missed guidance in other areas.

Despite the mixed results in the first quarter, the year is far from over, and there's still reason to believe that this year could be the best in the company's history. Will the company get back on track in the second quarter? Let's look at some things we can expect management to address.

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Hit and miss

Attributable to the deployment of GenDrive units and a better sales mix, revenue exceeded expectations of $22 million to $24 million in the first quarter as Plug Power reported $27.2 million on the top line. In the second quarter, management forecasts revenue of $37 million to $41 million, representing growth of 60% to 80% compared to the same period last year. Generating revenue represents one of the company's strengths; however, there are concerns regarding what lies below the top line.

At the start of 2017, management estimated that the company's annual adjusted gross margin, which excludes customer warrants, would fall between 8% and 12%. Much to the chagrin of investors, however, Plug Power reported an adjusted gross margin of 1.2%. The misses continued into 2018. Failing to achieve gross margin (no need to adjust for warrants) guidance of negative 13% to 11%, the company reported a gross margin of negative 14.6%.

In terms of Q2, management forecasts an adjusted gross margin of 3% to 5%, but considering management's miscalculations, investors shouldn't be surprised if this is lower than expected.

Breaking through to the other side

While Plug Power excels at increasing its top line, it has failed to achieve -- like its fuel-cell peers -- the same growth on the bottom line. Management, however, believes that the company is poised to turn the corner. Illustrating its optimism, management forecasts the company will cross a threshold and report positive EBITDAS (earnings before interest, taxes, depreciation, amortization, and stock-based compensation) in the second half of 2018.

The first quarter represented an inauspicious start to this pursuit. While management forecast Q1 EBITDAS of negative $13 million to negative $11 million, the company underperformed, reporting EBITDAS of negative $14 million. Nonetheless, the company remains confident that it will achieve its goal for the second half of the year and report positive EBITDAS.

When the company reports Q2 earnings, investors can see if the company meets its EBITDAS guidance: negative $9 million to negative $7 million. On a more granular level, they can monitor the company's progress in reducing service costs and hydrogen costs -- two factors that management identifies as playing a pivotal role in achieving its EBITDAS goals.

Keeping tabs on the Middle Kingdom

While Plug Power's bread and butter has been providing its solutions to the material-handling equipment industry, management recognizes an opportunity to expand its fuel-cell footprint and enter the electric vehicle (EV) market in China. Currently, the company is in the process of exploring joint venture candidates, and it aspires to find a partner that meets its criteria by the end of the year.

A red pin located on a map of China.

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Articulating this criteria in its Q1 letter to shareholders, Plug Power seeks a partner committed to the long term and which has "strong market access and internal demand, that will allow [Plug Power] to have a significant ownership position with protective governance rights."

In consideration of the enthusiasm that management has demonstrated, it will be worth noting any insight the company provides regarding its pursuits in China. Moreover, this will especially be worth paying attention to in light of the escalating tensions -- namely China's threat of $60 billion worth of tariffs on American goods -- regarding trade between the U.S. and China.

What to expect from Plug Power

Proving its aptitude for convincing customers of the value proposition afforded by fuel-cell solutions, Plug Power is no stranger to successfully growing its top line. Consequently, I wouldn't be surprised it it met or exceeded expectations. The trouble, however, resides with its ability to meet expectations regarding its gross margin and EBITDAS; therefore, I wouldn't be shocked if the company is unable to deliver on both of these metrics. Looking beyond the financials, I'll be interested to see how management addresses its progress in China since it has repeatedly emphasized it as a significant growth opportunity.