What happened

Shares of energy-in-a-box fuel cell company Bloom Energy (NYSE:BE) gained more than 12% in early trading Tuesday after reporting better than expected sales in its first-quarter earnings report last night. As of 1:55 p.m. EDT, the stock is still up 7.9%.  

Analysts had forecast that Bloom would generate sales of $151.8 million in its fiscal first quarter. In fact, Bloom reported $156.7 million.  

Bloom Energy boxes at Yahoo HQ.

Image source: Bloom Energy.

So what

Bloom Energy earned no profits in Q1. Still, its loss for the quarter under generally accepted accounting principles (GAAP) was only $0.61 per share, down 35% from the $0.94 per share lost a year ago, and sales grew 6.6% year over year.  

Bloom also made progress toward profitability in terms of margins, with its gross profit margin climbing from 1.1% in Q1 2019 to 12.7% in Q1 2020. Operating profit margins remain negative, but less so than a year ago, at negative 29.6%.

Company founder and CEO KR Sridhar said: "despite the impact of COVID-19, our business showed strength in the first quarter of 2020. We continued to grow acceptances, up 8.9% YoY, driven by existing customers increasing their Bloom Energy Server footprint, as well as new acceptances."

Now what

If there was one bit of bad news in the report, that might explain why enthusiasm for the improved profit margins seems to be waning. I think that bad news can be found on the company's cash flow statement. There, Bloom reveals that while its net loss shrank in Q1, cash burn in the quarter nearly doubled, from $21.8 million in negative free cash flow in Q1 2019, to negative $40.3 million in Q1 2020.

Bloom still has plenty of cash to keep it solvent for a while: $180.3 million in cash and equivalents, with another $29.7 million in "restricted cash." But with cash levels still moving in the wrong direction, I can see why that trend might make investors a little bit nervous on the cusp of a recession.

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