The problems that have plagued Plug-in power supply (PLUG -1.01%) The trend continued in the second quarter, as the company once again reported poor results. The share price has lost around 80 percent of its value over the past year.

Let’s take a closer look at the problems the company is facing and whether it has a chance of turning things around.

Plug Power’s problems

Plug Power’s biggest problems are negative gross margins and cash outflows. The company has found a niche by selling fuel cells for forklifts and other material handling equipment to large warehouses. In connection with these deals, however, it has long sold the hydrogen fuel needed to power these devices at a loss.

That trend continued in the most recent quarter, with the company reporting a gross loss of $131.3 million. While that was worse than the gross loss of $78.1 million a year ago, it was an improvement over the gross loss of $159.1 million in the first quarter.

For the second time this year, the company reported negative equipment gross margins in addition to negative fuel gross margins. On the positive side, the negative fuel gross margins have improved somewhat thanks to the green hydrogen production facilities the company has built.

Building hydrogen production facilities to supply hydrogen fuel to its customers is an important part of its plan to achieve positive gross fuel margins. Increased production at the Georgia facility, as well as some price increases, contributed to this improvement. In the meantime, the company expects that a new hydrogen plant it is building in Louisiana in a joint venture with Olin will start hydrogen production in the fourth quarter.

As the company sold its equipment and fuel at lower prices than it costs to produce them, Plug Power continued to accumulate losses and burn cash. During the quarter, the company posted a loss of $262.3 million, or $0.36 per share. At the same time, it had operating cash outflows of $254.7 million, while free cash flow was negative $350 million.

Looking at Plug Power’s balance sheet, the company has $214 million in debt versus $62.4 million in cash. It also has $956.6 million in tied-up cash. The tied-up cash comes mostly from prior sale-and-leaseback agreements that are released during the lease term and, to a lesser extent, from letters of credit secured by collateral.

Given the lack of available cash on its balance sheet, the company has been aggressively selling stock to fund its operations and the continued expansion of its hydrogen facilities, generating net proceeds of $266.8 million from stock sales in the quarter and $572.1 million in the first half.

To put Plug Power’s cash burn and capital raises into perspective, the company only has a market cap of around $1.8 billion based on the most recent share count.

Image source: Getty Images.

Are Plug Power’s problems fixable?

It’s possible the company can solve its problems, but it’s becoming increasingly unlikely that that will happen. First, its core fuel cell business has performed poorly. Given all of Plug Power’s problems, it’s almost easy to overlook the fact that its equipment sales plunged nearly 65% ​​year over year in the second quarter, and that was while the company was selling at a loss. But even as the company sold more equipment last year, its gross margins on equipment were still just above 13%.

The company is awaiting a potential $1.66 billion low-interest loan from the Department of Energy to finance the remainder of its hydrogen plant buildout. However, the loan has been challenged by U.S. Sen. John Barrasso (R-Wyo.), a ranking member of the Senate Energy and Natural Resources Committee. Without the loan, the company may have a difficult time finding additional financing given its current business situation.

Although gross margins on hydrogen fuel have improved, fuel sales are unlikely to be a strong profit driver. Getting fuel margins to breakeven would be an achievement, but that alone does not solve the company’s problems.

It’s worth noting that even if Plug Power grew its revenue to $1.5 billion a year, at a gross margin of 25 percent, its gross profit of $375 million still wouldn’t cover the roughly $400 million in corporate expenses it plans to incur this year. The company expects revenue to be between $825 million and $925 million this year. That just shows how far it is from profitability. In the meantime, Plug Power will continue to dilute shareholders and burn cash as it tries to turn things around.

While there are some bright spots, such as improving margins on hydrogen fuels and electrolyzer sales, the company still has a long way to go, which is why I would stay away from the stock at this time.