FUELCELL ENERGY INC Q1 FY2025 earnings call

• Launched global restructuring plan at start of first fiscal quarter, reducing expenses and driving revenue growth, narrowing operating losses. - Announced partnership with Diversified Energy and Tessiak to address data center energy demands, plan to deliver up to 360 MW of electricity, and it's a step toward data center vision. - Signed joint development agreement with Malaysia Marine and Heavy Engineering to co-develop large-scale hydrogen production systems across Asia, etc. - Announced partnership with city of Hartford to build 7.4 MW fuel cell power platform. - Accelerated progress on advanced demonstration projects, e.g., carbon capture project with ExxonMobil at Esso Needle and Rotterdam complex near pivotal stage. - Delivered solid oxide electrolysis sales system to US Department of Energy Idaho's National Laboratory. - Continuing to develop modules for GGE's fuel cell power platform in Korea, building inventory. - Significant progress in cost management, with operating expenses decreased in first quarter of fiscal 2025.

For the first quarter of fiscal year 2025, total revenues were $19 million compared to $16.7 million in the prior year quarter. Loss from operations was $32.9 million in the quarter compared to $42.5 million in the first quarter of fiscal year 2024. Adjusted EBITDA totaled negative $21.1 million in the first quarter of fiscal year 2025 compared to negative $29.1 million in the first quarter of fiscal year 2024. Product revenues were $0.1 million. Service agreement revenues increased to $1.8 million from $1.6 million. Generation revenues increased 8.1% to $11.3 million from $10.5 million. Advanced technology contract revenues increased to $5.7 million from $4.6 million. As of January 31, 2025, cash, restricted cash, cash equivalents, and short-term investments were $270.7 million. Backlog increased to $1.31 billion as of January 31, 2025, compared to $1.03 billion as of January 31, 2024.

• First quarter revenue is low watermark for fiscal year 2025, expecting meaningful improvement in revenues for fiscal year 2025 due to module deliveries to GGE. - Expect to reduce operating costs by approximately 15% in fiscal year 2025 compared with fiscal year 2024. - Backlog includes LTSA with GGE and 20-year PPA for Hartford project, with product backlog to be recognized as revenue upon module commissioning and service backlog as service is performed. - Solid oxide technology nearing commercialization to help the company reach EBITDA positive.

• Forward-looking statements may differ materially from actual future results due to a number of risks and uncertainties. - More information regarding risks and uncertainties is available in the safe harbor statement in the slide presentation and in filings with the Securities and Exchange Commission, particularly the risk factor section of most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q.

Q: Hey, guys. Thanks for taking my question. We'd love to learn more about the diversified energy deal. Maybe specifically if you could talk a little bit about if the data centers are greenfield, brownfield, how will the financing arrangement work and, you know, in terms of permitting, if there's any permitting required for the infrastructure pipeline build-out of that's already laid out. Love to just learn more about that.

A: Dushyant, good morning, and thank you for the question and thank you for joining the call. Yeah. So the partnership with Diversified is really focused on leveraging where Diversified has existing gas assets and availability. So even in cases where there might be a need to provide additional midstream infrastructure, I really think about it as, you know, kind of gas distribution infrastructure. The right of ways and access to do that, we feel very confident about executing on that pretty quickly. The deals that we are focused on cut across both greenfield and brownfield opportunities where there's existing data center operation and incremental capacity is needed. And so having that gas and then certainly our ability to deliver distributed platforms to meet those power needs, we think positions us quite well to satisfy the requirements of those data center customers. And then from a financing standpoint, the work that we're doing is work with Tessiak is bringing together, you know, financial partners as we have been able to do and successfully demonstrate corporately, and that goes across not only project financing, but tax equity and certainly back to leverage debt to support these projects. And so we feel pretty confident around the financing structure. And I guess the final thing I would say is we really think about this as being about as close to kind of data center in a box as you can get. From being able to bring gas and supply distributed power generation and land access, and then, of course, you know, the data center component to meet their power demands. And then from a permitting standpoint, you know, that's one big advantage of fuel cells. Right? Is that the fact that we can leverage fuel, but we don't combust that fuel makes permitting a lot easier for our technologies because we don't, you know, combust, so we're not producing SOX, NOX, and other particulates. And that's even in, you know, tough markets like California where we enjoy those benefits. And so we feel really good about our position here. And then just the fuel flexibility of our platform to not only leverage natural gas but to leverage the coal mine methane, and then the ability that we have to deliver steam for absorption chilling really puts together a very nice compelling package for those data center customers.

Q: Hi, everyone. Good morning, and thank you for taking my questions. Good morning, George. I'd like to focus a little bit on the tri-gen project and ask about any updates there. And also, whether you're seeing interest from other customers in a similar project.

A: George, thank you for the question. As you know, at least here domestically, clean hydrogen, if you will, in the transportation sector has probably been pushed a little bit to the right. We continue to have very interesting conversations with our existing customer as well as other customers about future opportunities around that platform and leveraging hydrogen. But I think some of the uncertainty and lack of clarity around what's gonna happen relative to things like the PTC and other things are certainly putting a bit of a slowdown on those opportunities at least domestically.

Q: Sure, George. This is Mike. I will take that question. So as far as revenue for this fiscal year, as we mentioned in the prepared remarks, we really see Q1 as the low watermark for revenue for the year. We have been building inventory for the GGE project. We are shipping that inventory to Korea, which will result in increasing revenue over the course of the fiscal year. As we mentioned, around backlog, we have 30 modules which will be delivered and installed in this calendar year. So we haven't put out exact dates of when those modules are installed as it's not all in the company's control. However, we're very comfortable in saying there will be a meaningful increase year over year as a result of these deliveries to Korea, and we're executing on those now. As far as the path to EBITDA positive at this run rate and with the investment cycle that we're in, particularly around solid oxide, the company is not EBITDA positive. As the solid oxide technology gets closer to commercialization and as we're able to take advantage of the available capacity in our factory in Torrington, that will allow the company to increase revenue and increase cash flow from that revenue and get the company to EBITDA positive. We have not obviously put out exact dates around that. It's really order dependent in continuing to fill up the backlog and increase our run rate in the Torrington sack.

Q: Yes. Thanks for taking my questions. Could you talk about the timeline for the recently announced Hartford project and maybe any other details related to PPA terms that you're able to share?

A: Sure, Ryan. Good morning. This is Mike. As far as the Hartford project, we're really excited about getting the Hartford project back in backlog. For those of that have followed the company for a while, this was actually a project award that we had several years ago. It came out of backlog as it proved to be uneconomic in the site that it was originally sited at. So we had essentially spent the last year plus in working with our counterparts, the two Connecticut utilities on that power purchase agreement as well as Connecticut regulators to change the site to another location in Hartford, Connecticut, which made it economic. As a result, that project is back in backlog, and we're in advanced development. Around that project, we expect it to be constructed in the 2026 time frame. And we'll provide further updates around this project as the development cycle continues.

Q: Good morning, and congratulations on the cost reduction efforts. Starting to show some teeth. That's good. I'll ask my two questions. I'll go back to the JDA again. First, I was wondering, how's it feel still gonna be compensated for its participation in the project? Meaning, will this mainly be for unit sales, or will you have some sort of an enduring cash flow stream from a given project?

A: Good morning, Jeff. I'll take that. So yeah. So all of the above. Really, what this partnership allows us is the ability to provide our technology in a meaningful way in a short period of time as we start to close these orders. So, certainly, we will get product sales through that opportunity, and then, of course, with every product sale that we do, there's a long-term service opportunity. These data center opportunities will likely be 20 plus year opportunities. So long-term revenue stream coming from that, and then, of course, participating in a partnership like this in a joint venture type acquisition development company, certainly, we would expect there to be long-term cash flows from that arrangement that the company could participate in as an investor.

Q: Hi. Good morning. Just had a couple. You know, I was thinking that when it comes to FuelCell Energy, Inc.'s experience in particular, with multiple input sources, particularly I think, with more experience using biogas as a source than competing fuel cell companies, you're talking about potential data center locations with potential customers, is sort of your lead in biofuels a topic that comes up a lot?

A: So there was a little bit of a break up there, but I think your question was whether or not biofuels comes up as a topic related to data center opportunities. Is that correct?

Q: Sure. And given your experience with that in particular.

A: Yeah. So, you know, one big advantage that we have on biofuels is the fact that we can use direct biofuels. We don't need biofuels to be upgraded to pipeline quality gas so that gas never needs to see its way onto a common carrier pipeline. So we can co-locate at a biofuel source or an anaerobic digester source and directly utilize that fuel to deliver power. So in those cases where that fuel source is available, that is certainly an interest and certainly something that we talk to customers about. As one way to deliver a net zero or negative carbon solution around a data center. And the upside of that is the fact that you're doing that with a baseload power solution and delivering a negative or net zero carbon intensity score, which is certainly something that a lot of the data center suppliers are focused on.