Overview

FuelCell Energy is a global leader in delivering clean energy solutions to address critical challenges around energy access, resilience, reliability, affordability, safety and security. The company’s purpose is to enable a world powered by clean energy. FuelCell Energy offers commercial technology that produces clean electricity, heat, clean hydrogen, and water, and is also capable of recovering and capturing carbon for utilization and/or sequestration.

Recent Developments

• Signed a Joint Development Agreement with Malaysia Marine and Heavy Engineering Sdn Bhd to collaborate on the co-development of large-scale hydrogen production electrolysis systems and technologies across Asia, New Zealand, and Australia.

• Announced a strategic partnership with Diversified Energy Co. PLC and TESIAC Corp. to form an acquisition development company to acquire, develop, own, and operate integrated fuel cell energy assets and related infrastructure.

Results of Operations

Comparison of Three Months Ended January 31, 2025 and 2024:

Revenues and Costs of Revenues

• Total revenues increased 14% to $19.0 million, driven by higher product, service agreements, and Advanced Technologies contract revenues.
• Cost of revenues decreased 15% to $24.2 million, primarily due to lower costs for the generation segment.
• Gross loss improved to $5.2 million from $11.7 million in the prior year period.

Product Revenues

• Product revenues were $0.1 million, compared to $0 in the prior year period.
• Cost of product revenues increased 27% to $3.0 million, primarily due to higher manufacturing variances.

Service Agreements Revenues

• Service agreements revenues increased 14% to $1.8 million.
• Cost of service agreements revenues decreased 12% to $1.7 million.
• Gross profit from service agreements was $0.2 million, compared to a gross loss of $0.3 million in the prior year period.

Generation Revenues

• Generation revenues increased 8% to $11.3 million.
• Cost of generation revenues decreased 27% to $15.3 million, primarily due to lower expensed construction costs and a mark-to-market gain on natural gas purchase contracts.
• Gross loss from generation was $3.9 million, compared to $10.4 million in the prior year period.

Advanced Technologies Contract Revenues

• Advanced Technologies contract revenues increased 25% to $5.7 million.
• Cost of Advanced Technologies contract revenues increased 30% to $4.2 million.
• Gross profit from Advanced Technologies contracts was $1.5 million, compared to $1.3 million in the prior year period.

Administrative and Selling Expenses

• Decreased 8% to $15.0 million, primarily due to lower compensation expense from recent restructuring actions.

Research and Development Expenses

• Decreased 23% to $11.1 million, primarily due to a shift in engineering resources to support increased funded Advanced Technologies activities.

Restructuring Expense

• $1.5 million expense related to a 13% global workforce reduction.

Loss from Operations

• Decreased to $32.9 million from $42.5 million in the prior year period, driven by lower operating expenses and gross loss.

Liquidity and Capital Resources

• As of January 31, 2025, unrestricted cash and cash equivalents totaled $98.1 million.
• The company believes it has sufficient liquidity to fund operations for the next 12 months.
• Key factors that may impact liquidity include project development and construction cycles, production rate management, accounts receivable and inventory levels, capital expenditures, and ability to obtain financing.
• The company has various outstanding loan facilities, including the OpCo Financing Facility, Derby Back Leverage Financing, Groton Back Leverage Financing, and EXIM Financing.
• Backlog increased 28% to $1.31 billion as of January 31, 2025, driven by a new 20-year PPA for a 7.4 MW solid oxide fuel cell project.

Outlook

• The company continues to invest in product development and commercializing technologies for hydrogen, long duration energy storage, and carbon capture.
• Capacity expansion plans are underway for both carbonate and solid oxide manufacturing, though some projects have been deferred due to the recent restructuring.
• Research and development expenses are expected to be $40-45 million in fiscal year 2025.
• The company is focused on cost savings measures and aligning resources with market demand.