DANBURY, Conn.– FuelCell Energy, Inc. (Nasdaq: FCEL) — a global leader in fuel cell technology — with a purpose of utilizing its proprietary, state-of-the-art fuel cell platforms to enable a world empowered by clean energy — today reported financial results for its second fiscal quarter ended April 30, 2020 and key business highlights.
- Revenues of $18.9 million, an increase of 105%, compared to $9.2 million
- Loss from operations improved to $(8.1) million compared to $(17.6) million
- Net loss decreased to $(14.8) million compared to $(19.5) million
- Adjusted EBITDA of $(3.3) million compared to $(14.5) million
- Gross profit of $0.2 million (0.9% gross margin) compared to gross loss of $(3.6) million ((39.5)% gross margin)
- Operating expense of $8.3 million, a decrease of $5.7 million, or 41%
- Backlog of $1.34 billion, an increase of $80.8 million, or 6%
“First and foremost, our focus remains on the health and safety of our employees as we navigate the unprecedented COVID-19 pandemic. Despite this challenging environment, I’m pleased with our second quarter performance, where we achieved significant progress in executing our “Powerhouse” business strategy,” said Jason Few, President and CEO. “We have made strides in advancing our integrated business model, which includes developing and managing generation assets. We remain focused on accelerating revenue growth, which more than doubled this quarter, fueled by increases in Generation, Service and Advanced Technology. At the same time, we continued to manage costs and enhance gross margin.” Mr. Few concluded, “Despite the challenges of the current global environment resulting from the COVID-19 pandemic, we continued to execute against our project pipeline and advanced our work with ExxonMobil Research and Engineering Company in pursuit of commercializing our proprietary carbon capture solution. We still have work to do but are on a clear strategic path to continue making progress and achieving our goals.”
- We continue to follow appropriate safety precautions, including continued work-from-home for those who can, and we currently anticipate the closure of our manufacturing facility in Torrington, CT to continue through at least June 22nd.
- We remain in contact with global team members, suppliers and customers to ensure timely sharing of information to help minimize any interruption in the execution of our business plan, and to help with the efficient restart of our manufacturing facility when appropriate.
Powerhouse Business Strategy Update
In January 2020, we launched our Powerhouse business strategy, which is focused on initiatives intended to Transform, Strengthen and Grow our company over the next three years. During the second quarter of fiscal 2020, despite the Torrington, Connecticut facility closure, we made significant progress on certain projects, including the 7.4 megawatt fuel cell project located on the U.S. Navy Submarine Base in Groton, Connecticut, and the start of construction on a 1.4 megawatt biofuel project located in San Bernardino, California. We also continued the development of our Advanced Technology platform applications, including a higher level of activity compared to the first quarter of fiscal 2020 under the carbon capture program with ExxonMobil Research and Engineering Company, and made progress on our solid oxide energy platform, as we work to commercialize electrolysis, long-duration hydrogen-based energy storage and hydrogen power generation.
Second Quarter Fiscal 2020 Results
Note: All comparisons between periods are between the second quarter of fiscal 2020 and the second quarter of fiscal 2019, unless otherwise specified. In this press release, FuelCell Energy refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures may not be comparable to similarly titled measures being used and disclosed by other companies. FuelCell Energy believes that this non-GAAP information is useful to an understanding of its operating results and the ongoing performance of its business. A reconciliation of EBITDA, Adjusted EBITDA and any other non-GAAP measures is contained in the appendix to this press release.
Consolidated Financial Metrics
|Three Months Ended April 30,|
|(Amounts in thousands)||2020||2019||Change|
|Gross profit (loss)||167||(3,640||)||105||%|
|Loss from operations||(8,142||)||(17,623||)||54||%|
|Net loss to common stockholders||(15,569||)||(22,876||)||32||%|
|Net loss per basic and diluted share||$||(0.07||)||$||(2.06||)||97||%|
Second quarter revenue of $18.9 million increased 105%, reflecting an increase in Generation revenues, Advanced Technologies revenues, and Service and License revenues.
- Generation revenues increased by 184% to $4.6 million from $1.6 million, primarily benefitting from additional revenue associated with the Bridgeport Fuel Cell Project, which was acquired in May 2019, and the closing of a sale-leaseback financing transaction with respect to the Tulare BioMAT project during the three months ended April 30, 2020.
- Advanced Technologies contract revenues increased by 46% to $7.3 million from $5.0 million due to the addition of the Joint Development Agreement with ExxonMobil Research and Engineering Company (which was executed during the first quarter of fiscal 2020) and the timing of activity under other existing contracts.
- Service and License revenues increased by 168% to $7.0 million from $2.6 million primarily due to revenue from module replacements under customer service agreements.
Gross profit totaled $0.2 million, compared to a gross loss of $(3.6) million, benefitting from increased Advanced Technology work under the Joint Development Agreement with ExxonMobil Research and Engineering Company as well as lower manufacturing costs resulting from our reduction in workforce during fiscal 2019, partially offset by approximately $1.0 million of manufacturing variances due to the shutdown of our Torrington manufacturing facility due to the COVID-19 pandemic and a loss from our Generation portfolio due to maintenance and repairs at several plants during the quarter.
Operating expenses decreased 41% to $8.3 million, compared to $14.0 million. This reduction consists primarily of a reduction in Research & Development expenses to $1.1 million (from $4.2 million), reflecting the decreased allocation of resources to research and development and lower headcount, and a reduction in Administrative & Selling expenses to $7.2 million (from $9.8 million), reflecting lower legal and consulting costs.
Net loss totaled $(14.8) million compared to net loss of $(19.5) million.
Adjusted EBITDA totaled $(3.3) million compared to an Adjusted EBITDA of $(14.5) million. Total depreciation and amortization expense for the quarter was $4.5 million, of which $3.2 million was attributable to our Generation portfolio. Please see the discussion of non-GAAP financial measures, including EBITDA and Adjusted EBITDA, as well as applicable reconciliations in the appendix at the end of this release.
The net loss per share attributable to common stockholders was $(0.07) compared to $(2.06), including a non-cash mark to market accounting expense of $3.4 million associated with the warrants issued to the lenders under our credit agreement (the “Orion Facility”) with Orion Energy Partners Investment Agent, LLC (the “Agent”) and its affiliated lenders, which accounted for an approximately $0.02 per share impact on the reported net loss per share. The lower net loss per common share is primarily due to higher weighted average shares outstanding due to share issuances since April 30, 2019. Results in the prior-year quarter included a deemed contribution of $1.6 million on the Company’s Series C Convertible Preferred Stock, as well as deemed dividends of $1.0 million on the Company’s Series D Convertible Preferred Stock.
Cash and Financing Update
The Company’s cash, cash equivalents and restricted cash consist of (a) restricted cash and cash equivalents, which consist of amounts pledged as performance security, reserved for future debt service requirements, reserved for letters of credit for certain banking requirements and contracts and reserved to pay down the Orion Facility and can be accessed or redeployed into other project financing at the option of and only with the approval of the lenders and the Agent under the Orion Facility or other lenders or third parties; (b) project cash and cash equivalents, which consist of amounts borrowed under the Orion Facility which can be used only by our consolidated wholly-owned project subsidiaries in the normal course of operations for project construction, purchase of equipment (including inventory from FuelCell Energy, Inc.) and working capital for projects approved under the Orion Facility in accordance with each project’s construction budget and schedule and which are classified as unrestricted cash on the Company’s consolidated balance sheets; and (c) unrestricted cash and cash equivalents, which can be used by the Company for general corporate purposes, including working capital at the corporate level, and which include the proceeds of the Paycheck Protection Program Promissory Note (the “PPP Note”) received during the quarter ended April 30, 2020. Unrestricted cash and cash equivalents, as presented on the Company’s consolidated balance sheets, consist of the amounts described in (b) and (c) above. As of April 30, 2020, unrestricted cash and cash equivalents totaled $29.1 million compared to $9.4 million as of October 31, 2019. Of this amount, project cash and cash equivalents funded under the Orion Facility totaled $18.6 million as of April 30, 2020 compared to $0 as of October 31, 2019. Excluding project cash and cash equivalents and the remaining balance of approximately $6.0 million under the PPP Note, which may only be used for certain payroll and other eligible expenditures, unrestricted cash and cash equivalents totaled $4.5 million as of April 30, 2020 compared to $9.4 million as of October 31, 2019.
Subsequent to quarter end, on June 8, 2020, in order to alleviate substantial doubt about the Company’s ability to continue as a going concern, the Company and certain of its affiliates as guarantors entered into a fifth amendment to the Orion Facility with the Agent and its affiliated lenders (the “Fifth Orion Amendment”). Pursuant to the terms of the Fifth Orion Amendment and the amended Orion Facility, the lenders have committed to make available certain delayed-draw loans to the Company in an aggregate principal amount of up to $35 million (the “Secondary Facility Loans”) between the execution date and September 14, 2020. Such Secondary Facility Loans may be used for general corporate purposes of the Company or the guarantors in accordance with either (i) the then effective operating budget of the Company or the guarantors or (ii) the cash use forecast delivered by the Company to the Agent on June 6, 2020. Any draws under the Secondary Facility Loans must be repaid by September 1, 2021. Refer to the Company’s Form 10-Q (filed on June 12, 2020), Note 18. “Subsequent Events” for additional details regarding the Secondary Facility Loans.
|As of April 30,|
|(Amounts in thousands)||2020||2019||Change|
|Total Contract Backlog||$||1,344,445||$||1,263,688||6||%|
(1) In July 2018, we contracted to operate and maintain a 20 megawatt plant for Korea Southern Power Company (“KOSPO”). This contract was originally represented in backlog as 20 years reflecting the total term of the contract. Under the terms of the contract, KOSPO has a renewal option in year 10. Thus, under the adoption of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which was implemented on November 1, 2018, service backlog was reduced by $64.3 million in 2019 compared to amounts previously disclosed. Should KOSPO exercise this option, service backlog will be adjusted accordingly.
Contract backlog increased to $1.34 billion as of April 30, 2020, reflecting additional generation backlog as a result of the acquisition of the Bridgeport Fuel Cell Project, offset by the removal of the Bolthouse Farms project from backlog due to the termination of the applicable power purchase agreement and revenue recognized during the period. Only projects for which we have a power purchase agreement (“PPA”) are included in generation backlog, which represents future revenue under long-term PPAs. Service backlog decreased mainly due to the acquisition of the Bridgeport Fuel Cell Project. Together, the service and generation portion of backlog had an average weighted term of approximately 18 years based on dollar backlog and utility service contracts of up to 20 years in duration at inception.
Backlog represents definitive agreements executed by the Company and our customers. Projects sold to customers (and not retained by the Company) are included in product sales and service backlog and the related generation backlog is removed upon the sale.
About FuelCell Energy
FuelCell Energy, Inc. (NASDAQ: FCEL) is a global leader in developing environmentally responsible distributed baseload power solutions through our proprietary fuel cell technology. We develop turn-key distributed power generation solutions and operate and provide comprehensive services for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, applications, markets and geographies. Our mission and purpose remains to utilize our proprietary, state-of-the-art fuel cell platforms to reduce the global environmental footprint of baseload power generation by providing environmentally responsible solutions for reliable electrical power, hot water, steam, chilling, distributed hydrogen, microgrid applications, electrolysis, long-duration hydrogen-based energy storage and carbon capture and, in so doing, drive demand for our products and services, thus realizing positive stockholder returns. Our fuel cell solution is a clean, efficient alternative to traditional combustion-based power generation and is complementary to an energy mix consisting of intermittent sources of energy, such as solar and wind turbines. Our systems answer the needs of diverse customers across several markets, including utility companies, municipalities, universities, hospitals, government entities and a variety of industrial and commercial enterprises. We provide solutions for various applications, including utility-scale distributed generation, on-site power generation and combined heat and power, with the differentiating ability to do so utilizing multiple sources of fuel including natural gas, renewable biogas (i.e., landfill gas, anaerobic digester gas), propane and various blends of such fuels. Our multi-fuel source capability is significantly enhanced by our proprietary gas-clean-up skid.