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 third quarter ended July 31, 2021 and key business highlights.
Third Quarter Fiscal 2021 Highlights
- Revenues of $26.8 million compared to $18.7 million
- Gross profit of $1.1 million compared to gross loss of $(3.1) million
- Loss from operations of $(10.6) million compared to $(10.8) million
- Unrestricted cash and cash equivalents of $468.6 million as of July 31, 2021
- Backlog of $1.30 billion as of July 31, 2021 compared to $1.33 billion as of July 31, 2020
“FuelCell Energy delivered higher revenue in the third fiscal quarter, both sequentially compared to the second fiscal quarter and year over year. We are pleased by the continued execution of our project backlog and the advancement of our strategic agenda in terms of infrastructure, solutions and talent to support our ability to achieve our long-term goals,” said Mr. Jason Few, President and CEO. “We made progress in advancing our inflight projects and combined with an increase in our investment in commercial capabilities and research and development activities, we believe we are positioning FuelCell Energy for long-term growth and sustainable commercial success.”
“We are almost two years into our Powerhouse business strategy, and we continue to make progress,” continued Mr. Few. “The ability to deliver these results while simultaneously increasing our annualized production rate, repositioning our brand for the future and building the next generation sales structure underscores the hard work and effort of the over 380 employees of FuelCell Energy. To further deepen our bench and ensure we are well positioned for the future, we recently announced additions to our team, significantly expanding our sales and marketing presence with the goal of enhancing customer engagement and effectiveness.”
Mr. Few added, “We have increased our investment in innovation and are making progress towards the availability of our Advanced Technologies solutions, including distributed hydrogen, long duration energy storage, and hydrogen production via our solid oxide platform. These offerings will complement our commercially available carbonate fuel cell platforms that provide a scalable solution to deliver against the increasing requirements of clean, distributed power and hydrogen generation to strengthen and supplement the grid power and enable the hydrogen economy. The global energy transition continues to accelerate, and we believe FuelCell Energy is positioned to answer these opportunities with our patented portfolio of platform solutions.”
Consolidated Financial Metrics
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
| Three Months July 31, |
||||||||||
| (Amounts in thousands except for share amounts and percentages) | 2021 | 2020 | Change | |||||||
| Total revenues | $ | 26,820 | $ | 18,728 | 43 | % | ||||
| Gross profit (loss) | 1,100 | (3,128 | ) | 135 | % | |||||
| Loss from operations | (10,585 | ) | (10,762 | ) | -2 | % | ||||
| Net Loss | (11,997 | ) | (15,331 | ) | -22 | % | ||||
| Net loss attributable to common stockholders | (12,797 | ) | (16,131 | ) | -21 | % | ||||
| Net loss per basic and diluted share | $ | (0.04 | ) | $ | (0.07 | ) | -43 | % | ||
| EBITDA | (6,076 | ) | (6,036 | ) | 1 | % | ||||
| Adjusted EBITDA | (5,173 | ) | (5,638 | ) | -8 | % | ||||
Third Quarter of Fiscal 2021 Results
Note: All comparisons between periods are between the third quarter of fiscal 2021 and the third quarter of fiscal 2020, unless otherwise specified.
Third quarter revenue of $26.8 million represents an increase of 43% over the prior-year quarter, driven by a $7.2 million increase in service agreements and license revenues, which was primarily due to the fact that there were more module exchanges during the quarter than in the prior year quarter.
- Service agreements and license revenues increased 102% to $14.3 million from $7.1 million. The increase in revenue is primarily due to the fact that there were more module exchanges during the quarter, generating approximately $13.4 million of revenue in the current year quarter compared to revenue of $6.0 million in the prior year quarter.
- Generation revenues increased 32% to $6.2 million from $4.7 million primarily due to higher operating output of the generation fleet portfolio as a result of investments in maintenance activities and an increase in the size of the fleet.
- Advanced Technologies contract revenues decreased 9% to $6.2 million from $6.9 million. Compared to the third fiscal quarter of 2020, Advanced Technologies contract revenues recognized under the Joint Development Agreement with ExxonMobil Research and Engineering Company (“EMRE”) were approximately $0.1 million higher during the third fiscal quarter of 2021, reflecting continued performance under our Joint Development Agreement with EMRE during the quarter. However, the increased revenues under the Joint Development Agreement with EMRE were offset by $0.8 million less revenue recognized under government contracts during the third fiscal quarter of 2021 than during the third fiscal quarter of 2020.
Gross profit for the third fiscal quarter of 2021 totaled $1.1 million, compared to a gross loss of $(3.1) million in the comparable prior-year quarter. Higher gross profit for the quarter was the result of (i) higher service gross margin primarily due to more new module exchanges for projects with higher margins during the current year quarter, (ii) improved generation gross margin primarily related to an increase in revenues and a decrease in depreciation expense, and (iii) lower manufacturing variances primarily as a result of increased production volumes. This was partially offset by lower Advanced Technologies gross margin primarily related to the mix of government contracts in the quarter.
Operating expenses for the third fiscal quarter of 2021 increased to $11.7 million from $7.6 million in the third fiscal quarter of 2020. Administrative and selling expenses in the third fiscal quarter of 2021 included legal expenses associated with tax equity financings and additional share-based compensation expense of $0.5 million due to the non-cash grants made in August 2020 and November 2020 under our Long-Term Incentive Plans. Research and development expenses of $3.0 million during the third fiscal quarter of 2021 reflect increased spending on the Company’s hydrogen commercialization initiatives compared to the prior year period.
Net loss was $(12.0) million in the third fiscal quarter of 2021, compared to net loss of $(15.3) million in the third fiscal quarter of 2020, due, in part, to higher gross margin for the third fiscal quarter of 2021 compared to the third fiscal quarter of 2020. Additional contributing factors included lower interest expense as a result of the early repayment of the Orion Facility and the fact that there was no charge for the change in fair value of common stock warrant liability, partially offset by higher operating expenses for the period and the fact that there was no gain on the extinguishment of financing obligation recorded in the quarter.
The net loss per share attributable to common stockholders in the third fiscal quarter of 2021 was $(0.04), compared to $(0.07) in the third fiscal quarter of 2020. The lower net loss per common share was primarily due to the higher weighted average shares outstanding due to share issuances since July 31, 2020, and the lower net loss attributable to common stockholders
Adjusted EBITDA totaled $(5.2) million in the third fiscal quarter of 2021, compared to Adjusted EBITDA of $(5.6) million in the third fiscal quarter of 2020. Please see the discussion of non-GAAP financial measures, including Adjusted EBITDA, in the appendix at the end of this release.
Cash, Restricted Cash and Financing Update
On June 11, 2021, the Company entered into an Open Market Sale Agreement with Jefferies LLC and Barclays Capital Inc. (the “Agents”) with respect to an at the market offering program under which the Company may, from time to time, offer and sell shares of the Company’s common stock having an aggregate offering price of up to $500 million. Pursuant to the Open Market Sale Agreement, the Company paid the Agent making each sale a commission equal to 2.0% of the aggregate gross proceeds it received from such sale by such Agent of shares under the Open Market Sale Agreement. From the date of the Open Market Sale Agreement through July 31, 2021, approximately 44.0 million shares were sold under the Open Market Sale Agreement at an average sales price of $8.56 per share, resulting in gross proceeds of $376.6 million, before deducting expenses and sales commissions. Net proceeds to the Company totaled approximately $369.0 million after deducting commissions and offering expenses totaling approximately $7.6 million. The Company plans to use the net proceeds from this offering to accelerate the development and commercialization of our Advanced Technologies products, including our solid oxide platform, for project development, for internal research and development, to invest in capacity expansion for solid oxide and carbonate fuel cell manufacturing, and for project financing, working capital support, and general corporate purposes.
Cash and cash equivalents and restricted cash and cash equivalents totaled $494.0 million as of July 31, 2021 compared to $192.1 million as of October 31, 2020. The breakdown of unrestricted and restricted cash is as follows:
- As of July 31, 2021, unrestricted cash and cash equivalents totaled $468.6 million, compared to $149.9 million of unrestricted cash and cash equivalents as of October 31, 2020.
- As of July 31, 2021, restricted cash and cash equivalents totaled $25.5 million, of which $10.2 million was classified as current and $15.2 million was classified as non-current, compared to $42.2 million of restricted cash and cash equivalents as of October 31, 2020, of which $9.2 million was classified as current and $33.0 million was classified as non-current.
Operations Update
Groton Sub Base. The Company achieved mechanical completion, executed the interconnect agreement in July, and commenced the process of commissioning the 7.4 MW platform at the U.S. Navy Submarine Base in Groton, Connecticut. During the commissioning process (the final stage prior to commercial operation), a localized and contained elevated temperature was observed inside a component on one of the two installed plants and, as a result, the commissioning process was suspended. Due to the temporary elevated temperature being above the heat rating, we need to repair the gasket seals and insulation. Our team has identified the root cause of the issue and is in the process of applying improvements and preventative upgrades as well as making the necessary repairs to the plant. The issue identified affects unique aspects of this plant and does not affect the rest of our fleet. We expect to resume commissioning on the project in late September but timing is dependent on non-FuelCell Energy related activities on the Navy base. Our intent is to achieve commercial operations as expeditiously as possible. If commercial operations are delayed beyond October 18, 2021, an extension will be required from the Navy and the Navy will determine whether such extension will be granted. This platform, when fully operational, will demonstrate the ability of FuelCell Energy’s platforms to perform at high efficiencies and provide low CO2 to MWh output. Incorporation of the platform into a microgrid will demonstrate the ability of FuelCell Energy’s platforms to increase grid stability and resilience while supporting the U.S. military’s efforts to fortify base energy supply and demonstrating the Navy’s commitment to clean reliable power.
Subsequent to quarter end, in August 2021, the Company closed on a tax equity financing transaction with East West Bank for this project. East West Bank’s tax equity commitment totals $15 million. In connection with the initial closing, the Company was able to draw down $3.0 million, of which approximately $0.8 million was used to pay closing costs including appraisal fees, title insurance expenses and legal and consulting fees. The Company is eligible to draw the remaining amount of the commitment, approximately $12 million, once the Groton Project achieves commercial operation. Under the terms of our agreement with East West Bank, the project has a required commercial operations deadline of October 18, 2021, unless that deadline is amended or waived. If commercial operations are delayed beyond October 18, 2021, an extension will be required from the Navy and the Navy will determine whether such extension will be granted.
San Bernardino, CA. This 1.4 MW platform located at the wastewater treatment facility in San Bernardino, California commenced commercial operation in July 2021.
Subsequent to quarter end, in August 2021, the Company closed on a tax equity sale-leaseback financing transaction with Crestmark Equipment Finance (“Crestmark”) for this project. In this transaction, a subsidiary of the Company sold the fuel cell power plant located at the wastewater treatment plant in San Bernardino, California to Crestmark for a purchase price of $10.2 million and then leased the plant back from Crestmark. Net proceeds of unrestricted cash to the Company were approximately $5.3 million after deducting an initial rental down payment and one quarter’s rent totaling $2.2 million, debt service and future module replacement reserves totaling $2.5 million (classified as restricted cash of the Company until such time as it meets its performance obligations under the Long-Term Service Agreement for the project), and taxes and transaction fees.
LIPA — Yaphank, NY. On-site civil construction of this 7.4 MW project has materially advanced, with all foundations having been completed and most equipment necessary for the complete construction of the fuel cell project having been delivered to the site.
Derby, CT. On-site civil construction of this 14.8 MW project has advanced, having largely completed the foundational construction necessary in order to begin to receive delivery of the fuel cell platform equipment. This utility scale fuel cell platform will contain 5 SureSource 3000 fuel cell systems that will be installed on engineering platforms alongside the Housatonic River.
Toyota — Port of Long Beach, CA. This 2.3 MW trigeneration platform, which will produce electricity, hydrogen and hot water, has advanced to early site civil construction. It is anticipated that the fuel cell platform equipment will be received on-site over the next 90 days following the date of this release.
Backlog
(Amounts in thousands)
As of July 31,
| 2021 | 2020 | Change | |||||||
| Service | $ | 127,048 | $ | 153,818 | -17 | % | |||
| Generation | 1,109,343 | 1,099,625 | 1 | % | |||||
| License | 22,182 | 22,182 | 0 | % | |||||
| Advanced Technologies | 40,027 | 51,892 | -23 | % | |||||
| Total Backlog | $ | 1,298,600 | $ | 1,327,517 | -2 | % | |||
Backlog decreased 2.2% to $1.30 billion as of July 31, 2021, reflecting the continued execution of backlog and adjustments to generation backlog, primarily resulting from the decrease in fuel pricing which has lowered estimated future revenue, offset by the inclusion of the project with United Illuminating in Derby, Connecticut which was awarded in the second quarter of this fiscal year.
Only projects for which we have an executed power purchase agreement (“PPA”) are included in generation backlog, which represents future revenue under long-term PPAs. Together, the service and generation portion of backlog had a weighted average term of approximately 18 years, with weighting based on the dollar amount of 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.
Conference Call Information
FuelCell Energy will host a conference call today beginning at 10:00 a.m. EDT to discuss third quarter fiscal 2021 results and key business highlights. Participants can access the live call via webcast on the Company website or by telephone as follows:
- The live webcast of the call and supporting slide presentation will be available at www.fuelcellenergy.com. To listen to the call, select “Investors” on the home page, proceed to the “Events & Presentations” page and then click on the “Webcast” link listed under the September 14th earnings call event, or click here.
- Alternatively, participants can dial 647-689-4106 and state FuelCell Energy or the conference ID number 8137459.
The replay of the conference call will be available via webcast on the Company’s Investors’ page at www.fuelcellenergy.com approximately two hours after the conclusion of the call.
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