FuelCell Energy, Inc. (NASDAQ:FCEL) Q1 2023 Earnings Conference Call March 9, 2023 10:00 AM ET Company Participants Tom Gelston – Senior Vice President-Finance and Investor Relations Jason Few – President and Chief Executive Officer Mike Bishop – Executive Vice President and Chief Financial Officer Michael Lisowski – Executive Vice President and Chief Operating Officer John Torrance – Senior Vice President, Chief Commercialization and Solid Oxide Manufacturing Officer Conference Call Participants Manav Gupt ...

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FuelCell Energy, Inc. (NASDAQ:FCEL) Q4 2022 Earnings Conference Call December 20, 2022 10:00 AM ET Company Participants Tom Gelston - SVP, Finance and IR Jason Few - President and CEO Mike Bishop - EVP and CFO Mike Lisowski - EVP and COO Tony Leo - EVP and Chief Technology Officer Conference Call Participants Manav Gupta - UBS George Gianarikas - Canaccord Genuity Jeff Osborne - Cowen & Company Sam Burwell - Jefferies Ryan Pfingst - B. Riley Eric Stine - Craig-Hallum Praneeth Satish - Wells Fargo Noel Parks ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) FuelCell Energy leads in proprietary fuel cell technology, offering clean energy solutions and targeting a multi-trillion dollar market - FuelCell Energy is a **global leader** in sustainable clean energy technologies, manufacturing proprietary fuel cell platforms for a diverse customer base including businesses, utilities, and governments[20](index=20&type=chunk) - The company's technology is based on two platforms, carbonate and solid oxide, which can use various fuels like natural gas, biogas, and hydrogen to produce electricity, heat, hydrogen, and water, while also enabling carbon capture[23](index=23&type=chunk)[24](index=24&type=chunk) - The company's "Powerhouse" strategy, updated to "**Grow, Scale and Innovate**," focuses on optimizing its core business, expanding geographically, investing in manufacturing capacity, and innovating in hydrogen and carbon capture technologies[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) Total Addressable Market (TAM) Opportunity through 2030 | Market Segment | Estimated TAM Value | Company's Commercial Status | | :----------------------------------------------------------- | :------------------ | :----------------------------------------------------------- | | Global carbon capture, separation, and utilization | ~$1 trillion | Carbon separation/utilization available; capture under development | | Global distributed hydrogen | ~$400 billion | Commercially available | | Global megawatt and sub-megawatt distributed power | ~$300 billion | Commercially available | | Global solid oxide based long-duration hydrogen energy storage and electrolysis | ~$150 billion | Under development and available for order | Backlog as of October 31 (in thousands) | Category | 2022 | 2021 | | :--- | :--- | :--- | | **Commercial** | | | | Product | $9,065 | $0 | | Service | $114,040 | $125,918 | | Generation | $944,041 | $1,099,006 | | License | $0 | $22,182 | | **Total Commercial** | **$1,067,146** | **$1,247,106** | | **Advanced Technologies** | **$22,853** | **$40,763** | | **Total Backlog** | **$1,089,999** | **$1,287,869** | Revenue Percentage by Major Customer | Customer | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Korea Fuel Cell Co., Ltd (KFC) | 46% | —% | —% | | Connecticut Light and Power | 14% | 20% | 17% | | ExxonMobil Technology and Engineering Company (EMTEC) | 8% | 29% | 32% | | Korea Southern Power Company (KOSPO) | 6% | 12% | —% | | U.S. Department of Energy (DOE) | 6% | 8% | 9% | | Long Island Power Authority (LIPA) | 5% | —% | —% | | Pfizer, Inc. | 2% | 5% | 4% | | UIL Holdings Corporation | —% | 5% | 18% | | **Total** | **87%** | **79%** | **80%** | [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including persistent losses, negative cash flows, substantial debt, operational challenges, and market acceptance issues - The company has a **history of incurring losses** and anticipates **continued losses and negative cash flows**, with **profitability not guaranteed**[14](index=14&type=chunk)[235](index=235&type=chunk) - Significant revenue is derived from competitive bidding processes, and there is a risk that project awards **may not convert to contracts or revenue**, which could **materially affect cash flows**[14](index=14&type=chunk)[267](index=267&type=chunk) - The business is subject to **risks in international operations**, including its relationship with **POSCO Energy and KFC** in South Korea, which could be impacted by historical disputes despite a recent settlement[14](index=14&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - The company depends on **third-party suppliers** for key raw materials like nickel and stainless steel, and **disruptions in the supply chain** could harm manufacturing capabilities[14](index=14&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - **Additional capital will be needed** to fund operations and growth, which may not be available on acceptable terms and could result in **significant dilution** to existing stockholders[16](index=16&type=chunk)[317](index=317&type=chunk) - The company's **stock price has been and may remain volatile** due to factors such as failure to meet commercial milestones, variations in operating results, and general market conditions[16](index=16&type=chunk)[331](index=331&type=chunk) [Unresolved Staff Comments](index=61&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[361](index=361&type=chunk) [Properties](index=61&type=section&id=Item%202.%20Properties) FuelCell Energy owns its 72,000 square-foot corporate headquarters and R&D facility in Danbury, CT, and leases additional facilities in Torrington, CT, Taufkirchen, Germany, and Calgary, Alberta, Canada Company Facilities | Location | Function | Size (sq. ft.) | Ownership/Lease Expiration | | :--- | :--- | :--- | :--- | | Danbury, CT | Corporate HQ, R&D, Admin | 72,000 | Company owned | | Torrington, CT | Manufacturing & Admin | 167,000 | Lease expires Dec 2030 | | Taufkirchen, Germany | Manufacturing & Admin | 20,000 | Lease expires June 2023 | | Calgary, Alberta, Canada | Manufacturing, R&D | 32,220 | Lease expires Jan 2023 | [Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings from the ordinary course of business but does not expect them to have a material adverse effect on its financial statements - The company is involved in legal proceedings from the ordinary course of business but does **not expect them to have a material adverse effect** on its financial statements[364](index=364&type=chunk) [Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[365](index=365&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) FuelCell Energy's common stock trades on Nasdaq under "FCEL"; no cash dividends are paid, and shares were repurchased in Q4 2022 - The company's common stock trades on the **Nasdaq Global Market** under the symbol "**FCEL**"[368](index=368&type=chunk) - **No cash dividends** have ever been paid on common stock, and none are anticipated in the foreseeable future[368](index=368&type=chunk) Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Aug 1 - Aug 31, 2022 | 378,933 | $4.21 | | Sep 1 - Sep 30, 2022 | 793 | $3.97 | | Oct 1 - Oct 31, 2022 | 0 | $0.00 | | **Total** | **379,726** | **$4.21** | [Reserved](index=65&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2022 revenues increased **88%** to **$130.5 million**, but gross and operating losses widened significantly, ending with **$458.1 million** unrestricted cash Fiscal Year 2022 vs. 2021 Financial Summary (in thousands) | Metric | FY 2022 | FY 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $130,484 | $69,585 | 88% | | Total Costs of Revenues | $160,059 | $85,224 | 88% | | Gross Loss | $(29,575) | $(15,639) | 89% | | Loss from Operations | $(143,724) | $(64,902) | 121% | | Net Loss Attributable to Common Stockholders | $(145,922) | $(104,255) | 40% | | Loss Per Share | $(0.38) | $(0.31) | 23% | - Product revenues were **$60.0 million** in FY2022, entirely from module sales to Korea Fuel Cell Co., Ltd. (KFC), compared to **zero product revenue** in FY2021[392](index=392&type=chunk) - Administrative and selling expenses increased significantly to **$79.6 million** in FY2022 from **$37.9 million** in FY2021, primarily due to a **$24.0 million** legal expense related to the settlement with POSCO Energy and KFC[419](index=419&type=chunk) - Research and development expenses more than **tripled** to **$34.5 million** in FY2022 from **$11.3 million** in FY2021, driven by increased spending on solid oxide platform and carbon capture solutions[420](index=420&type=chunk) - The company ended FY2022 with **$458.1 million** in unrestricted cash and cash equivalents, up from **$432.2 million** at the end of FY2021, primarily due to proceeds from at-the-market stock offerings[435](index=435&type=chunk) - The Groton Sub Base project achieved commercial operation at **6 MW** on December 16, 2022, with a Technical Improvement Plan to reach its rated **7.4 MW** capacity by December 31, 2023[381](index=381&type=chunk)[457](index=457&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=92&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including interest rate, foreign currency, and commodity price fluctuations, particularly for natural gas and RNG, which it mitigates - The company has **minimal interest rate exposure** on its cash holdings and debt, with a **1% change** in rates **not expected to have a material impact**[555](index=555&type=chunk) - Foreign currency exchange risk is present due to international operations, but as of October 31, 2022, only **0.3% of cash** was held in foreign currencies[556](index=556&type=chunk) - The company faces fuel price risk for its generation projects; a sensitivity analysis indicates a **$1/MMBTu increase** in natural gas prices would have a **~$1.4 million annual cost impact**, and a **$10/MMBTu increase** in RNG prices would have a **~$2.0 million annual impact** on projects with fuel price exposure[560](index=560&type=chunk)[562](index=562&type=chunk) [Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for FY2022-2020, including Balance Sheets, Operations, Equity, and Cash Flows, with detailed notes Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2022 | Oct 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents, unrestricted | $458,055 | $432,213 | | Total current assets | $580,280 | $543,386 | | Project assets, net | $232,886 | $223,277 | | Total assets | $939,717 | $875,248 | | **Liabilities & Equity** | | | | Total current liabilities | $85,800 | $52,770 | | Total liabilities | $185,333 | $169,923 | | Total stockholders' equity | $684,392 | $642,438 | | Total liabilities and stockholders' equity | $939,717 | $875,248 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(112,167) | $(70,438) | $(36,781) | | Net cash used in investing activities | $(46,651) | $(73,230) | $(32,520) | | Net cash provided by financing activities | $180,583 | $411,908 | $221,667 | | **Net increase in cash** | **$20,832** | **$268,160** | **$152,274** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=146&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[893](index=893&type=chunk) [Controls and Procedures](index=146&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of October 31, 2022, with no material changes - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were **effective** as of October 31, 2022[895](index=895&type=chunk) - Management concluded that the company maintained **effective internal control over financial reporting** as of October 31, 2022, based on the COSO framework[897](index=897&type=chunk) [Other Information](index=147&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[900](index=900&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=147&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[900](index=900&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=148&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement, and a Code of Ethics is adopted - Information required by this item is **incorporated by reference** to the Company's 2023 Proxy Statement[902](index=902&type=chunk) - The company has adopted a **Code of Ethics**, which is available on its website[903](index=903&type=chunk) [Executive Compensation](index=148&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item concerning executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information required under this Item is **incorporated by reference** to the Company's 2023 Proxy Statement[904](index=904&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=148&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the 2023 Proxy Statement, with **8,460,061** securities available for future issuance under equity plans - Information required under this Item is **incorporated by reference** to the Company's 2023 Proxy Statement[905](index=905&type=chunk) Equity Compensation Plan Information as of October 31, 2022 | Plan Category | Shares to be issued upon exercise of outstanding options/rights | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity incentive plans | 20,231 | $66.90 | 8,451,061 | | Employee stock purchase plan | 0 | N/A | 9,000 | | **Total** | **20,231** | **$66.90** | **8,460,061** | [Certain Relationships and Related Transactions, and Director Independence](index=149&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's 2023 Proxy Statement - Information required under this Item is **incorporated by reference** to the Company's 2023 Proxy Statement[908](index=908&type=chunk) [Principal Accountant Fees and Services](index=149&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's 2023 Proxy Statement - Information required under this Item is **incorporated by reference** to the Company's 2023 Proxy Statement[909](index=909&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=150&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including corporate governance documents and material contracts - This section provides an **index** of all financial statements and exhibits filed with the 10-K report[911](index=911&type=chunk) [Form 10-K Summary](index=158&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[944](index=944&type=chunk)

Financial Data and Key Metrics Changes - For Q3 fiscal year 2022, total revenues were $43.1 million, a 61% increase from $26.8 million in Q3 fiscal year 2021 [25] - Product revenues were $18 million, compared to no product revenues in the prior year, driven by module sales to Korea Fuel Cell Company [26] - Service agreement revenues decreased by 37% to $9 million, while generation revenues increased by 75% to $10.9 million [27] - The net loss for Q3 fiscal year 2022 was $29 million, compared to a net loss of $12 million in Q3 fiscal year 2021 [31] Business Line Data and Key Metrics Changes - Product sales returned to the revenue mix with orders for 20 modules from Korea Fuel Cell, with 12 modules delivered in Q3 [9][12] - Service agreement revenues decreased due to fewer module exchanges and maintenance activities [27] - Generation revenues included an increase from renewable energy credits, contributing approximately $1.7 million [28] Market Data and Key Metrics Changes - The company is focusing on expanding in Asian markets, particularly South Korea, where the government has announced a hydrogen economy roadmap [20] - The company has established a memorandum of understanding with TuNur Ltd. to deliver low carbon electricity and hydrogen to North Africa and Europe [20] Company Strategy and Development Direction - The company aims to decarbonize power, produce hydrogen, and utilize hydrogen as a clean energy fuel [10] - The strategic focus includes scaling operations, enhancing manufacturing capabilities, and investing in research and development [41][39] - The company is committed to achieving net zero emissions by 2030 and aligning with UN Climate Action goals [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the impact of the Inflation Reduction Act on long-term market and tax certainty for investments [21] - The company anticipates growth in recurring revenues as projects begin operation under long-term power purchase agreements [39] - Management highlighted strong demand for grid resiliency and reliability, particularly in light of the energy crisis in Europe [55] Other Important Information - The company reported a backlog of $1.284 billion, slightly down year-over-year, with product sales backlog increasing due to module orders [33] - As of July 31, 2022, the company had approximately $479.6 million in cash and cash equivalents [34] Q&A Session Summary Question: Can you talk about the incremental production capacity? - Management discussed strategic actions to integrate carbonate manufacturing capabilities and optimize operations to achieve increased capacity [46][47] Question: Can you talk about supply chain optimization efforts? - Management confirmed ongoing efforts to strengthen the supply chain and expand manufacturing footprint to meet global growth demand [49][50] Question: Can you provide more details on the Groton project challenges? - Management clarified that the challenges are unique to the Groton project and that confidence remains high for resolving issues within a year [52] Question: Any updates on product sales for new customers? - Management noted strong momentum in building the pipeline, particularly in Korea and Europe, driven by the push towards hydrogen [54][55] Question: Can you elaborate on the MOU with KEPCO? - Management explained that the MOU with KEPCO focuses on developing large-scale utility projects in South Korea, leveraging the company's unique capabilities [59] Question: What is the outlook for product momentum in the U.S.? - Management expressed optimism for product momentum in the U.S., particularly in carbon capture and separation technologies [63][65]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements%2E) The financial statements detail the company's financial position as of July 31, 2022, and performance for the three and nine months then ended [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$944.4 million** as of July 31, 2022, driven by cash, inventories, and project assets Consolidated Balance Sheet Highlights (in thousands) | Account | July 31, 2022 | October 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $579,533 | $543,386 | | **Total assets** | $944,422 | $875,248 | | **Total current liabilities** | $80,514 | $52,770 | | **Total liabilities** | $184,755 | $169,923 | | **Total equity** | $696,780 | $642,438 | [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenues grew significantly, but net loss attributable to common stockholders widened for both periods Statement of Operations - Three Months Ended July 31 (in thousands, except per share) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Total revenues** | $43,104 | $26,820 | | **Gross (loss) profit** | $(4,180) | $1,100 | | **Loss from operations** | $(27,997) | $(10,585) | | **Net loss attributable to common stockholders** | $(30,214) | $(12,797) | | **Loss per share** | $(0.08) | $(0.04) | Statement of Operations - Nine Months Ended July 31 (in thousands, except per share) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Total revenues** | $91,283 | $55,650 | | **Gross loss** | $(14,385) | $(7,274) | | **Loss from operations** | $(101,058) | $(42,348) | | **Net loss attributable to common stockholders** | $(102,655) | $(79,274) | | **Loss per share** | $(0.27) | $(0.24) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased, while financing activities provided significantly less cash year-over-year Consolidated Cash Flows - Nine Months Ended July 31 (in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(88,088) | $(60,585) | | **Net cash used in investing activities** | $(39,483) | $(44,208) | | **Net cash provided by financing activities** | $147,323 | $406,769 | | **Net increase in cash and restricted cash** | $19,426 | $301,968 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, liquidity, revenue recognition, project assets, and debt obligations - The company believes its unrestricted cash, expected receipts, and release of restricted cash will be **sufficient to meet obligations for at least one year** from the financial statement issuance date[37](index=37&type=chunk) - A settlement with POSCO Energy led to the recharacterization of **$22.2 million** in deferred license revenue to a customer deposit and established a new revenue stream from module sales to KFC[65](index=65&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - The company recorded charges of **$14.0 million** for the nine months ended July 31, 2022, related to the Toyota project, as a potential source of renewable natural gas was no longer considered probable[85](index=85&type=chunk)[132](index=132&type=chunk) - A new at-the-market offering program initiated in July 2022 sold approximately **18.5 million shares**, raising net proceeds of approximately **$27.2 million** during the quarter, with an additional **$38.4 million** received in August 2022[34](index=34&type=chunk)[102](index=102&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%2E) Revenue growth was driven by product sales, but gross loss widened due to project costs and increased operating expenses [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Revenues increased significantly due to product sales, but gross margin turned negative, and operating expenses rose sharply Revenue by Segment - Three Months Ended July 31 (in thousands) | Segment | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Product | $18,000 | $0 | N/A | | Service | $9,049 | $14,344 | (37)% | | Generation | $10,877 | $6,230 | 75% | | Advanced Technologies | $5,178 | $6,246 | (17)% | | **Total Revenues** | **$43,104** | **$26,820** | **61%** | Gross (Loss) Profit by Segment - Three Months Ended July 31 (in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Product | $81 | $(1,903) | | Service | $1,331 | $1,318 | | Generation | $(7,259) | $(498) | | Advanced Technologies | $1,667 | $2,183 | | **Total Gross (Loss) Profit** | **$(4,180)** | **$1,100** | - Operating expenses for Q3 2022 increased to **$23.8 million** from **$11.7 million** in Q3 2021, driven by accelerated investment in solid oxide and carbon capture platforms[11](index=11&type=chunk)[193](index=193&type=chunk)[197](index=197&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Unrestricted cash totaled **$456.5 million**, with liquidity supported by equity offerings and project development plans - As of July 31, 2022, unrestricted cash and cash equivalents totaled **$456.5 million**[243](index=243&type=chunk) - Total backlog as of July 31, 2022, was **$1.28 billion**, a slight decrease from **$1.30 billion** as of July 31, 2021[267](index=267&type=chunk)[268](index=268&type=chunk) - The company forecasts project asset expenditures for fiscal 2022 to be between **$40.0 million** and **$60.0 million**[278](index=278&type=chunk) - Capital expenditures for fiscal 2022 are expected to range from **$20.0 million** to **$30.0 million**, focused on expanding molten carbonate and solid oxide production capacity[283](index=283&type=chunk) - Company-funded R&D expenditures for fiscal 2022 are expected to be between **$30.0 million** and **$40.0 million** to accelerate commercialization of Advanced Technologies solutions[284](index=284&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=96&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk%2E) The company faces market risks, primarily fuel price exposure for projects without pass-through mechanisms - The company has significant fuel price exposure for three projects in development: the Toyota project (RNG) and two Derby, CT projects (natural gas)[330](index=330&type=chunk) Fuel Price Sensitivity Analysis (Annual Impact) | Fuel Type | Price Change | Cost Impact | | :--- | :--- | :--- | | Natural Gas | +$1 / MMBTu | ~$1.4 million | | Renewable Natural Gas (RNG) | +$10 / MMBTu | ~$2.0 million | - The company utilizes an interest rate swap to fix the rate on its BFC Credit Agreement at **5.09%**, mitigating exposure to floating LIBOR rates[325](index=325&type=chunk) [Controls and Procedures](index=98&type=section&id=Item%204%2E%20Controls%20and%20Procedures%2E) Disclosure controls and procedures were effective as of July 31, 2022, with no material changes in internal controls - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[333](index=333&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[334](index=334&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=100&type=section&id=Item%201%2E%20Legal%20Proceedings%2E) Major legal disputes with POSCO Energy and KFC were resolved, granting direct market access and new module orders - On December 20, 2021, the Company entered into a Settlement Agreement with POSCO Energy and KFC, resolving all major legal disputes and arbitrations[347](index=347&type=chunk) - The settlement amends the license agreements, granting FuelCell Energy exclusive rights in Korea and Asia, while PE Group retains a limited 'Right to Service License' for existing customers[351](index=351&type=chunk) - As part of the settlement, KFC committed to purchasing **20 SureSource 3000 modules** at **$3.0 million** each and has an option for **14 more**[352](index=352&type=chunk) - The company paid its counsel, Wiley Rein, LLP, a total of **$24.0 million** to satisfy all obligations under its contingency-based engagement letter for the POSCO litigation[360](index=360&type=chunk) [Risk Factors](index=108&type=section&id=Item%201A%2E%20Risk%20Factors%2E) No material changes to previously disclosed risk factors in the 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2021 Annual Report on Form 10-K[364](index=364&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%2E) No unregistered equity sales occurred; common stock repurchases were for tax withholding on employee awards Common Stock Repurchases (Q3 FY2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1, 2022 – May 31, 2022 | 752 | $3.85 | | **Total** | **752** | **$3.85** | - Share repurchases were made to satisfy statutory tax withholding obligations for employees in connection with vesting stock-based awards[364](index=364&type=chunk) [Defaults Upon Senior Securities](index=108&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities%2E) None - None[365](index=365&type=chunk) [Mine Safety Disclosures](index=108&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures%2E) None - None[365](index=365&type=chunk) [Other Information](index=108&type=section&id=Item%205%2E%20Other%20Information%2E) None - None[366](index=366&type=chunk) [Exhibits](index=109&type=section&id=Item%206%2E%20Exhibits%2E) This section lists exhibits filed with the Form 10-Q, including certifications and XBRL data files

FuelCell Energy, Inc. (NASDAQ:FCEL) Q2 2022 Results Conference Call June 9, 2022 10:00 AM ET Company Participants Tom Gelston - Senior Vice President, Finance and Investor Relations Jason Few - President, Chief Executive Officer and Chief Commercial Officer Mike Bishop - Executive Vice President, Chief Financial Officer and Treasurer Mike Lisowski - Executive Vice President and Chief Operating Officer Conference Call Participants Colin Rusch - Oppenheimer & Company Noel Parks - Tuohy Brothers Eric Stine - C ...