FuelCell Energy(FCEL) - 2025 Q3 - Quarterly Report

Financial Statements Consolidated Balance Sheets As of July 31, 2025, the company's total assets were $830.5 million, a decrease from $944.1 million as of October 31, 2024, with both current assets and total liabilities decreasing, and stockholders' equity falling from $656.9 million to $556.2 million Consolidated Balance Sheets (USD in thousands) | Metric | July 31, 2025 (USD in thousands) | October 31, 2024 (USD in thousands) | | :-------------------------------- | :------------------------------- | :-------------------------------- | | Assets | | | | Cash and Cash Equivalents, unrestricted | 174,662 | 148,133 | | Investments - Short-term | - | 109,123 | | Inventories | 104,598 | 113,703 | | Project Assets, net | 224,482 | 242,131 | | Goodwill | - | 4,075 | | Intangible Assets, net | 4,215 | 14,779 | | Total Assets | 830,535 | 944,124 | | Liabilities and Stockholders' Equity | | | | Total Current Liabilities | 69,027 | 73,904 | | Long-term Liabilities and Other Liabilities | 119,320 | 130,850 | | Total Liabilities | 205,458 | 216,658 | | Total Stockholders' Equity | 556,171 | 656,922 | - As of July 31, 2025, the company's unrestricted cash and cash equivalents increased to $174.7 million from $148.1 million as of October 31, 2024, with all short-term investments having matured and no longer held[7] - Goodwill and certain intangible assets were impaired to zero due to restructuring plans and the cessation of solid oxide technology commercialization activities[7][66][78] Consolidated Statements of Operations and Comprehensive Loss (Three Months Ended July 31, 2025 and 2024) For the three months ended July 31, 2025, total revenue increased by 97% to $46.7 million year-over-year, but operating and net losses significantly widened due to $64.5 million in impairment charges and $4.1 million in restructuring expenses Consolidated Statements of Operations and Comprehensive Loss (USD in thousands) | Metric (USD in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Total Revenue | 46,743 | 23,695 | | Total Cost of Sales | 51,877 | 29,897 | | Gross Loss | (5,134) | (6,202) | | Total Operating Expenses | 90,230 | 27,415 | | Operating Loss | (95,364) | (33,617) | | Net Loss | (91,896) | (35,123) | | Net Loss Attributable to Common Stockholders | (92,456) | (33,460) | | Basic and Diluted Loss Per Share | (3.78) | (1.99) | - Product revenue significantly increased, primarily driven by the delivery and commissioning of 8 fuel cell modules under a Long-Term Service Agreement (LTSA) with GGE, and a sales contract with Ameresco, Inc[130] - The quarter recognized $64.5 million in impairment charges, mainly related to goodwill, in-process intangible assets, property, plant, and equipment, and inventories associated with solid oxide technology, along with $4.1 million in restructuring expenses[8][146][147] Consolidated Statements of Operations and Comprehensive Loss (Nine Months Ended July 31, 2025 and 2024) For the nine months ended July 31, 2025, total revenue increased by 64% to $103.1 million year-over-year, but net loss expanded to $162 million with a loss per share of $7.22 due to impairment and restructuring charges Consolidated Statements of Operations and Comprehensive Loss (USD in thousands) | Metric (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | | Total Revenue | 103,146 | 62,806 | | Total Cost of Sales | 122,922 | 87,807 | | Gross Loss | (19,776) | (25,001) | | Total Operating Expenses | 144,249 | 92,455 | | Operating Loss | (164,025) | (117,456) | | Net Loss | (162,031) | (117,178) | | Net Loss Attributable to Common Stockholders | (160,431) | (86,993) | | Basic and Diluted Loss Per Share | (7.22) | (5.56) | - Product revenue was primarily driven by the delivery and commissioning of 12 fuel cell modules under the LTSA with GGE, and a sales contract with Ameresco, Inc[161] - Research and development expenses decreased to $28.6 million, mainly due to reduced investment in the commercial development of solid oxide power generation and electrolysis platforms, and carbon separation and capture solutions[177] Consolidated Statements of Changes in Equity (Three and Nine Months Ended July 31, 2025) For the nine months ended July 31, 2025, total stockholders' equity decreased from $657 million as of October 31, 2024, to $556 million, primarily due to net loss and preferred stock dividends, partially offset by common stock issuances and equity incentive plans Consolidated Statements of Changes in Equity (USD in thousands) | Metric (USD in thousands) | Balance as of October 31, 2024 | Balance as of July 31, 2025 | | :------------------------ | :----------------------------- | :-------------------------- | | Common Stock Shares | 20,375,932 | 29,645,294 | | Common Stock Amount | 2 | 3 | | Additional Paid-in Capital | 2,300,031 | 2,357,630 | | Accumulated Deficit | (1,641,550) | (1,799,581) | | Accumulated Other Comprehensive Loss | (1,561) | (1,881) | | Treasury Stock | (1,198) | (1,360) | | Deferred Compensation | 1,198 | 1,360 | | Total Stockholders' Equity | 656,922 | 556,171 | | Noncontrolling Interests | 10,687 | 9,049 | | Total Equity | 667,609 | 565,220 | - For the nine months ended July 31, 2025, approximately 9.2 million shares of common stock were sold through the Amended Sales Agreement, generating net proceeds of approximately $51.6 million[30][89] - Preferred stock dividends were $2.4 million for both nine-month periods[9][189] Consolidated Statements of Changes in Equity (Three and Nine Months Ended July 31, 2024) For the nine months ended July 31, 2024, total stockholders' equity decreased from $700 million as of October 31, 2023, to $685 million, primarily due to net loss and preferred stock dividends, partially offset by common stock issuances and noncontrolling interest contributions Consolidated Statements of Changes in Equity (USD in thousands) | Metric (USD in thousands) | Balance as of October 31, 2023 | Balance as of July 31, 2024 | | :------------------------ | :----------------------------- | :-------------------------- | | Common Stock Shares | 15,020,872 | 18,461,340 | | Common Stock Amount | 2 | 2 | | Additional Paid-in Capital | 2,199,704 | 2,277,470 | | Accumulated Deficit | (1,515,541) | (1,600,134) | | Accumulated Other Comprehensive Loss | (1,672) | (1,576) | | Treasury Stock | (1,078) | (1,198) | | Deferred Compensation | 1,078 | 1,198 | | Total Stockholders' Equity | 682,493 | 675,762 | | Noncontrolling Interests | 17,955 | 9,345 | | Total Equity | 700,448 | 685,107 | - For the nine months ended July 31, 2024, noncontrolling interests contributed $25.1 million, primarily from tax equity financing transactions for the Derby and Groton projects[14][247] - Net proceeds from common stock issuances totaled $71.7 million[14][247] Consolidated Statements of Cash Flows (Nine Months Ended July 31, 2025 and 2024) For the nine months ended July 31, 2025, cash used in operating activities decreased, cash provided by investing activities significantly increased, and cash provided by financing activities decreased, with total cash, cash equivalents, and restricted cash at period-end increasing to $237 million Consolidated Statements of Cash Flows (USD in thousands) | Cash Flow Activities (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net Cash Used in Operating Activities | (102,427) | (158,751) | | Net Cash Provided by (Used in) Investing Activities | 89,970 | (18,978) | | Net Cash Provided by Financing Activities | 40,537 | 96,238 | | Effect of Exchange Rate Changes on Cash | (109) | 96 | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 27,971 | (81,395) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | 236,854 | 218,181 | - Cash provided by investing activities primarily resulted from $772 million in maturities of U.S. Treasury securities, offset by $661 million in U.S. Treasury security purchases, $3.8 million in project asset expenditures, and $17.6 million in capital expenditures[243] - Cash provided by financing activities primarily stemmed from $4 million in noncontrolling interest contributions and $51.6 million in net proceeds from common stock sales, partially offset by $10.4 million in debt repayments and $2.4 million in preferred stock dividend payments[246] Notes to Consolidated Financial Statements The notes to consolidated financial statements provide detailed information on the company's business, accounting policies, recent accounting pronouncements, tax equity financings, revenue recognition, impairment and restructuring, investments, inventories, project assets, goodwill and intangible assets, accrued liabilities, leases, stockholders' equity, redeemable preferred stock, loss per share, restricted cash, debt, benefit plans, commitments and contingencies, and subsequent events Note 1. Nature of Business and Basis of Presentation FuelCell Energy is a global leader in fuel cell technology, offering clean power, heat, hydrogen, and carbon capture solutions, which implemented a 1-for-30 reverse stock split in November 2024 and generates cash primarily through product sales, projects, power generation, R&D, and financing activities - The company focuses on providing environmentally responsible distributed baseload energy solutions through its proprietary fuel cell technology platforms, including clean power, heat, clean hydrogen, and water, with carbon capture capabilities[18] - On November 8, 2024, the company effected a 1-for-30 reverse stock split, reducing outstanding common stock from 611 million shares to approximately 20.376 million shares[21] - As of July 31, 2025, unrestricted cash and cash equivalents were $174.7 million, an increase from $148.1 million as of October 31, 2024, with all short-term U.S. Treasury security investments having matured prior to July 31, 2025[27] - The company anticipates sufficient liquidity for the next 12 months, but long-term profitability and cash flow depend on timely project completion, increased power generation cash flows, financing access, order growth, R&D funding, solid oxide and carbon capture platform commercialization, and cost reductions[33][34] Note 2. Recent Accounting Pronouncements The company is evaluating recent FASB accounting pronouncements on reportable segment disclosures, income tax disclosures, and expense classification disclosures, expecting the impact on financial statements to be primarily in disclosures with no material effect on operating results - The FASB issued guidance in November 2023 to improve reportable segment disclosures, requiring enhanced disclosure of significant segment expenses, effective for annual reports in fiscal year 2025[39] - The FASB issued guidance in December 2023 to enhance income tax disclosures, requiring more information on how entity operations, tax risks, tax planning, and operating opportunities affect tax rates and future cash flows, effective for fiscal years beginning after December 15, 2025[40] - The FASB issued new guidance in November 2024, requiring enhanced disclosures for specific expense categories within certain expense captions in the income statement, effective for fiscal years beginning after December 15, 2026[41] Note 3. Tax Equity Financings The company funds its Derby, Groton, and Yaphank projects through tax equity financing transactions, with Derby showing net income attributable to noncontrolling interests of $0.4 million (three months) and $1.2 million (nine months) for 2025, and net losses for Groton and Yaphank in both periods Net Income (Loss) Attributable to Noncontrolling Interests (USD in thousands) | Project | Period | Net Income (Loss) Attributable to Noncontrolling Interests (USD in thousands) | | :------ | :------------------------------- | :------------------------------------------------------------ | | Derby | Three Months Ended July 31, 2025 | 400 | | Derby | Three Months Ended July 31, 2024 | (1,800) | | Derby | Nine Months Ended July 31, 2025 | 1,200 | | Derby | Nine Months Ended July 31, 2024 | (28,600) | | Groton | Three Months Ended July 31, 2025 | (10) | | Groton | Three Months Ended July 31, 2024 | (200) | | Groton | Nine Months Ended July 31, 2025 | (3,500) | | Groton | Nine Months Ended July 31, 2024 | (3,500) | | Yaphank | Three Months Ended July 31, 2025 | (600) | | Yaphank | Three Months Ended July 31, 2024 | (400) | | Yaphank | Nine Months Ended July 31, 2025 | (1,700) | | Yaphank | Nine Months Ended July 31, 2024 | (500) | - For the nine months ended July 31, 2024, the loss attributable to noncontrolling interests for the Derby project was primarily due to investment tax credits (ITC) and accelerated depreciation[191] Note 4. Revenue Recognition The company's contract assets and liabilities both increased, customer consideration payable related to the Toyota hydrogen production and power purchase agreement remained stable, and the joint development agreement with ExxonMobil Technology and Engineering Company (EMTEC) and Rotterdam pilot project purchase order continued to contribute to advanced technology revenue, while the Long-Term Service Agreement (LTSA) with Gyeonggi Green Energy Co., Ltd. (GGE) is valued at $159.6 million for 42 fuel cell module replacements and long-term O&M services Contract Balances (USD in thousands) | Metric (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------ | :------------ | :--------------- | | Contract Assets | 98,100 | 65,100 | | Contract Liabilities | 10,700 | 7,200 | | Customer Consideration Payable | 6,000 | 6,000 | - The joint development agreement with EMTEC was extended to December 31, 2026, with an expected annual budget of at least $10 million, and allows the company to pursue new carbon capture projects using Generation 1 and Generation 2 technologies[56][57] - The LTSA with GGE totals $159.6 million for the replacement of 42 1.4 MW fuel cell modules, balance of plant replacement parts, and long-term operations and maintenance services, with the first 6 modules commissioned in Fall 2024 and another 12 modules commissioned during the nine months ended July 31, 2025[59][61] Remaining Performance Obligations (USD in thousands) | Remaining Performance Obligations (USD in thousands) | Amount (USD in thousands) | Estimated Recognition Period | | :----------------------------------- | :------------------------ | :--------------------------- | | Service Agreements | 169,400 | 3-15 years | | Power Purchase Agreements (PPAs) | 378,900 | 19-20 years | | Advanced Technology Contracts | 7,100 | Approximately 2 years | | Product Purchase Agreements | 96,200 | Next 2 fiscal years | Note 5. Impairment and Restructuring The company implemented multiple restructuring rounds in September, November 2024, and June 2025, including workforce reductions of approximately 39% to lower operating costs and reallocate resources, with the June 2025 plan resulting in $64.5 million in impairment charges related to solid oxide technology goodwill, in-process intangible assets, inventories, and property, plant, and equipment - In June 2025, the Board of Directors approved a global restructuring plan, reducing the workforce by 122 employees (approximately 22% of total staff) and ceasing most solid oxide technology development efforts to lower operating costs and reallocate resources[64] Impairment Charges by Category (USD in thousands) | Impairment Charge Category (USD in thousands) | Amount (USD in thousands) | | :------------------------------------ | :------------------------ | | Property, Plant, and Equipment | 42,100 | | Inventories | 9,000 | | In-Process Intangible Assets | 9,300 | | Goodwill | 4,100 | | Total | 64,500 | - Restructuring expenses, primarily severance, were $4.1 million and $5.6 million for the three and nine months ended July 31, 2025, respectively[65] Note 6. Investments – Short-Term As of July 31, 2025, the company no longer holds short-term U.S. Treasury security investments, as all such securities held during the first nine months of fiscal year 2025 have matured Investments – Short-Term (USD in thousands) | Metric (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------ | :------------ | :--------------- | | U.S. Treasury Securities | - | 109,123 | - The company classified U.S. Treasury securities as held-to-maturity and recorded them at amortized cost, with a weighted-average yield to maturity of 4.78% as of October 31, 2024[72] Note 7. Inventories As of July 31, 2025, the company's total inventories were $107.3 million, including $71 million in work-in-process inventories, and a $9 million impairment charge for solid oxide inventories was recognized during the three months ended July 31, 2025, due to the cessation of solid oxide technology commercialization activities Inventories by Category (USD in thousands) | Inventory Category (USD in thousands) | July 31, 2025 | October 31, 2024 | | :---------------------------------- | :------------ | :--------------- | | Raw Materials | 36,360 | 35,989 | | Work-in-Process | 70,981 | 80,457 | | Total Inventories | 107,341 | 116,446 | | Inventories – Current | (104,598) | (113,703) | | Inventories – Long-term | 2,743 | 2,743 | - Work-in-process inventories primarily include standard inventories used to manufacture modules or module components, intended for future project asset construction, power plant orders, or service agreements[73] - Long-term inventories include exchange modules contractually required to be segregated for specific project assets[74] Note 8. Project Assets As of July 31, 2025, the company's net project assets totaled $224.5 million, primarily comprising 12 completed and operational power generation facilities with a net value of $223.8 million, and $0.7 million in construction-in-progress project assets Project Assets by Category (USD in thousands) | Project Asset Category (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------------------ | :------------ | :--------------- | | Project Assets in Operation | 306,747 | 308,503 | | Accumulated Depreciation | (82,964) | (66,542) | | Project Assets in Operation, net | 223,783 | 241,961 | | Construction-in-Progress Project Assets | 699 | 170 | | Project Assets, net | 224,482 | 242,131 | - The estimated useful lives for project assets are 20 years for balance of plant and site construction, and 4 to 7 years for modules[76] Note 9. Goodwill and Intangible Assets Due to the June 2025 restructuring plan, the company recognized $4.1 million in goodwill and $9.3 million in in-process intangible asset impairment charges related to Versa Inc. during the three months ended July 31, 2025, reducing goodwill to zero, and as of July 31, 2025, net intangible assets were $4.2 million, primarily associated with the Bridgeport Fuel Cell Project acquisition Intangible Assets by Category (USD in thousands) | Intangible Asset Category (USD in thousands) | Net as of July 31, 2025 | Net as of October 31, 2024 | | :----------------------------------- | :---------------------- | :------------------------- | | In-Process Intangible Assets | - | 9,592 | | Bridgeport PPA | 4,215 | 5,187 | | Total | 4,215 | 14,779 | - Amortization expense for intangible assets related to the Bridgeport Fuel Cell Project was $0.3 million for both three-month periods and $1 million for both nine-month periods ended July 31, 2025 and 2024[79] Note 10. Accrued Liabilities As of July 31, 2025, the company's total accrued liabilities were $29.87 million, slightly lower than $30.36 million as of October 31, 2024, primarily comprising accrued payroll and employee benefits, customer consideration payable, accrued service agreement and PPA costs, and accrued severance Accrued Liabilities by Category (USD in thousands) | Accrued Liability Category (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------------------ | :------------ | :--------------- | | Accrued Payroll and Employee Benefits | 6,999 | 9,808 | | Customer Consideration Payable | 2,515 | 2,515 | | Accrued Service Agreement and PPA Costs | 11,872 | 10,574 | | Accrued Legal, Tax, Professional, and Other | 5,097 | 5,230 | | Accrued Severance | 3,383 | 2,235 | | Total Accrued Liabilities | 29,866 | 30,362 | - Accrued service agreement costs include a service agreement loss reserve of $9.8 million as of July 31, 2025, and $9 million as of October 31, 2024[85] - Accrued severance is primarily related to restructuring activities and workforce reductions in September, November 2024, and June 2025[85] Note 11. Leases The company primarily leases real estate, vehicles, and equipment through operating lease agreements, with a weighted-average remaining lease term of approximately 18 years and a weighted-average discount rate of 7.8% as of July 31, 2025 Operating Lease Expense (USD in thousands) | Operating Lease Expense (USD in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Operating Lease Expense | 300 | 400 | | Operating Lease Expense (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | Operating Lease Expense | 1,000 | 1,100 | Undiscounted Operating Lease Liability Maturities (USD in thousands) | Undiscounted Operating Lease Liability Maturities (USD in thousands) | Amount (USD in thousands) | | :------------------------------------------- | :------------------------ | | Due in Year 1 | 1,313 | | Due in Year 2 | 1,431 | | Due in Year 3 | 1,748 | | Due in Year 4 | 1,221 | | Due in Year 5 | 1,119 | | Thereafter | 17,617 | | Total Undiscounted Lease Payments | 24,449 | Note 12. Stockholders' Equity The company continues to issue common stock through its Amended Sales Agreement, selling approximately 6.8 million shares for net proceeds of $38.1 million during the three months ended July 31, 2025, and approximately 9.2 million shares for net proceeds of $51.6 million during the nine months ended July 31, 2025, with approximately $151.4 million of stock remaining available for sale as of July 31, 2025 - The Amended Sales Agreement allows the company to issue and sell common stock with an aggregate offering price of up to $300 million from time to time[88] Common Stock Sales through Amended Sales Agreement | Period | Common Stock Shares Sold (millions) | Average Selling Price (USD/share) | Net Proceeds (million USD) | | :----- | :-------------------------------- | :-------------------------------- | :------------------------- | | Three Months Ended July 31, 2025 | 6.8 | 5.70 | 38.1 | | Nine Months Ended July 31, 2025 | 9.2 | 5.84 | 51.6 | - As of July 31, 2025, approximately $151.4 million of stock remained available for sale under the Amended Sales Agreement[90] Note 13. Redeemable Preferred Stock As of July 31, 2025, the company had 64,020 shares of Series B 5% Cumulative Convertible Perpetual Preferred Stock issued and outstanding, with a liquidation preference of $1,000 per share and a carrying value of $59.9 million, and paid $0.8 million and $2.4 million in preferred stock dividends for the three and nine months ended July 31, 2025 and 2024, respectively Redeemable Preferred Stock (USD in thousands) | Metric (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------ | :------------ | :--------------- | | Series B Preferred Stock (Shares Outstanding) | 64,020 | 64,020 | | Series B Preferred Stock (Carrying Value) | 59,857 | 59,857 | - The Series B Preferred Stock has a liquidation preference of $1,000 per share[92] - The company paid $0.8 million and $2.4 million in preferred stock dividends for the three and nine months ended July 31, 2025 and 2024, respectively[92] Note 14. Loss Per Share Due to net losses, diluted loss per share calculations did not consider potentially dilutive securities, with net loss attributable to common stockholders of $92.5 million and $160.4 million, and loss per share of $3.78 and $7.22, for the three and nine months ended July 31, 2025, respectively Loss Per Share (USD in thousands, except per share data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | | Net Loss Attributable to Common Stockholders (USD in thousands) | (92,456) | (33,460) | | Basic and Diluted Loss Per Share (USD) | (3.78) | (1.99) | | Weighted-Average Common Stock Shares | 24,441,294 | 16,772,791 | | Metric | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | | Net Loss Attributable to Common Stockholders (USD in thousands) | (160,431) | (86,993) | | Basic and Diluted Loss Per Share (USD) | (7.22) | (5.56) | | Weighted-Average Common Stock Shares | 22,233,074 | 15,646,242 | Potentially Dilutive Securities | Potentially Dilutive Securities | July 31, 2025 | July 31, 2024 | | :------------------------------ | :------------ | :------------ | | Options to Purchase Common Stock | 523 | 577 | | Unvested Restricted Stock Units | 929,358 | 559,081 | | Series B Preferred Stock | 1,261 | 1,261 | | Total | 931,142 | 560,919 | Note 15. Restricted Cash As of July 31, 2025, the company's total restricted cash and cash equivalents amounted to $62.2 million, primarily designated for performance guarantees, future debt service, and letters of credit, with $16.1 million classified as short-term and $46.1 million as long-term restricted cash Restricted Cash by Category (USD in thousands) | Restricted Cash Category (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------------------ | :------------ | :--------------- | | Restricted Cash for Letters of Credit | 14,152 | 14,152 | | Restricted Cash for Crestmark Sale-Leaseback Transaction | 2,914 | 2,908 | | Debt Service and Performance Reserve for OpCo Financing Facility | 20,868 | 24,721 | | Debt Service and Performance Reserve for Senior and Subordinate Back-Leverage Facilities | 15,756 | 12,869 | | Other | 8,502 | 6,100 | | Total Restricted Cash | 62,192 | 60,750 | | Short-term Restricted Cash | (16,092) | (12,161) | | Long-term Restricted Cash | 46,100 | 48,589 | - As of July 31, 2025, total outstanding letters of credit were $14.2 million, with various maturity dates extending through October 2029[95] Note 16. Debt As of July 31, 2025, the company's total debt and financing obligations were $123.1 million, slightly lower than $131.7 million as of October 31, 2024, primarily comprising EXIM financing, Derby and Groton back-leverage loans, the OpCo financing facility, and the Connecticut loan, with the OpCo financing facility's interest rate swap generating a $0.6 million gain and a $0.2 million loss for the three and nine months ended July 31, 2025, respectively Debt by Category (USD in thousands) | Debt Category (USD in thousands) | July 31, 2025 | October 31, 2024 | | :------------------------------- | :------------ | :--------------- | | EXIM Financing Facility | 9,409 | 10,104 | | Derby Senior Back-Leverage Facility | 7,805 | 8,514 | | Derby Subordinate Back-Leverage Facility | 3,500 | 3,500 | | Groton Senior Back-Leverage Facility | 10,145 | 10,857 | | Groton Subordinate Back-Leverage Facility | 8,000 | 8,000 | | Sale-Leaseback Transaction Financing Obligation | 18,781 | 18,811 | | Connecticut Loan | 5,350 | 6,024 | | OpCo Financing Facility | 63,563 | 70,067 | | Deferred Financing Costs | (3,481) | (4,215) | | Total Debt and Financing Obligations | 123,072 | 131,662 | | Current Portion | (16,710) | (15,924) | | Long-term Portion | 106,362 | 115,738 | - The OpCo financing facility's interest rate swap generated a $0.6 million gain and a $0.2 million loss for the three and nine months ended July 31, 2025, respectively[98] Note 17. Benefit Plans The company implements long-term incentive plans, including Performance Stock Units (PSUs) tied to relative Total Shareholder Return (TSR) and time-vesting Restricted Stock Units (RSUs), granting 186,507 PSUs and 186,501 time-vesting RSUs to senior management, and 321,184 time-vesting RSUs to other employees in fiscal year 2025, with a total of 929,358 unvested RSUs as of July 31, 2025 - The fiscal year 2025 long-term incentive plan includes relative Total Shareholder Return (TSR) Performance Stock Units (PSUs) and time-vesting Restricted Stock Units (RSUs)[100][102] Equity Compensation Expense (USD in thousands) | Equity Compensation Expense (USD in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Cost of Sales | 207 | 463 | | Administrative and Selling Expenses | 1,271 | 2,304 | | Research and Development Expenses | 158 | 483 | | Total | 1,636 | 3,250 | | Equity Compensation Expense (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Cost of Sales | 620 | 1,211 | | Administrative and Selling Expenses | 7,399 | 6,498 | | Research and Development Expenses | 482 | 1,257 | | Total | 8,501 | 8,966 | Restricted Stock Unit Activity | Restricted Stock Unit Activity | Shares | Weighted-Average Fair Value (USD) | | :----------------------------- | :-------- | :-------------------------------- | | Unvested as of October 31, 2024 | 516,561 | 64.53 | | Granted - Time-Vesting RSUs | 507,685 | 8.11 | | Granted - PSUs | 186,507 | 14.38 | | Vested | (146,207) | 63.36 | | Forfeited | (135,188) | 39.84 | | Unvested as of July 31, 2025 | 929,358 | 26.53 | Note 18. Commitments and Contingencies The company faces risks from performance penalties under service agreements, fuel price volatility under power purchase agreements, and other purchase commitments, with $66.9 million in material, supply, and service purchase commitments as of July 31, 2025, and derivative fair value risk related to natural gas purchase contracts, though management believes existing legal proceedings will not materially adversely affect financial statements - The company's service agreements require power plants to meet minimum operating levels, otherwise it may face performance penalties or need to replace fuel cell modules[108] - Power purchase agreements expose the company to fuel price volatility and fuel procurement risks, which are mitigated through fuel cost pass-through mechanisms, fixed-price supply contracts, and potential financial hedges[110] - As of July 31, 2025, the company had $66.9 million in material, supply, and service purchase commitments[112] - The company recognized net mark-to-market gains of $1 million and $2 million related to natural gas contract derivatives for the three and nine months ended July 31, 2025, respectively[111] Note 19. Subsequent Events Subsequent to the quarter-end, the company sold approximately 2.7 million shares of common stock through its Amended Sales Agreement, generating net proceeds of approximately $11.8 million, with approximately $139.4 million of stock remaining available for sale under the agreement - Subsequent to the quarter-end, the company sold approximately 2.7 million shares of common stock through its Amended Sales Agreement at an average price of $4.55 per share, generating net proceeds of approximately $11.8 million[114][199] - Following this sale, approximately $139.4 million of stock remained available for sale under the Amended Sales Agreement[114][199] Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This report contains numerous forward-looking statements regarding the company's future financial condition, operating results, business plans, market developments, project completion timelines, financing capabilities, cost competitiveness, restructuring plan effectiveness, and sales targets, which are based on current beliefs and assumptions and involve inherent risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements cover the development and commercialization of fuel cell technologies and products, project completion timelines, business plans and strategies, anticipated operating results (such as revenue growth and profitability), liquidity, future funding under advanced technology contracts, project financing, and cost reduction targets[117] - Risks and uncertainties include those related to product development and manufacturing, economic conditions, interest rate changes, supply chain disruptions, changes in the regulatory environment, availability of government subsidies, unexpected costs or consequences of restructuring plans, technological changes, competition, and the ability to obtain additional financing[118] OVERVIEW FuelCell Energy is dedicated to providing clean energy solutions through its proprietary fuel cell technology, including power, heat, hydrogen, and carbon capture, having been founded in 1969 and commencing commercial sales of stationary fuel cell power plants in 2003, focusing on markets with high energy costs, poor grid reliability, and support for multi-value streams and emissions reduction policies - The company offers commercial technologies capable of producing clean electricity, heat, clean hydrogen, and water, with the ability to recycle and capture carbon[124] - The company continues to invest in product development and commercialization technologies to enhance the solid oxide technology platform's ability to provide hydrogen and long-duration hydrogen-based energy storage, and to augment existing platforms with carbon capture solutions[124] - The company primarily sells its products in the U.S., European, and South Korean markets, while also seeking opportunities in other countries globally[125] RESULTS OF OPERATIONS This section discusses the company's results of operations for the three and nine months ended July 31, 2025 and 2024, focusing on changes in revenue, cost of sales, gross loss, operating expenses, and net loss Comparison of the Three Months Ended July 31, 2025 and 2024 For the three months ended July 31, 2025, total revenue increased by 97% to $46.7 million year-over-year, primarily driven by a significant increase in product revenue, but operating and net losses expanded considerably due to $64.5 million in impairment charges and $4.1 million in restructuring expenses Consolidated Statements of Operations and Comprehensive Loss (USD in thousands) | Metric (USD in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change (USD in thousands) | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------ | :--------- | | Total Revenue | 46,743 | 23,695 | 23,048 | 97% | | Total Cost of Sales | 51,877 | 29,897 | 21,980 | 74% | | Gross Loss | (5,134) | (6,202) | 1,068 | 17% | | Operating Loss | (95,364) | (33,617) | (61,747) | (184)% | | Net Loss | (91,896) | (35,123) | (56,773) | (162)% | Revenue by Category (USD in thousands) | Revenue Category (USD in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change (USD in thousands) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------ | :--------- | | Product Revenue | 26,000 | 250 | 25,750 | 10300% | | Service Agreement Revenue | 3,130 | 1,411 | 1,719 | 122% | | Power Generation Revenue | 12,355 | 13,402 | (1,047) | (8)% | | Advanced Technology Revenue | 5,258 | 8,632 | (3,374) | (39)% | - Administrative and selling expenses and research and development expenses both decreased, but were significantly offset by impairment and restructuring charges[144][145][146][147] Comparison of the Nine Months Ended July 31, 2025 and 2024 For the nine months ended July 31, 2025, total revenue increased by 64% to $103.1 million year-over-year, driven by growth in product and service revenue, but operating and net losses significantly widened due to impairment and restructuring charges Consolidated Statements of Operations and Comprehensive Loss (USD in thousands) | Metric (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | Change (USD in thousands) | Change (%) | | :------------------------ | :------------------------------ | :------------------------------ | :------------------------ | :--------- | | Total Revenue | 103,146 | 62,806 | 40,340 | 64% | | Total Cost of Sales | 122,922 | 87,807 | 35,115 | 40% | | Gross Loss | (19,776) | (25,001) | 5,225 | 21% | | Operating Loss | (164,025) | (117,456) | (46,569) | (40)% | | Net Loss | (162,031) | (117,178) | (44,853) | (38)% | Revenue by Category (USD in thousands) | Revenue Category (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | Change (USD in thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------------ | :--------- | | Product Revenue | 39,099 | 250 | 38,849 | 15540% | | Service Agreement Revenue | 13,122 | 4,397 | 8,725 | 198% | | Power Generation Revenue | 35,825 | 38,013 | (2,188) | (6)% | | Advanced Technology Revenue | 15,100 | 20,146 | (5,046) | (25)% | - Administrative and selling expenses and research and development expenses both decreased, but were significantly offset by impairment and restructuring charges[176][177][179][181] LIQUIDITY AND CAPITAL RESOURCES The company primarily obtains cash through product sales, power generation revenue, R&D contracts, equity issuances, and debt financing, with unrestricted cash and cash equivalents of $174.7 million as of July 31, 2025, and continues to raise capital through its at-the-market sales agreement, expecting sufficient liquidity for the next 12 months, though long-term liquidity remains dependent on project completion, cash flow growth, financing access, and cost reductions, with detailed disclosures on various loans and restricted cash Overview, Cash Position, Sources and Uses The company primarily obtains cash through product sales, power generation revenue, R&D contracts, equity issuances, and debt financing, with unrestricted cash and cash equivalents of $174.7 million as of July 31, 2025, and all short-term U.S. Treasury securities having matured, while continuing to raise capital through its at-the-market sales agreement and expecting sufficient liquidity for the next 12 months - As of July 31, 2025, unrestricted cash and cash equivalents were $174.7 million, an increase from $148.1 million as of October 31, 2024[196] - For the first nine months of fiscal year 2025, the company received $4 million in noncontrolling interest contributions through a tax equity financing transaction with East West Bank[197] - For the nine months ended July 31, 2025, approximately 9.2 million shares of common stock were sold through the Amended Sales Agreement, generating net proceeds of approximately $51.6 million[198] - The company expects its unrestricted cash and cash equivalents, anticipated revenue from its contract backlog, and the release of short-term restricted cash to be sufficient to meet its obligations for the next 12 months[204] Generation Operating Portfolio, Project Assets, and Backlog The company expands its power generation operating portfolio by investing in the development and construction of fuel cell projects, with a total operating capacity of 62.8 MW as of July 31, 2025, and its total backlog increased to $1.24 billion, driven by the Hartford project and long-term service agreements with CGN and GGE - As of July 31, 2025, the company's power generation operating portfolio had a total capacity of 62.8 MW, consistent with July 31, 2024[140][214] Power Generation Operating Portfolio | Project Name | Location | Rated Capacity (MW) | PPA Term (Years) | | :----------- | :------- | :------------------ | :--------------- | | CCSU | CT | 1.4 | 15 | | Riverside | CA | 1.4 | 20 | | Pfizer, Inc. | CT | 5.6 | 20 | | Santa Rita Jail | CA | 1.4 | 20 | | Bridgeport Fuel Cell Project | CT | 14.9 | 15 | | Tulare BioMAT | CA | 2.8 | 20 | | San Bernardino | CA | 1.4 | 20 | | LIPA Yaphank Project | NY | 7.4 | 20 | | Groton Project | CT | 7.4 | 20 | | Toyota | CA | 2.3 | 20 | | Derby - CT RFP-2 | CT | 14.0 | 20 | | SCEF - Derby | CT | 2.8 | 20 | | Total | | 62.8 | | - The company has ceased development and expenditures for the Trinity College and UConn solid oxide projects and removed them from the contract backlog[217][218] Backlog by Category (USD in thousands) | Backlog Category (USD in thousands) | July 31, 2025 | July 31, 2024 | | :-------------------------------- | :------------ | :------------ | | Service Agreements | 169,400 | 178,400 | | Power Generation | 955,000 | 839,500 | | Products | 96,200 | 136,700 | | Advanced Technology Contracts | 24,300 | 42,500 | | Total | 1,244,900 | 1,197,100 | Factors that may impact our liquidity Factors impacting the company's liquidity include cash reserves, long decision cycles for large projects, productivity management, extended project cycles requiring upfront investment, fluctuations in accounts receivable and unbilled receivables, inventory levels, project asset investments, fuel procurement risks, capital expenditures, R&D spending, performance guarantees, and the ability to continuously implement cost-saving measures - As of July 31, 2025, unrestricted cash and cash equivalents were $174.7 million[225] - The company's annualized production rate for the first nine months of fiscal year 2025 was 30.5 MW, slightly lower than 31.1 MW for the first nine months of fiscal year 2024, primarily due to adjusting production levels based on contractual demand[163][225] - As of July 31, 2025, total accounts receivable and unbilled receivables were $108.1 million, with $53.4 million classified as "other assets"[225] - Capital expenditures for fiscal year 2025 are projected to be between $15 million and $20 million, revised downward due to the June 2025 restructuring plan[230] - Company-funded research and development expenditures are expected to be between $35 million and $40 million for fiscal year 2025, also revised downward due to the restructuring plan[238] Cash Flows For the nine months ended July 31, 2025, cash used in operating activities decreased to $102.4 million, cash provided by investing activities turned into $89.9 million, and cash provided by financing activities decreased to $40.5 million, with total cash, cash equivalents, and restricted cash at period-end increasing to $236.9 million Cash Flow Activities (USD in thousands) | Cash Flow Activities (USD in thousands) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net Cash Used in Operating Activities | (102,427) | (158,751) | | Net Cash Provided by (Used in) Investing Activities | 89,970 | (18,978) | | Net Cash Provided by Financing Activities | 40,537 | 96,238 | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 27,971 | (81,395) | - The decrease in cash used in operating activities was primarily due to non-cash adjustments to net loss and a reduction in accounts receivable[240] - Cash provided by investing activities primarily resulted from $772.4 million in maturities of U.S. Treasury securities, partially offset by U.S. Treasury security purchases and capital expenditures[243] - The decrease in cash provided by financing activities was mainly due to reduced noncontrolling interest contributions and increased debt repayments, despite continued funding from common stock issuances[246][247] Commitments and Significant Contractual Obligations As of July 31, 2025, the company's total commitments and contractual obligations amounted to $270.5 million, primarily including purchase commitments, term loans (principal and interest), operating lease commitments, sale-leaseback financing obligations, and natural gas and biomethane supply contracts Commitments and Contractual Obligations (USD in thousands) | Commitment Category (USD in thousands) | Total (USD in thousands) | Less than 1 Year (USD in thousands) | 1-3 Years (USD in thousands) | 3-5 Years (USD in thousands) | More than 5 Years (USD in thousands) | | :----------------------------------- | :----------------------- | :---------------------------------- | :--------------------------- | :--------------------------- | :----------------------------------- | | Purchase Commitments | 66,861 | 58,464 | 4,274 | 2,825 | 1,298 | | Term Loans (Principal and Interest) | 136,315 | 18,543 | 31,567 | 60,930 | 25,275 | | Operating Lease Commitments | 24,449 | 1,313 | 3,179 | 2,340 | 17,617 | | Sale-Leaseback Financing Obligations | 7,133 | 1,394 | 2,583 | 2,562 | 594 | | Natural Gas and Biomethane Supply Contracts | 35,727 | 9,504 | 17,672 | 8,551 | - | | Total | 270,485 | 89,218 | 59,275 | 77,208 | 44,784 | - The company pays $3.2 million annually in Series B Preferred Stock dividends, which are not included in this table as it is not reasonably determinable when they might convert to common stock[250] Outstanding Loans as of July 31, 2025 As of July 31, 2025, the company's outstanding loans include EXIM financing, Derby and Groton back-leverage loans, the OpCo financing facility, and the Connecticut loan, with EXIM financing supporting the GGE long-term service agreement, Derby and Groton back-leverage loans for project financing, the OpCo financing facility secured by six operational fuel cell power generation projects, and the Connecticut loan facing an accelerated repayment penalty for not meeting employment obligations - The EXIM financing, completed on October 31, 2024, generated approximately $10.1 million in gross proceeds to support the long-term service agreement with GGE, with a fixed interest rate of 5.81% over a 7-year term[251] - The Derby Senior and Subordinate Back-Leverage Facilities, completed on April 25, 2024, totaled $13 million and bear interest at 7.25% and 8%, respectively[254][256][257] - The OpCo financing facility, completed on May 19, 2023, includes an $80.5 million term loan and a $6.5 million letter of credit, secured by six operational fuel cell power generation projects[261][262] - The Connecticut loan is expected to incur a $2.1 million accelerated repayment penalty due to the company's failure to meet revised employment obligations by October 31, 2024[298][300] Restricted Cash As of July 31, 2025, the company has pledged approximately $62.2 million in cash and cash equivalents as collateral for performance guarantees and letters of credit, including reserves for letters of credit, sale-leaseback transactions, Groton and Derby back-leverage loans, and the OpCo financing facility - As of July 31, 2025, the company has pledged approximately $62.2 million in cash and cash equivalents as collateral for performance guarantees and letters of credit[302] - Restricted cash includes $14.2 million for outstanding letters of credit, $2.9 million for the Crestmark sale-leaseback transaction, $14 million for the Groton Senior Back-Leverage Facility, $1.8 million for the Derby Senior and Subordinate Back-Leverage Facilities, and $20.9 million for the OpCo financing facility[302] Service and warranty agreements The company provides standard warranties for its products and enters into service contracts with customers to ensure power plants meet minimum operating levels for terms up to 20 years, with service contract pricing based on future cost