FuelCell Energy(FCEL) - 2022 Q4 - Annual Report

Part I Business 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] - 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][24] - 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][45][46][47] 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 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][235] - 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][267] - 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][247][248] - 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][256][257] - 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][317] - 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][331] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[361] Properties 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 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] Mine Safety Disclosures This item is not applicable to the company - Not applicable[365] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - No cash dividends have ever been paid on common stock, and none are anticipated in the foreseeable future[368] 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 This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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] - 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] - 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] - 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][457] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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][562] Financial Statements and Supplementary Data 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 This item is not applicable to the company - Not applicable[893] Controls and Procedures 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] - Management concluded that the company maintained effective internal control over financial reporting as of October 31, 2022, based on the COSO framework[897] Other Information The company reports no other information for this item - None[900] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[900] Part III Directors, Executive Officers and Corporate Governance 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] - The company has adopted a Code of Ethics, which is available on its website[903] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] 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 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] Principal Accountant Fees and Services 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] Part IV Exhibits and Financial Statement Schedules 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] Form 10-K Summary This item is not applicable to the company - Not applicable[944]