FuelCell Energy(FCEL) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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 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 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] - 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][68][69] - 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][132] - 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][102] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue growth was driven by product sales, but gross loss widened due to project costs and increased operating expenses Results of Operations 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][193][197] Liquidity and Capital Resources 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] - Total backlog as of July 31, 2022, was $1.28 billion, a slight decrease from $1.30 billion as of July 31, 2021[267][268] - The company forecasts project asset expenditures for fiscal 2022 to be between $40.0 million and $60.0 million[278] - 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] - 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] Quantitative and Qualitative Disclosures about Market Risk 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] 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] Controls and Procedures 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] - No material changes to internal control over financial reporting occurred during the last fiscal quarter[334] PART II - OTHER INFORMATION Legal Proceedings 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] - 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] - 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] - 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities None - None[365] Mine Safety Disclosures None - None[365] Other Information None - None[366] Exhibits This section lists exhibits filed with the Form 10-Q, including certifications and XBRL data files