FuelCell Energy (FCEL)
Q3 2011 Earnings Call
September 07, 2011 10:00 am ET
Kurt Goddard - Vice President of Investor Relations
Arthur Bottone - Chief Executive Officer, President, Director and Chairman of Executive Committee
Michael Bishop - Chief Financial Officer, Senior Vice President, Treasurer and Corporate Secretary
Mark Sigal - Canaccord Adams
Matthew Crews - Noble Financial Group, Inc.
Sanjay Shrestha - Lazard Capital Markets LLC
Walter Nasdeo - Ardour Capital
Previous Statements by FCEL
» FuelCell Energy's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» FuelCell Energy's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» FuelCell Energy CEO Discusses F4Q2010 Results - Earnings Call Transcript
Good morning, and welcome to the Third Quarter 2011 Earnings Call for FuelCell Energy. Delivering remarks today will be Chip Bottone, President and Chief Executive Officer; and Mike Bishop, Senior Vice President and Chief Financial Officer.
The earnings release is posted on our web site at www.fuelcellenergy.com, and a replay of this call will be posted 2 hours after its conclusion. The telephone numbers for the replay are listed in the press release.
Before proceeding with the call, I would like to remind everyone that this call is being recorded and that the discussion today will contain forward-looking statements, including the company's plans and expectations for the continuing development and commercialization of our fuel cell technology. I would like to direct listeners to read the company's cautionary statement on forward-looking information and other risk factors in our filings with the U.S. Securities and Exchange Commission.
Now I'd like to turn the call over to Chip Bottone. Chip?
Thank you, Kurt. Good morning, everyone, and welcome. As global energy demand and the need for the new sources of power grows, our intense focus on driving growth has generated increased order flow and produced the highest backlog of products and services in our history. Our team is executing on the production of this record backlog extremely well, and we are delivering strong financial results.
For the first time since commercializing our fuel cell power plants, we achieved a gross profit from the third quarter of 2011. This is a great achievement for the entire FuelCell Energy team, and brings us closer to our goal of company profitability.
As announced previously, during the third quarter, POSCO Power, our South Korean partner, placed a 2-year order for 70 megawatts of fuel cell kits, equipment and services valued at $129 million. This is POSCO's largest order to-date, and represents initial demand under South Korea's renewable portfolio standard. We're also pleased to announce further expansion into the Asia region by POSCO.
Before discussing any results further, I want to introduce Michael Bishop, FuelCell Energy's Chief Financial Officer, who will present our financial results. Mike is a CPA and has an extensive experience with high-growth public companies, technology development and services deployment. I know his experience in financial leadership will serve us well. During his 8 years with us, Mike has built a solid team, ensuring that the finance, legal and information systems are well positioned to support and continue the growth of the company. Mike?
Thank you, Chip. Good morning, and thank you for joining our call today. FuelCell Energy reported total revenues for the third quarter of 2011 of $31.2 million, compared to $18.9 million in the same period last year. This 65% growth in quarterly revenue from one year ago is reflective of the increasing demand for our products and our current production rate, which now exceeds 50 megawatts on an annual basis.
Product sales and revenues for the third quarter were $29.4 million, compared to $16.2 million in the prior year. The company's product sales and service backlog totaled $231 million as of July 31, 2011, compared to $80 million as of July 31, 2010. For the third quarter of 2011, product order backlog totaled $153 million, and backlog for service agreements totaled $78 million. Backlog is the highest in the company's history as a result of the $129 million order for 70 megawatts of fuel cell kits and other equipment and services received from our South Korean partner, POSCO Power. We generated gross profit in the third quarter of 2011. This is a significant milestone and the first growth profit since the company began commercializing our FuelCell product.
Margins for product sales and revenues improved by $4.1 million compared to the third quarter of 2010, and the product cost-to-revenue ratio improved 0.99:1.00. Research and development contract revenue was $1.8 million for the third quarter of 2011, compared to $2.7 million in the prior-year quarter. The company's research and development backlog totaled $13.6 million as of July 31, 2011, compared to $7.4 million as of July 31, 2010. Net loss to common shareholders for the third quarter decreased by $8.6 million, or $0.07 per basic and diluted share, compared to $13.8 million or $0.15 per basic and diluted share for the third quarter of 2010. This is a 38% improvement over the prior year, as a result of improved product margins and lower operating costs.
My discussion to follow on year-to-date results will exclude the charges related to the repair and upgrade program, and the revaluation of the Series I preferred shares recorded during the second quarter of 2011. Please note that there is a non-GAAP reconciliation included at the end of the earnings release that illustrates financial results fiscal year-to-date, excluding these items.