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FuelCell Energy (FCEL)
Q1 2012 Earnings Call
March 12, 2012 10:00 am ET
Kurt Goddard - Vice President of Investor Relations
Arthur A. Chip Bottone - Chief Executive Officer, President, Director, Chairman of Executive Committee and Member of Government Affairs Committee
Michael S. Bishop - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer and Corporate Secretary
Sanjay Shrestha - Lazard Capital Markets LLC, Research Division
John Quealy - Canaccord Genuity, Research Division
Walter Nasdeo - Ardour Capital Investments, LLC, Research Division
Jeff Osborne - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by FCEL
» FuelCell Energy's CEO Discusses Q4 2011 Results - Earnings Call Transcript
» FuelCell Energy's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» FuelCell Energy's CEO Discusses Q2 2011 Results - Earnings Call Transcript
Good morning, and welcome to the First Quarter 2012 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, as well as an accompanying slide presentation, is posted on our website 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. Once again, for those of you listening to this call via the dial-in phone number rather than via the internet, management will be referencing a first quarter 2012 slide presentation that is available on the Investor Relations section of our website.
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 would like to turn the call over to Chip Bottone. Chip?
Arthur A. Chip Bottone
Thank you, Kurt. Good morning, everyone, and welcome. I'd ask you to please turn to Slide 4. We continue to execute on our global growth strategy, including a series of strategic initiatives in Asia with our partner POSCO Energy that we announced this morning, combined with actions in Europe with 2 new partners. Our partnership with POSCO Energy includes a 120-megawatt multiyear order commitment, acceleration of deliveries under the existing 70-megawatt order, a commitment by POSCO Energy to purchase 20 million shares of FuelCell Energy common stock in proceeds of $30 million and a licensed commitment for manufacturing of direct fuel cell components in South Korea.
We continue laying a foundation for our future growth in Europe and Latin America by establishing a joint venture with Fraunhofer IKTS, based in Germany and a partnership with Abengoa, based in Spain. We now have 2 broad and complementary channels for our products and services in these large and growing markets for claim-based load distributed generation.
While our partnership with Abengoa will leverage their market presence and sales resources, our joint venture with Fraunhofer IKTS will be different. A preeminent global applied research organization, Fraunhofer will apply their extensive research capabilities, and we will be able to leverage their government and industrial relationships as we focus on building a direct sales model through the joint venture.
As these new relationships demonstrate, our flexible proven business model is being replicated successfully on a global scale. We are executing on our strategic plan to drive growth through global expansion and penetration of key markets.
Our margins continue to expand during the quarter, and we achieved our third consecutive quarterly gross profit. We have lowered year-over-year operating costs and refined our operating profile. We recently executed new service agreements including another with the California Utility, contributing to the growth of our services business. These results are consistent with our growth plans as we continue moving towards company profitability.
I will discuss our strategy and results in more detail after Mike Bishop, our Chief Financial Officer, reviews our financial results for the quarter. Mike?
Michael S. Bishop
Thank you, Chip. Good morning, and thank you for joining our call today. Please turn to Slide 5 titled Financial Highlights. FuelCell Energy reported total revenues for the first quarter of 2012 of $31.3 million compared to $28.1 million in the same period last year. Product sales and revenues for the first quarter increased to $29.6 million compared to $25.8 million reported in the prior year.
Research and development contract revenue was $1.7 million for the first quarter of 2012 compared to $2.3 million. We generated gross profit from product sales and research and development contracts in the first quarter of $2.1 million. This is our third consecutive quarterly gross profit resulting from increased production volume and lower product costs.
Gross profit for product sales and revenues improved by $4.2 million compared to the first quarter of 2011. The product gross margin was 6.6% for the first quarter of 2012 compared to a negative 8.9% in the prior-year period. Improvements in margins are primarily attributable to increased production volume, lower product costs achieved from manufacturing and supply chain efficiencies and improved service margins.
Total operating expenses were $7.5 million for the first quarter of 2012, compared to $8.3 million in the prior year. Our focus on cost control drove this expense reduction of approximately 10%, while we grew revenues year-over-year by approximately 11%.