Good day, ladies and gentlemen, and welcome to the FuelCell Energy Reports Second Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to hand the conference over to Mr. Kurt Goddard, Vice President of Investor Relations. Sir, you may begin.

Good morning, and welcome to the second quarter 2013 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. If you have not done so, I encourage you to visit our website, register for email alerts and view our second quarter 2013 earnings release, as well as the accompanying slide presentation. Our website address is www.fuelcellenergy.com. 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 -- excuse me, a second quarter 2013 slide presentation that is available on the Investor Relations section of our website at www.fuelcellenergy.com. 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?

Thank you, Kirk. Good morning, everyone, and welcome. Please turn to Slide 4, second quarter 2013 highlights. We continue to execute on our global growth strategy: record revenue supports, expanding margins and strong backlog is moving us towards profitability. Our associates have successfully completed a production increase to 70 megawatts in our manufacturing facility in the U.S. as of May 1, the start of our third quarter. This successful ramp has increased our confidence and strength of our global supply chain. We are making excellent progress on high-profile projects in Asia, the U.S. and Europe, including 2 large-scale fuel cell parks. Construction is on schedule with the a 14.9-megawatt Bridgeport fuel cell park in Connecticut and the 59-megawatt fuel cell Park in Hwasung City, South Korea. These projects have elevated the global profile of our company and our ultra-clean efficient power generation solutions, leading to increased inquiries and growth in our sales pipeline. Our existing and potential customers have greater clarity with our value proposition and project investors with financial returns. I will discuss our results and outlook in more detail after Mike Bishop, our Chief Financial Officer, reviews our financial results for the quarter. Mike?

Thank you, Chip. Good morning, and thank you for joining our call today. Please turn to Slide 5 titled quarterly financial highlights. FuelCell Energy reported total revenues for the second quarter of 2013 of $42.4 million compared to $24.2 million in the same period last year. Revenue was higher than our guidance of $38 million to $40 million, primarily due to the timing of construction activities at the Bridgeport fuel cell park. Product sales for the second quarter totaled $34.4 million compared to $18.7 million reported in the prior year. The increase year-over-year reflects higher fuel cell kit sales combined with the revenue from the Bridgeport fuel cell park project of approximately $8.9 million. The company increased its production rates during the second quarter of 2013 at the Torrington, Connecticut manufacturing facility, reaching an annual run rate of 70 megawatts, effective May 1, 2013. Service and license revenues for the second quarter of 2013 totaled $4.1 million, including approximately $3.1 million derived from service and $1 million from license and royalty revenue. For the comparable prior year period, service revenue totaled $3.5 million. Advanced Technology contract revenues were $4 million for the second quarter of 2013 compared to $2 million for the prior year quarter, with the growth primarily reflecting the consolidation of Versa Power Systems. Total gross profit was $2.3 million for the second quarter of 2013 compared to a gross profit of $200,000 in the prior year quarter. This is the highest the gross profit generated since we began commercializing our fuel cell power plants. Further margin expansion is expected in 2013 from higher production volumes of favorable sales mix that excludes complete power plants plus installation services and lower product costs from the overhead and supply chain leverage. Total operating expenses were $9.5 million for the second…

Thank you, Mike. Please turn to Slide 8, global operations. We increased production volume in our North American manufacturing facility in Torrington, Connecticut to support our strong backlog. By May 1, our team had completed the planned production ramp to 70 megawatts. This represents a 25% increase over the 56-megawatt run rate for the first quarter. Our global supply chain is smoothly supporting this increased level of production. Greater volume drives further cost reductions and overhead leverage that moves us towards our vision of having our fuel cell power plants produce power and thermal energy below grid pricing. We do not require additional capital expenditures to support higher volume levels. As shown on the slide, production measured in megawatts has increased significantly since 2007. The present 70-megawatt run rate brings us closer to our projected EBITDA breakeven run rate of 80 megawatts. We will ramp up production further as backlog and lead times demand. Executing on our growth strategy for Europe, we are now assembling fuel cell power plants at our German-based FuelCell Energy Solutions production facility in Ottobrunn near Munich, Germany. The photos show the power plant being assembled for the Federal Ministry of Education and Research government complex in Berlin. Thanks to an impressive effort led by our Chief Operating Officer, Tony Rauseo and his team, the production increases were accomplished smoothly on schedule. Please turn to Slide 9, Bridgeport project update. The Bridgeport fuel cell project park is generating tremendous interest and media coverage. Construction of the fuel cell park, while achieving all safety expectations, remains on-budget and on-schedule. The largest fuel cell project of its kind in North America, this multi-megawatt project validates our energy environmental solutions while demonstrating our ability to execute on large-scale projects. Our company's capabilities include project development, obtaining financing, engineering, procurement,…

[Operator Instructions] Our first question comes from Ajay Kejriwal from FBR Capital Markets. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Chip, maybe just following up on your comments on Dominion. Clearly a milestone project, at least in my perspective. So talk a little bit about the pipeline. You mentioned you're getting a lot of interest from other parties. So what are you seeing there? Have some of the other projects that you're working on have been moved a little bit further down the pipeline? Just a little color there will be helpful.

Okay. Ajay, thanks for calling in. Yes, so I mean there's been a lot of positive side effects of doing that project, Bridgeport with Dominion. I mean, obviously, it adds a lot of validation because obviously, Dominion would look at a lot of different things. They're an operator, so I think that puts a lot of credibility in people's minds that they obviously did their homework. It's a 15-megawatt project. So our strategy was always to build bigger and bigger plants. And the reason for that is that the costs go down on a per unit basis, which is helpful. And so all of a sudden, people were saying, wow, megawatt and above is -- you guys are already doing that and have a lot of installed base. So it really was kind of a just, I would say, a recognition of what we're doing. And as a result, we can actually point to drawings and lots of different things that are relative to bigger plants. It is very, very helpful that somebody else is doing it. So whether it's in North America or Europe, and certainly, Asia was first to do some of these bigger projects, it's been very, very helpful. And frankly, Dominion continues to be supportive in any way we need because things are going quite well with that project. So I think it's just, all around, it's a win-win for everybody. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Good, that's helpful. And then maybe just on POSCO. I thought I heard you say they're pursuing, actively pursuing a number of other projects. So to the extent you can provide a little more color on what those projects might be, and then in the event they get some of those projects, is there possibility that you could see additional orders? Or would that -- would those projects be more that they would produce on-site after the licensing agreement that you have in place?

Yes, Ajay, I appreciate your recognition of, I can't be too specific for competitive reasons, more than anything else, on there. But they have a tremendous pipeline of activity, let me just say that. Obviously, they're building a 60-megawatt plant, which is great. If you go back historically, their sweet spot was probably 3 megawatts to 10. So there's a bunch of those on the list, but there's also some greater than 10, I'll be clear on. So for them right now, yes, they're busy filling up the site there to support the current project. And they have some others that they just recently got, as I mentioned. But we've got orders in place now for about 40 megawatts a year for them over the next several years. And of course, they want to bring their own capacity online in late '14, early '15. So given the lead time of these projects and things like that, I think we can support whether it's from here, more activity or from there, where we derive royalty, Ajay, to support the market demand. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: That's very helpful. Then maybe just a couple on the quarter or so. The production rate of 63 megawatt, I guess that reflects on the product sales, but it sounds like you've increased the production rate to 70 megawatts. So as we think about the next couple of quarters, should be kind of assume that the sales increase on a pro rata basis?

Ajay, it's Mike. Let me take that one. So sure. So we did increase the production rates during the quarter. That was over the course of the quarter, and we got to 70 megawatts at May 1. So this will be our first full quarter at 70 megawatts in Q3. So we would expect growing product sales from that full quarter of 70 megawatts at the -- if you look at the lines in our P&L. If you do an average over the next 2 quarters, we would expect the product sales line to be in the range of $38 million to $42 million. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Got it. And then last one for me before I pass it on. So on the service license fees, it looks like that's becoming a nice, recurring business for you. And as you implement the Dominion project and your installed base grows in Korea and elsewhere, how should we think about these revenues?

Sure. Good question, Ajay. It's Mike again. So on the service line on the P&L, when you look at the rest of this year, we'd expect some modest growth, but we're probably in the range that we were in Q2. As we add these projects in backlog, that revenue will increase going into fiscal '14, particularly from the Bridgeport project.

Our next question comes from Sanjay Shrestha from Lazard Capital Markets.

A couple of questions. First on sort of the EBITDA breakeven now at 80-megawatt, right? Previously, you guys sort of talked about 85, 90. Now was there anything specific that actually happened that allowed you guys to sort of now get to that point that even in lower volume versus even those previously talked about in the past? What are some of the things you guys did?

Sure. Sanjay, it's Mike. So our -- we're really keeping with our business model guidance. Our guidance has been at the net income level, 80 to 90 megawatts of annual production volume gets you to net income breakeven. On an EBITDA basis, we have been talking about approximately 80 megawatts to get to breakeven on an EBITDA basis. To get there, obviously, you need margin expansion to do that. We're seeing that coming through this quarter. We would expect to see more of that. There's really 3 factors that go into margin expansion: One, and the biggest driver near-term is the production rate. So as we ramp, we get leverage in the factory. We have 90 megawatts capacity in the factory. So as we fill that up, we get leverage there, as well as from our supply chain. Additionally, we will see service leverage coming through in the future as we both add additional units in the field and as our fleet transitions more from sub-megawatts to multi-megawatt power plants, and then finally, sales mix. So as we do complete power plants and add ancillary services, such as EPC work, construction, installation, that type of thing, there's additional margin opportunity. So all 3 of those combined will lead to margin expansion. The business model has us in double-digit, low-teens margins as we get to that 80 to 90 megawatts of production volume.

Got it. So that was actually going to be my follow-up question, right? So I think you guys mentioned 2 things about sort of the strong incremental margins, so beyond that 70 megawatts and the supply chain leverage, right? Overhead absorption, we obviously kind of know that higher volume leverage in that model, right? So can you be a bit more specific on the supply chain leverage and maybe sort of the incremental margin as you go from 60 to 70 to 80 to 90 megawatts? What is that incremental margin you guys get, getting you to tap sort of double-digit gross margin and therefore, sort of breakeven even on a net income level?

Sanjay, this is Chip. Let me take that one here. So a couple of things there. I mean, there's no doubt that the team has done a good job on the supply chain. We've strengthened the supply chain, which means we've had some rotation of some of the suppliers or more suppliers for whatever it might be, has some strategy there. But we've been gaining from that exercise, obviously leveraging, and sometimes the bigger players now that we have a bigger purchasing value. So we are seeing that come through in terms of cost reductions at the gross margin product level. The other thing in it that you'll see is just the leverage we're going to get. As we ramped in the second quarter, obviously, there's training required and there's some built-in -- I wouldn't say built-in. There's some inefficiencies relative to the overhead just to get safely and consistently to that higher run rate, which the team did, and we knew that. So you're going to get some gain from that leverage there as well. So those are kind of the 2 drivers. I can just tell you that we're seeing the cost reductions come through based on the volume or the sourcing actions we're taking, and you'll see further leverage. And those 2 things combined, on top of what Mike said, is going to get you the expanding margins going forward on a higher volume.

Got it. One final question from me then, guys. So I guess, there's a bit of a history in the making here on the fuel cell sector if you guys do get to that EBITDA breakeven level sooner rather than later, which seem to be the case. Now when I look at your backlog, obviously, it's pretty damn impressive. And so as you have now all that sort of the reference project, right? So when I sort of think about the company over the next 12 to 18 months, right, should I be expecting big-size project? Or what type of a new project win should we be sort of expecting where your backlog remains stable to maybe even growing as you continue to -- sort of more from a book-and-burn standpoint, how do we think about that other than the fact that it probably will be lumpy on a quarterly basis?

Yes, so there's no question that we are transitioning to larger projects, number one, just in terms of megawatts. And with the given project, we're also doing more scope. So in the past, we might have sold equipment, Sanjay. Now, like Bridgeport -- I mean, a significant portion of that Bridgeport was non-equipment related revenue. So we really kind of setting ourselves up, and that was a great testament that our project, if you will, to be project developers for the projects that require that. But we're also -- the people that we are working with that perhaps have some of those skills as well, they're going after bigger projects as well just because they know their math works better. The transaction costs are obviously leverageable. So our story, I would say, is finally getting through, and we're seeing that frankly in Europe as well. And it took a little bit of education because our business model was a little bit different. We do made guarantees on the terms of our performance and things like that, that when you're doing bigger and bigger projects, you may not have to do with smaller projects. So I think we have assembled a different mentality here and it seems to be paying off for us. So it will definitely be bigger, and we definitely want to have more, and then we also want to have some diversity. So that's what we're focused on right now.

Our next question comes from Emily MClaughlin from Stifel. Emily McLaughlin - Stifel, Nicolaus & Co., Inc., Research Division: Just one for me. Now that the Bridgeport project is underway, what does the rest of the U.S. pipeline look like? And what stage are some of the discussions that you're having?

Emily, this is Chip, and you can have more than one question, but I will answer your first one here. The other guys got more than one, so get more than one, too. So we look at the world kind of in 4 pieces. We look at Eastern part of the U.S., which is, you can imagine, the Northeast. We look at the West, which is primarily California, Europe and then Asia. The Asia piece is pretty well set with what we're doing with POSCO. Europe, we're working on rather some large projects. And again, I'm not trying to be coy, but we work in a competitive world, I can't exactly say specifically what our strategies are and who are the people we're talking to. But we're going after large projects where there's either no funding required or incentives, or ones that have funding available and -- to execute those in the next certainly 6 to 12 months. In the East, there's established programs that we can leverage, both at the federal level and the local level. So out West, there's obviously programs in California, and we have a number of large projects there just using those existing programs. And in the East, you have different programs in different states. And I said where -- the interest level that they've had based on the Bridgeport project and just on the projects that we've done over the time. And we've got that 25 megawatts of projects running in California, for example, and probably 10 or 15 in the East here. So we have an installed base on how the people can reference and go visit. So I'm pretty encouraged and I would say that within the fairly short term period here, you'll see some other projects come to fruition. Emily McLaughlin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then just one clarification. You said a few minutes ago that at the 70-megawatt run rate, you'd be at $38 million to $42 million revenues at the product level. So would the service and in the contract revenue would be on top of that? Is that the right way to think about it?

Emily, this is Mike. Yes, that's the right way to think about it. There's 3 lines on our -- on the P&L, in the revenue side. So that $38 million to $42 million I mentioned is at top line. The other 2 lines, it's consistent with what we reported in Q2, a little bit of modest growth on those as we go out through the rest of the year.

Our next question comes from Walter Nasdeo from Ardour Capital.

A lot of my sales questions have been discussed already in the Q&A, and I guess I'm understanding how you're establishing the funnel. And on the backlog side, how are you monetizing that? Is that -- are you still working on a -- like a 12-month rolling, turning it to the revenue kind of thing?

Yes, Walter, this is Chip. I feel bad that I can't be more specific on what specific projects. But I think you can appreciate, we live in a competitive world and we can't say that. But yes, so what we're doing, Walter, is obviously we've got a backlog, and then we are also -- we have capacity that we, I think we've showed most people in our presentations, for other projects. And we're trying to manage that from a -- roughly a 12-month project schedule. So that's how we're kind of fitting things in. So when we signed these contracts, we're kind of working both the timeframe, as well as the project itself. So I don't know if that answers your question, but we -- because a lot of the U.S. projects are based on tax equity, we have to be careful what we commit to, Walter, because we have to deliver in those, whatever the tax commitment year is, whether it's '13, '14 or '15.

Walter, this is Mike. Let me take another slice at that on -- just on the backlog side of your question. If we look at our commercial backlog, that really breaks down into 2 components, commercial and service. So service, if you're thinking about modeling, servicing would model out over a long period of time. Most of our service commitments are tied to financing. So that 157 million probably gets modeled out over 5 to 10 years. The product backlog turns much quicker. But in there is multiple-year commitment to POSCO. And as Chip said, we're doing about 40 megawatts a year, and that comes down in the out-years to POSCO, so through 2016. So you really have to spread out over the next several years.

Okay. That's -- yes, I get that part of it. If we use Bridgeport as a model, right, when we were up there for the groundbreaking, it's a very -- it's a nice, elegant solution to push power into the grid. Is that -- can you look to that as replicable as you talk to other utilities instead of on a municipality basis, but working more with the utility themselves to kind of supplement whatever -- whether it's a coal or a nuke or whatever type of power production that they're currently working with?

Walter, it's Chip. Let me take that. Absolutely. It may not all be 15 megawatts. It might be 5. They might be 10 or something. But that really opened the door for us to have that dialogue. We've always had dialogue with certain people, certain utilities we put plants in. But I think with that project, in itself, that's been very helpful. And Dominion has been very helpful in supporting our story as well. I mean, the things are going well, which is nice. But let's just say that they've been helpful in multiple fronts for us to find other opportunities. But it's not all just about them. We are all talking to others. And it's interesting. You could put -- for some big users and stuff, there are those out there that you could actually put 5 megawatts, or maybe even others, on the customer side of the meter. That's not unheard of, and we're finding those opportunities.

Through the utilities themselves?

Well, this is non-utility. So yes, we're talking to utilities about projects like Bridgeport, which is more the utility side of the meter, but there are large opportunities, as I was saying, on the customer side of the meter as well.

I get that. But, I mean, does that relationship work through the utility where the utility says, "Look, I've got some sort of large plant here that's just sucking power at a crazy rate. Why don't we bring you guys in on their side of the meter to kind of alleviate the pressure on the grid itself?" Has that type of discussion ever happened?

We're having those discussions at some utilities. Because if you're putting little plants all over, it really doesn't amount to a meaningful amount of power sometimes. But 5-, 10-, 15-megawatt power plants, it may actually be the difference being able to satisfy, particularly things in your neck of the woods there, events and things like that, that have happened, right?

Our next question comes from Les Sulewski from Sidoti & Company. Les Sulewski - Sidoti & Company, LLC: I have a question regarding perhaps government incentives, such as the monetary or tax incentives, either to the utilities that perhaps could drive further product sales that maybe were unperceivable in the past?

Okay. Les, this is Chip. Well, let me start in the U.S. because in the U.S., we have both federal incentives, and then there's each state has their own -- and it literally is a portfolio because it might -- there's all kinds of different things that they do from property tax to this, that and the others. At the federal level, that program goes through 2016, and that's an investment tax credit worth 30%. So assuming you're a utility that's a non-cooperative, you can monetize that. And obviously, our customers can monetize that, assuming that they have a tax appetite. But there's also people out there willing to finance these projects that obviously can monetize that federal tax credit. At the state level, there's more -- there are different forms, but those -- there's frankly, when you dig around a little bit, particularly and probably in a couple of states out West and certainly, 3 or 4 states in the East, those incentives exist when you're talking to the right people sometimes. In Europe, there's -- frankly, there's money around. Our pitch has been, it's not about spending more money, it's just figuring out how to spend your money wisely. So we're finding opportunities that if we can deliver on our commitments, which we're comfortable are, we can find the ways to move things forward. Now having said that, we don't want to be sitting here -- our goal is to be able to have our products stand on its own, without incentives. So that's a function of continuing to focus on, as Mike said, the cost reductions of the product and overhead leverage and things like that. So we're still on the track, but, at the same time, there's enough money around to do a bunch of projects. Les Sulewski - Sidoti & Company, LLC: And one other question regarding research. Is there still a lot of cost involved moving forward, or you've kind of plateaued there?

No, we really transitioned, clearly, over time, and we're producing 70 megawatts. We're not an R&D company anymore. I mean, we still do R&D as it relates to our product development, to make improvements and things like that, but that spending has shifted a lot in recent years to more supporting projects and things like that. We have our Advanced Technologies Group that Tony Leo heads up. It does a lot of kind of forward-thinking type projects, such as hydrogen and carbon capture and things like that, that one could talk about as R&D, but we get paid for all of that now.

I would now like to hand the conference back over to Mr. Chip Bottone for any closing remarks.

Well, thank you, everybody, for joining today, and we look forward to speaking with all of you on our next call. Have a great day.

Ladies and gentlemen, thanks for participating in today's conference. This concludes our program. You may all disconnect, and have a wonderful day.