Ladies and gentlemen, thank you for standing by and welcome to the FuelCell Energy's First Quarter Fiscal Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to hand the conference over to your speaker today, Tom Gelston, Senior Vice President of Finance and Investor Relations. Thank you. Please go ahead, sir.

Thank you, Julian. Good morning, everyone, and thank you for joining us on the call today. As a reminder, this call is being recorded. This morning, FuelCell Energy released our financial results for the first quarter of fiscal year of 2020, and the earnings press release is available on the Investor Relations section of our website at fuelcellenergy.com. Consistent with our practice, in addition to this call and our press release, we have posted a slide presentation on our website. This webcast is being recorded and will be available for replay on the company's website approximately two hours after we conclude the call. Before we begin our prepared comments, please direct your attention to the disclosure statement on Slide 2 of the presentation, and the disclaimers included in the press release related to forward-looking statements. The discussion today will contain forward-looking statements, including without limitation, statements with respect to the company's anticipated financial results, and statements regarding the company's plans and expectations regarding the continued development, commercialization and financing of it's fuel cell technology and it's business plans. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today other than statements of historical facts are forward-looking statements, and include statements regarding our anticipated financial and operational performance. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statement. We strongly encourage you to review the information and the reports we filed with the SEC regarding these…

Thank you, Tom. Before turning to Slide 4, good morning everyone and thank you for joining us on the call today. Before we get started, I would like to highlight how proud I am of the FuelCell Energy team. This last six months has been a transformational period for our company, and we have made significant progress on executing our plan, driven by our focus on backlog project execution, revenue generation, cost containment and disciplined capital allocation. I also want to take a moment to offer prayers of healing and support to any of our team members, shareholders, suppliers, fellow Americans, and citizens around the world impacted by the novel coronavirus, known as COVID-19. We also offer support to those in the frontline working on all of our behalf. I will address the current impact of COVID-19 and our company's response in more detail later in my prepared remarks. As we refresh or for those of you who may be less familiar with our business, we have included a company snapshot on Slide 4, that depicts revenue for the most recent full-year period fiscal year 2019. Last year, we recorded $60.8 million of total revenue with the three largest categories, service and licenses, advance technologies, and generation providing diversified sources of recurring revenue to the company. Additionally, I would like to draw your attention to some of the customers illustrated on the slide. All of these customers have multi-year contracts with us. We believe our existing customer base offers growth opportunities for our companies and that both, current and future customers will benefit from the enhancements to our technology platform over the past few years, including our extended seven-year stack life, combined heat and power, micro grid applications, on-site hydrogen generation, and in the future with the commercialization of our…

Thank you, Jason. Let's begin by reviewing some highlights for the quarter shown on Slide 8. We executed well on our plan in the quarter and revenue met our expectations at $16.3 million. This is a 9% decline versus the prior year quarter, but with an increase sequentially versus the fourth quarter of 2019. To add bit more color on the revenue mix, generation revenues totaled $5.4 million, an increase of 268% over the prior year period, primarily benefiting from the additional revenue associated with the Bridgeport Fuel Cell Park project which was acquired in 2019. With the commissioning of the Tulare BioMAT project during the quarter, we now have 28.9 megawatts of operating power plants in our portfolio as of January 31, 2020, compared to 11.2 million as of January 31, 2019. Increasing generation assets in order to benefit from the long-term recurring cash flows remains a strategic focus of the company. Advanced technology contract revenues increased by 15% to $5.2 million due to the addition of our joint development agreement with ExxonMobil Research and Engineering Company. The balance of advanced technology contract revenues in the first quarter of fiscal 2020 relates to the continued development of our solid-oxide platform as we prepare to deliver electrolysis and long duration hydrogen-based energy storage platforms. Service and license revenues decreased by 52% to $5.6 million, a key driver of the decrease was there were no module replacements during the quarter. Revenue recognized in the period includes licensed revenues of $4 million associated with our joint development agreement with ExxonMobil Research and Engineering Company. The absence of any product sales in the quarter reflects our previous strategic decision to focus on utility scale power purchase agreements or PPAs to grow our generation portfolio rather than selling our projects outright, as well as…

Thank you, Mike. Next on Slide 10, I want to provide more insight on our accomplishments under our Powerhouse business strategy, which we unveiled last quarter consisting of the following priorities; transform, strengthen and grow. Fiscal 2019, and the first quarter of fiscal 2020, we undertook various restructuring initiatives to support the next phase of our business strategy. We accomplished several foundational milestones but recognized there is still work to do, thus we are keenly focused on additional improvements while we are also shifting focus to growing our business, achieving profitability, and establishing our position of industry leadership. We continue to focus on progressing our advanced technologies innovations across carbon capture, hydrogen generation, electrolysis and hydrogen-based long duration energy storage. As we detailed last quarter, we implemented a cost reduction and restructuring plan that resulted in annualized operating savings of approximately $15 million in fiscal 2019. We plan to continue to deliver on a lower operating expense profile. Moving to strengthening; we are now focused on strengthening our business by optimizing capital deployment. We will continue to focus on disciplined capital deployment and securing lower cost, long-term financing and tax equity financing, were completed generation projects. The most recent example is the successful sale leaseback of Tulare BioMAT, FuelCell project. Pursuing commercial excellence; over the past quarter we have focused on strengthening our customer relationships and building a world-class customer centric reputation by keeping close to the markets we serve and responding to the needs of our customers. We also remain focused on developing business opportunities for the company. We are encouraged by the marketplaces response to our product solutions and our reinvigorated and broadened go-to-market efforts. Our priority is to continue to provide a deep and strategic partnership to our existing customers and develop such relationships with future customers.…

[Operator Instructions] Your first question comes from Eric Stine - from Craig-Hallum. Your line is open.

Good morning, everyone.

Morning, Eric. How are you?

I'm Fine. And you?

Doing great. Thank you.

Good. Well, I just wanted to dig more into the product, some of the plans there. Obviously you're fully committed and have made very good progress on the generation side, but I know product backlog and product inroads have been lacking. So maybe just talk about some of the steps you're taking, whether it's with key customers, E.ON, Toyota, etcetera? And just maybe some milestones or signpost we should look for going forward?

So, if we think about what the work that we're doing with E.ON which is really targeted on the European marketplace. There is something that we're doing there that is different than in the US market, we have our sub-megawatt platform there, both a 250-kilowatt and 400-kilowatt platform that we think fits the European market quite nicely, in addition to the fact that we will continue to sell megawatt plus platform there also. So I think, the milestone I would say to look for there is our -- opportunity to win some new business in Europe beyond the current set of customers we serve today. In terms of product extensions and what we're doing product-wise; I think if you look at the Toyota project, that's an example where you're going to see a pretty significant extension of our product platform where we're doing actual on-site hydrogen generation that will support Toyota's efforts to both, on the fueling standpoint of large trucks in addition to fuel cell vehicles coming off the ships through the port. I think groundbreaking there would be a milestone I would point you to look at in terms of our -- extending our product portfolio in that regard. Mike, would you add anything to that?

The only other thing as I said in my prepared remarks, Eric, obviously Korea has been a bit of a headwind but we are working diligently to get back into that market, and obviously those opportunities are quite large as well.

Yes. I mean that's -- I guess a good segue to my next question. I know that there has been some back and forth and some recent developments with POSCO, and maybe there is not anything you can give just while things are developing near-term; but if there is, that would be great. And I mean, you're clearly positive about that market, just wondering whether it's with KOSPO or some of the other opportunities you've talked about in the past, how you see that playing out?

Yes. We -- as you know, we have -- we issued an 8-K in terms of where we are with POSCO today. We are working through the process that is consistent with our agreement to try to achieve resolution. As we think about the market and the opportunity there, we're probably not at a point where we could say more about where we will end up, but we remain very positive about the market in South Korea and Asia, overall. And we intend, as we've stated to aggressively pursue being back in those markets to support our future growth as a company.

Okay. And then, last one for me. Just -- and maybe I missed this, but on the fiscal year 2022 targets, and the three kind of goals you have there; are you factoring in product revenue at all into that or the positive adjusted EBITDA I would assume that that's largely from generation.

That is largely from generation, that is correct. We do intend as we said, to be back in the market from a product sales perspective but this is largely driven by generation.

Okay, thanks a lot.

Thank you.

Your next question comes from Colin Rusch from Oppenheimer. Your line is open.

Thanks so much guys. I know it's early days here but as you look at your construction pipeline and the products that you have going, what can you say about resiliency of your timelines in the face of work shortages or stoppages, processes around permitting and approvals, things like that at this point? How far in your client process are you there and what can you say?

So Colin, maybe I'll start and then I'll turn it over to Mike Lisowski to maybe add some additional comments. As it relates to our in-flight projects, we still feel very good about not only the progress we're making about the plan on a go-forward basis to complete those projects on the current timeline, we acknowledge and recognize that those projects could be impacted by actions that state or federal governments may take with respect to work stoppage. But as of today we have no indication that we are going to be impacted from a product development standpoint. Mike, would you add anything to that? Mike Lisowski.

Yes Jason, thank you very much. And Colin, thank you for the question. All I would add in addition to Jason's comments is, we have a very existing robust corporate operational risk management program and we use that program to manage all of the project execution phases of all projects that are in project backlog. Based on our current solid inventory positions, the existing current direct labor workforce, the key actions that we've taken relative to our supply pipeline; I feel very confident that we're well positioned to continue to make progress on the items that you listed relative to project execution, and we're continuing on through the construction phases. But overall, project execution, we are well-positioned at this time and feel confident that we'll be able to efficiently and effectively execute on those projects going forward. Again, we'll continue to monitor very closely the situation, and as things develop we'll take appropriate actions where needed.

Great. And then, I guess, the second question is really on the supply chain. Sorry, you may have just answered that but in terms of the equipment that you have on-hand, and the additional pieces that you need to bring in; how much -- how many of those sources are domestic and how many of them are international? And I guess, really what the question is; the inventory that you need to bring in outside of the US to complete these projects? And this maybe -- just being a little bit extreme here in terms of asking the question; but how many things you need to bring in from outside the country from an equipment perspective to actually complete these projects?

Colin, this is, Mike Lisowski, again. The way I would characterize that is, you know, our assessment is we have low to moderate supply risk relative to the existing projects in backlog. We have a fair amount of equipment in the finished goods inventory that we are well positioned to deploy to the project when ready, and the balance of the equipment and direct materials that are needed to execute on the projects are either in semi-finished goods inventory or well along their way into supply pipeline. Relative to our external supply chain, we have a very, very balanced supply chain and what I would say is, we've taken some key strategic actions and predominantly the bulk of our direct materials are being furnished on supply domestically here in the United States with a very small percentage of our content coming globally.

Perfect. Thanks so much guys.

[Operator Instructions] Your next question comes from Jeff Osborne from Cowen & Company. Your line is open.

Yes, thanks, good morning. Couple of questions on my end. First of all, Mike, on the $62.5 million that you drew down; which projects are those for? Is that all for the Groton facility or something else?

Good morning, Jeff. So we drew down $65.5 million in the quarter, the second tranche on our Orion credit facility, and predominantly that's targeted at two projects, but we also refinanced our short-term debt in conjunction with that drawdown. But the two projects that are under the Orion facility as we sit here today are the Groton sub-based projects that has a COD date of July of this year, and then the LIPA projects, which has a COD date in '21 of next year.

If you recall, that we talked about a little bit in the fourth quarter call, I think we talked about moving roughly $34 million or so of short-term debt into long-term debt, that's part of the way we've utilized the funds from Orion.

Okay, that's helpful. And then, speaking of the LIPA projects; can you just give us an update if there is one on the two other projects that I don't think have signed PPAs but you have been awarded in the past?

Yes. As you know, we've -- those two products do not have signed PPAs yet. We continue to work with LIPA to try to advance those projects but have not signed PPAs as of yet.

Is there something from the outside world we should be watching, either an RFP process that would lead to that or is it -- I guess, any sense of what you can share, maybe what the holdup is?

No, I don't think there will be an RFP process, it's not part of the process; it's just really trying to work through where both, LIPA is and some of the policy and legislation things that are being considered in the State of New York. But other than that, we -- there is no other indicator I would tell you to look at.

Okay. And then, I think for yourself, Jason or maybe for Tony; is there anything you can share as it relates to the Toyota facility in Long Beach on the hydrogen side? How we should think about the cost of generation relative to say, electrolyzers using low cost renewables? It's certainly an intriguing asset that you have there and a new vertical of growth as part of your platform, but just given sort of the surge in interest among investors, as well as the broader hydrogen economy and electrolyzers. I was just curious how we should sort of benchmark your cost? I certainly appreciate the lower water usage that you highlighted, but any other facets you could share would be helpful?

Yes, the cost of hydrogen production -- what we call tri-generation is reduced [ph] by the fact that we have the second revenue stream for power, based on the speed in tariff, it's pretty significant revenue stream. You had to pay that much for power for electrolysis project, it will be pretty expensive for hydrogen. So, obviously it varies depending on power price and fuel price, but like carbon capture, the fact that you're producing power while you're making hydrogen really enhances the economics.

That's good. Thank you. That's all I had. Appreciate it.

Thanks, Jeff.

We have no further questions. I turn the call back over to Mr. Jason Few for closing remarks.

Julian, thank you. I want to conclude our call today by reiterating that our thoughts and prayers go out to those around the world impacted by the coronavirus, and we provide our complete support to those on the front lines. I also want to express again, how proud I am of the many accomplishments achieved by the FuelCell Energy team in the short timeframe since I joined the management team. I also want to thank our customers, our value partners, and our stockholders that invest both, their money and their trust in our team. I am very excited about the future and the opportunity FuelCell Energy has to deliver on it's purpose to enable the world to live a life empowered by clean energy. In closing, I want to thank everyone for participating in our earnings call today and for your interest in FuelCell Energy. If you have any follow-up questions, please don't hesitate to reach out to us. Thank you very much, and enjoy your day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.