FuelCell Energy Inc NEW (DE) 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining us on the call today. This morning, FuelCell Energy released our financial results for the third quarter of fiscal year 2026, and our earnings press release is available in the investors section of our website at www.fuelcellenergy.com. In addition to this call and our earnings press release, we have posted a slide presentation on our website. The webcast is being recorded and will be available for replay on our website approximately two hours after we conclude. Before we begin, please note that some information that you will hear or be provided with today consists of forward-looking statements within the meaning of the Securities Exchange Act of 1934.

Such statements express our expectations, beliefs, and intentions regarding the future and include statements concerning our anticipated financial results, plans and expectations regarding the continuing development, commercialization, and financing of our fuel cell technology, our anticipated market opportunities, and our business plans and strategies. Our actual future results could differ materially from those described in or implied by such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the safe harbor statement, in the slide presentation, and in our filings with the SEC, particularly the risk factor section of our most recent Form 10-K and any subsequently filed quarterly reports on Form 10-Q.

During this call, we will be discussing certain non-GAAP financial measures, and we refer you to our website, our earnings press release, and the appendix of the slide presentation for the reconciliation of those measures to GAAP financial measures. Our earnings press release and a copy of today's webcast presentation are available on our website under the investor relations tab. For this call, I am joined by Jason Few, our President and Chief Executive Officer. Following our prepared remarks, the leadership team will be available to take your questions. I will now hand the call over to Jason for opening remarks.

Jason? Thank you, Mike, and good morning, everyone.

Thank you for joining us today. I am pleased to welcome you to our third quarter fiscal year 2026 earnings call. In the third quarter, we took an important step in the commercial development of FuelCell Energy's data center strategy. The rapid growth of AI and high-density computing is creating power requirements that the existing grid cannot address quickly enough. For data center customers, access to power has become a critical constraint on development. The AI economy will not be constrained by silicon. It will be constrained by access to electricity. We believe distributed generation will become an essential layer of AI infrastructure, enabling the grid to expand while allowing AI factories to deploy on commercial timelines rather than utility timelines.

Our FuelCell Energy Blocks are designed to address the constraint by providing clean, continuous, behind-the-meter power that can be deployed at the customer site and scaled as demand grows. In the third quarter, we began to convert that value proposition into commercial commitments. We secured our first order for FuelCell Energy Blocks to supply baseload power for data center applications, increased committed backlog to $1.3 billion, and added $2.4 billion of awarded capacity backlog, resulting in total committed and awarded capacity backlog of $3.6 billion as of July 31. Awarded capacity backlog is a new category reflecting multi-phase contracts and capacity reservations, which I will let Mike detail in his remarks. Subsequent to the quarter end, we closed a 75-megawatt capacity reservation agreement with a major colocation data center operator for a Texas project.

We believe our utility-scale distributed generation platform is uniquely positioned to help accelerate AI infrastructure by reducing time to power, extending the existing electric grid with reliable behind-the-meter generation, and addressing many of the permitting and community challenges associated with large-scale power development. We expect to provide additional detail upon execution of definitive agreements. That is the central message for the quarter. We are moving from a growing pipeline to tangible commercial commitments while advancing the manufacturing capacity and operating capabilities required to deliver at scale. At the outset, I want to talk about this commercial commitment. During the quarter, we signed a Capital Equipment Purchase Agreement with Fit Energy to supply power solutions for data center applications. It covers up to 380 megawatts across four phases, sized to the customer's deployment schedule.

We received an upfront deposit on the initial 30-megawatt phase, which we expect to begin delivering in the fourth quarter, and the remaining phases are at Fit Energy's election. At the same time, our fiscal 2026 year-to-date pipeline has grown to roughly 10 gigawatts of active proposals, and it reflects our progress toward proving our value proposition for data centers, which now accounts for about 97% of the total third quarter pipeline. I have said before that pipeline is a leading indicator, not a result, and I hold to that. The measure that matters is conversion, and Fit Energy is commercial proof that FuelCell Energy Block System can be the solution to some of the current public perception challenges facing data centers by providing scalable, clean, quiet, behind-the-meter power for data centers. The most important signal isn't that our pipeline is larger, it's that customers are buying differently.

AI has made power availability a strategic decision rather than simply a utility decision. In addition to our domestic backlog, we continue to execute on our existing global projects. In the third quarter, we successfully completed the repowering of the 42 modules Gyeonggi Green Energy project in South Korea. This execution demonstrates our capability to manage complex utility-scale repowering projects overseas while maintaining strict operational standards. Furthermore, it validates our long-term technology replacement cycle, proving that our existing fleet represents a continuous source of service and product revenues as Energy Blocks reach their natural replacement intervals. Important to converting our existing pipeline and backlog is our ability to scale, because demand only matters if we can meet it. To support our increasing backlog, we are systematically expanding our manufacturing capacity.

We are actively expanding our Torrington, Connecticut manufacturing facility to support the multi-megawatt demand of the AI factory and data center markets. Our immediate operational milestone is to increase our annualized production rate at Torrington to its current full capacity of 100 megawatts, with achievement of this milestone expected in October 2026. This near-term target represents a vital step toward our larger, long-term goal of reaching 500 megawatts of annualized production capacity by June 2028, an expansion we are already investing in. This expansion is progressing on schedule. During the third quarter, we finalized the comprehensive factory design, made significant equipment purchase commitments, and began the installation of a new high-volume tape caster that will dramatically increase our throughput. It is important to emphasize that this expansion is fully funded.

We are executing this capital spend in alignment with our committed backlog to ensure disciplined capital allocation with the goal of meeting the high volume requirements of global hyperscalers without building ahead of the market. As we scale, one aspect of our fuel cells has come into particular focus, and that is the sourcing strategy for our materials. Our Carbonate platform provides a powerful supply chain advantage, and it does not rely on rare earth minerals and is scandium-free, utilizing globally abundant commodity metals like nickel and steel rather than highly volatile, critical minerals, or those that are predominantly mined in potentially sanctioned countries. Our platform was designed around the abundant industrial materials, not scarce critical minerals.

With over 90% of our supply chain sourced domestically in the U.S. and approximately 93% of our FuelCell Energy Block components reusable or recyclable through a take-back program, we offer our customers unmatched supply security in the current uncertain geopolitical environment. Along with growing demand for FuelCell Energy power systems, our technology is being validated on a global stage by an increasingly diverse group of world-class blue-chip partners. We are proud to report that we have delivered and installed the first two Carbonate fuel cell carbon capture modules at ExxonMobil's Rotterdam complex in the Netherlands. This delivery represents a pivotal operational milestone under our joint development agreement with ExxonMobil Technology and Engineering Company. This installation is the world's first industrial-scale demonstration of our jointly developed carbon capture technology, successfully moving it out of the laboratory and into a real-world application, addressing hard-to-abate, low CO2 emissions from an industrial facility.

This Rotterdam demonstration is expected to validate our fuel cells performance under commercial operating conditions, positioning us as an essential technology partner for global industrial decarbonization. During the third quarter, we also signed a memorandum of understanding with Siemens to design and supply the electrical balance of plant systems for our fuel cell installations. The primary goal of this collaboration is to accelerate physical deployment and lower the cost of large-scale commercial projects exceeding 100 megawatts. We plan to jointly develop integrated distributed energy systems that combine our clean fuel cells with battery energy storage, advanced microgrid controls, and medium voltage electrical equipment. By optimizing the electrical balance of plant, we can manage the full spectrum of power variability from minutes down to microseconds.