Hello, and thank you for standing by. My name is Kippany, and I will be your conference operator today. At this time, I would like to welcome everyone to the FuelCell Energy Second Quarter of Fiscal 2025 Financial Results Conference Call. Thank you. I would now like to turn the call over to Tom Gelston. Tom, please go ahead.

Thank you, and 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 second quarter of fiscal year 2025, and our earnings press release is available in the Investors section of our website at www.fuelcellenergy.com. Consistent with our practice, in addition to this call and our earnings press release, we have posted a slide presentation on our website. This webcast is being recorded and will be available for replay on our website approximately 2 hours after we conclude the call. Before we begin, please note that some of the information that you will hear or be provided with today will consist of forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Such statements express our expectations, beliefs and intentions regarding the future, and include, without limitation, statements with respect to our anticipated financial results, our plans and expectations regarding the continuing development, commercialization and financing of our fuel cell technology 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 Securities and Exchange Commission, particularly the Risk Factors section of our most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of this call, we will be discussing certain non-GAAP financial measures, and we refer you to our website and to 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 Investors tab. For our call today, I'm joined by Jason Few, FuelCell Energy's President and Chief Executive Officer; and Mike Bishop, FuelCell Energy's Executive Vice President, Chief Financial Officer and Treasurer. Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team. I'll now hand the call over to Jason for opening remarks. Jason?

Thank you, Tom, and good morning, everyone. Thank you joining us on our call today. Along with our earnings announcement this morning, FuelCell Energy announced a restructuring plan that prioritizes sales of our molten carbonate platform. Additionally, as I this effort, we are taking meaningful steps to rightsize our business, manage expenses and position ourselves to take advantage of near-term opportunities. Altogether, we believe this strategy will accelerate the time line toward expected profitability. We believe that this restructuring plan will sharpen and accelerate our path to positive cash flow and growth. We are intensifying our focus on our carbonate platform while reducing overhead to optimize our supply chain and focusing on driving efficiency. At the same time, we will strategically preserve the platform's long-term flexibility with the goal of unlocking further opportunities such as carbon capture. Regarding our solid oxide platform, our exclusive focus will remain on validating and demonstrating our electrolysis technology at the U.S. Department of Energy's Idaho National Laboratory. We are pausing broader solid oxide R&D immediately reducing costs and intensifying our investment in proven customer-ready solutions. We are focused on delivering future-ready today. We believe that a successful targeted demonstration at Idaho National Laboratory will position us strategically to capitalize as the hydrogen economy expands, highlighting our highly efficient and differentiated electrolysis platform. our restructuring plan, we will recalibrate our Torrington manufacturing facility production schedule to align with contracted demand rather than forecasted demand, which without continued growth in our closed order book would result in a decrease in our annualized production rate. We believe that our disciplined demand-driven approach will position us for sustainable profitability and growth in the future, while maximizing efficiency and delivering measurable value. With our enhanced focus on our core technologies, specifically the manufacture and sale of our carbonate platforms…

Thank you, Jason. I would like to begin by adding some detail on our global restructuring plan, which involves our operations in the U.S., Canada and Germany. This restructuring is intended to further reduce operating costs, realign resources toward advancing our core carbonate technologies and protect our competitive position amidst slower-than-expected investments in advanced alternative energy technology. This restructuring plan, which was announced today builds upon our November 2024 restructuring action. Through this restructuring, we aim to reduce our operating expenses by 30% on an annualized basis compared to operating expenses incurred in fiscal year 2024. Key actions under our new restructuring plan include: a global workforce reduction, a significant reduction of discretionary overhead spending, recalibration of the Torrington production schedule to align with contracted demand, deferral of certain compensation and benefit obligations, the cessation of the majority of development efforts with respect to our solid oxide technology and other targeted cost savings measures. These steps reflect our commitment to strategic discipline and focus with the goal of ensuring we continue to advance our most commercially available technology while preserving the long-term optionality of our broader platform innovations. With our enhanced focus on our core technologies, specifically the manufacturing and scale of our carbonate platform and the growing demand for distributed power generation in the U.S., Asia and Europe, we are targeting the future achievement of positive adjusted EBITDA once our Torrington, Connecticut manufacturing facility reaches an annualized production rate of 100 watts per year. As of April 30, 2025, the facility was operating at an annualized production rate of approximately 31 megawatts, and our annualized production rate may decrease in the near term as part of our restructuring plan. As a reminder, the maximum annualized capacity is 100 megawatts per year at the Torrington facilities configuration. The Torrington facility…

[Operator Instructions] Your first question comes from George Gianarikas with Canaccord Genuity.

I'm confident that these weren't easy actions to take with the restructuring. Maybe first question is around DPP. If you could just sort of talk a little bit about any tangible -- excuse me, momentum you have there in procuring customers and orders.

George, thank you for joining the call, and thank you for your question and also your comments about our team members and the restructuring. With respect to DPP, we have a very focused effort around bringing to data center customers as our primary target, a combination of fuel provided by diversified energy, fuel cell power generation provided by us and financing brought together to We have a number of conversations that are active today that we are pursuing across the area in Northern Virginia and Kentucky that we talked about in our earlier press releases, and we feel pretty positive about the momentum that we're building there to start to see that partnership turned some transactions where we're delivering fuel and power to data center customers.

And just as a follow-up, I'm sure this isn't an easy question to answer, but you mentioned EBITDA neutral would imply 100 megawatts production. I'm curious as to any sort of line of sight you give us there any thoughts around when we can sort of maybe expect that to happen.

George, this is Mike. So yes, as part of our disclosures today, we did confirm that with the lower of the business, the company is comfortable saying that we can achieve adjusted EBITDA positive when we get the factory in the 100 megawatt range. And as a reminder, as I said in my remarks, today, we have capacity of 100 megawatts in Torrington. We don't need to spend any additional capital to get to 100 megawatt. It's really ramping at the pace of order flow. We also have the footprint to get that capacity up to 200 megawatts with some additional expenditures primarily around capital equipment. So your question as far as the timing to get there. The timing is really going to be paced by flow of orders, right? And as Jason talked about, we see a tremendous opportunity right now in the U.S. around distributed generation in general as well as the large data center opportunity.

Your next question comes from Jeff Osborne with TD Cowen.

Maybe just to follow up on George's question. I guess, sort of pre-COVID in years before, Mike, the task or target around EBITDA breakeven was more driven by what the size of the generation portfolio was. And so I'm just curious like what the actions are to hit that? Or why the manufacturing side of the business is more the driver of profitability relative to generation getting to 80 megawatts or 100 megawatts, whatever the math ends up being?

Sure, Jeff. And good question. So as we look at the overall financial model, certainly, the contribution from the generation portfolio is part of it. And when you look at the contribution from generation today, for example, in this quarter, you're in the $3.5 million to $4 million range when you take out depreciation, right? So that is a contributor. And on an annualized basis, that's obviously [ more ] times the number that I just said. But as we look at the opportunities here going forward, we are not banking on increasing that generation portfolio. We see this as a product and service business, right? And by being able to sell product into DPP and broadly beyond that, and you can look at the Korean market as an opportunity there as well. Broadly beyond that, we'll have service on those units. So we're really keying the target around getting up to a stated volume, but also recognizing that the overall financial model does have contributions, not only from generation but around advanced technology, which has been a profitable part of the business for us as well.

That's helpful. Maybe just the last follow-up question on my side is just I think the price of gas turbines has tripled here over the past 18 to 24 months. And so as we look at future bookings for you folks for data center applications, would you anticipate that the ASPs would be similar to what you saw in Korea and recent orders? I'm just curious, as we make our models to eventually get you to 100 megawatts whenever that comes in the future, what you've seen in the past 5 years of pricing and cost? Is that similar? Or any other changes on either inputs or output?

Yes. Jeff, we see -- that we see the increase in cost there as well as the time line to get gas turbines as an opportunity for us as one of the tailwinds because of our ability to deliver and really meet the requirement around time to power. So we don't see significant changes in our pricing to customers. As a result of the demand, it's been driven by the growth in electricity demand. We actually see it as an opportunity, and we intend to work really hard to exploit that opportunity.

[Operator Instructions] Your next question comes from Noel Parks with Tuohy Brothers.

I was just wondering about the very broad power generation opportunity for support of AI and data centers. Could you just maybe characterize a bit what sort of customers are -- you're talking to that are maybe moving the fastest showing the most urgency? And if you have a sense of whether any particular type or region of customer is going to be most instrumental in possibly getting you up to -- closer to the 100-megawatt manufacturing level at Torrington?

No, thank you for the question. So just a couple of comments. First, I would say that our entire opportunity as we see it as a company, is not just solely around data centers, right? If you look at our Korean opportunity, as an example, and if you look at our just pure grid resiliency and reliability like the project we talked about, last quarter in Hartford to deliver distributed power generation that's going to act as a resource on the grid. So we see the ability to get to the 100 megawatts being a combination of opportunities. But specifically to your question on data centers, we see the data center segment is somewhat fragmented, right? You've got developers that might fall into the traditional real estate REIT kind of category. You've got hyperscalers. So when you think about the big players like Meadows and Googles and Amazons of the world. And then you have developers that are building out large-scale data center projects, we're in conversations across the board with those customers. And I would add another segment to that, that we're in conversations with, and this really ties to the relationship we have with diversified, just as an example. There's also a number of players that we're in conversations with that are on the gas distribution side that are also looking to bring solutions to their customers because they've got gas. They need power generation solutions to consume that gas. And so there are opportunities there that we are also pursuing that with those customers. So we're on a multifrontal attack, if you will, with respect to the data centers. And we think that, to your question about who's going to go first? This is the traditional way to think about the model. They're all trying to secure offtake agreements to get those data centers up and running. And what we really like about our position, I like to think about it as kind of first power block in, if you will, right, to get those data centers up and running in those 20 to 50 megawatt-type blocks, and we think that's where we have a real opportunity to excel, and we're excited about it.

Great. And when you mentioned the gas distribution side and those customers looking to bring -- or those looking to bring opportunities to their customers. Are those something you anticipate would be structured ultimately long as a long-term PPA-type agreement or more sort of just supply volume agreement? I guess I'm just trying to get a sense of just what those might look like kind of with that extra party in the middle?

Sure. And that's a really good question. No, this is Mike. Thank you for that. So again, the way we look at DPP is a partnership that FuelCell will be selling into, right? As I mentioned earlier, we're going to be selling product into that partnership, diversified, obviously, selling fuel into the partnership. And then the go-to-market, for DPP is put forth power purchase agreements in front of customers. And of course, there could be -- depending on the end customer, there could ultimately just be a sale the project coming out of DPP -- out of DPP. But DPP will be doing the development and also sourcing the financing. And with a platform like this, that's going to be growing, we -- our expectation is you're able to source financing at a reasonable cost of capital that will enable the growth and provide back again to FuelCell Energy orders for product and service. So that's how we think about it. There will be -- there will generally be a power purchase agreement coming out of DPP to the end user, right? But optionality there, depending on the client, whether that asset stays in DPP long term and DPP just finances it or it gets sold to that client.

And Noel, maybe just to add a little bit to that. When you look at opportunities that fall outside of that construct, our focus is going to be delivering these projects as Energy as a Service. And so for us, what is key there is doing projects with investment-grade counterparties to make sure that we're able to develop these projects and then deliver these projects to another financial holder who is willing to contract for those long-term high-quality revenues associated with those projects. And in line with that, we will have long-term service agreements that run coterminous with those agreements, and that's where you'll start to see as well for us having those predictable long-term revenues that you see in our generation portfolio today, which are on balance sheet, shifting more to a service-focused model as opposed to an on-balance sheet general

There are no further questions at this time. I will now turn the call back over to Jason Few for closing remarks.

Thank you, and thank you all for listening in today. I hope you come away from the call with a clear understanding of the steps FuelCell Energy has taken to position ourselves for success, disciplined execution, leveraging our proven carbonate platform, energy growth tailwinds, the modular speed advantage that we have, first power block in and structural cost reductions to shorten our pathway to adjusted EBITDA positive. I look forward to sharing more progress updates next quarter. Thank you all for joining the call, and I hope you all have a wonderful weekend. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.