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FuelCell Energy: Relentless Dilution Bodes Well For Preferred Stockholders
FCELFuelCell Energy(FCEL) Seeking Alpha·2024-06-12 02:14

Core Insights - FuelCell Energy reported disappointing Q2/FY2024 results, characterized by negative gross margins and significant cash burn [3][23] - The company continues to face relentless dilution of common shares due to high cash usage and ongoing financing needs [5][23] - Preferred shares offer a 13.2% annualized dividend yield, making them attractive for income-oriented investors despite the company's operational challenges [21][23] Financial Performance - Total revenue for Q2/FY2024 was 22.4million,adecreasefrom22.4 million, a decrease from 44 million in Q1/FY2024 [4] - Gross margin was -31.6%, significantly lower than the company's typical range of 40%-50% [4][14] - Adjusted EBITDA for Q2/FY2024 was -26.5 million, indicating ongoing operational losses [4] Cash Flow and Liquidity - The company reported a negative cash flow from operations of 37.1millionforQ2/FY2024[4]−Unrestrictedcashandshort−terminvestmentsdecreasedto37.1 million for Q2/FY2024 [4] - Unrestricted cash and short-term investments decreased to 260.1 million, with additional liquidity available through an amended sales agreement [6][9] - The company raised 31.7millionfromselling38.6millionsharesafterthequarter−end,indicatingongoingrelianceonequityfinancing[5][7]BacklogandFutureProspects−Thebacklogincreasedslightlyto31.7 million from selling 38.6 million shares after the quarter-end, indicating ongoing reliance on equity financing [5][7] Backlog and Future Prospects - The backlog increased slightly to 1,061.5 million, supported by a new long-term service agreement with Gyeonggi Green Energy worth approximately 160million[11][15]−TheserviceagreementisexpectedtogeneraterevenuestartinginFY2025,withcommissioningofnewfuelcellmodulesscheduledbetween2024and2026[19][18]−ThecompanyhasreduceditsFY2024spendingplansby160 million [11][15] - The service agreement is expected to generate revenue starting in FY2025, with commissioning of new fuel cell modules scheduled between 2024 and 2026 [19][18] - The company has reduced its FY2024 spending plans by 30 million, primarily due to project delays [9] Market Position and Strategy - FuelCell Energy's generation segment saw revenue growth to 14.1 million in Q2/FY2024, although gross margins remained negative [14] - The company is focusing on expanding its manufacturing capacity and R&D investments, with capital expenditures targeted between 45 million and $60 million [10] - The ability to issue additional common shares remains crucial for maintaining liquidity and funding ongoing operations [9][23]