Q3 2024 FuelCell Energy Inc Earnings and Business Update Call
Speaker Change: Thank you for standing by and welcome to the Fuel Cell Energy 3rd Quarter of fiscal 2024 financial results conference call.
Speaker Change: All Line's have been placed on mute to prevent any background noise.
Speaker Change: and I'm going to ask you a question after this speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again.
Speaker Change: Thank you. I'd now like to turn the call over to Tom Gelston, Senior Vice President of Finance and Investor Relations. Please go ahead.
Speaker Change: Thank you, good morning everyone, and thank you for joining us on the call today.
Speaker Change: As a reminder, this call is being recorded. This morning, fuel cell energy released our financial results for the third quarter of 2024, and our earnings press release on our quarterly report on Form 10Q are available in the investor section of our website at www.fuelcellenergy.com.
Speaker Change: Consistent with our practice, in addition to this call and our earnings press release, we have posted a slide presentation on our website.
Speaker Change: This webcast is being recorded and will be available for replay on our website approximately two hours after we conclude the call.
Speaker Change: 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 Exchange Act of 1934.
Speaker Change: Such statements expressed our expectations, believes 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 our field-self technology and our business plans and strategies.
Speaker Change: Our actual future results could differ materially from those described or implied by such forward-looking statements because of a number of risks and uncertainties.
Speaker Change: and the State Department, more information regarding such risks and uncertainties is available in the safe harbor statement in the slide presentation, and in our fileings with the Securities and Exchange Commission, particularly the risk factor section of the most recently filed annual report on Form 10K and any subsequently filed quarterly reports on Form 10Q.
Speaker Change: During the course of this call, we will be discussing certain non-gap financial measures and we refer you to our website and to our earnings press release and appendix to the slide deck presentation for your reconciliation of those measures to get financial measures.
Speaker Change: Our earnings press release and a copy of today's webcast presentation are available on our website under investors.
Speaker Change: For our call today, I am joined by Jason Few, fuel cell energy's president and chief executive officer, and Mike Bishop, our executive vice president, chief financial officer and treasurer.
Speaker Change: Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team.
Jason Few: I will now hand the call over to Jason for opening remarks. Jason?
Jason Few: Thank you, Tom, and good morning, everyone. Thank you for joining us on our call today.
Jason Few: In the third quarter, we achieve solid performance and continue to advance our powerhouse strategy.
Speaker Change: are revenue increased sequentially compared to our second quarter. Year over year, revenue decreased as expected given the comparison against three modular replacements in the prior year quarter while there were none in this quarter.
Speaker Change: We had strong growth in generation and advanced technology revenues and continued our focus on discipline, expense and capital deployment management.
Speaker Change: We will provide more detail in the financial portion of our presentation.
Speaker Change: Each quarter, we also like to share some non-financial highlights for feel-so energy shown on slide 3.
Speaker Change: to give an overview of who we are and what we do in short, all of us at feel so energy are committed to our work and support of our purpose to enable a world empowered by clean energy.
Speaker Change: We are working to achieve this purpose by deploying our proprietary fuel cell technology platforms for energy delivery and emissions management around the world to accomplish two fundamental technology applications, decarbonizing power and industry and producing hydrogen.
Speaker Change: Turn it to 5-4. Let's look at the key messages for the quarter.
Speaker Change: Church.
Speaker Change: We announced a significant commercial win during the third quarter.
Speaker Change: the execution of a long-term service agreement, pursuant to which we will provide Trongy Green Energy or GGE in South Korea with 42 upgraded replacement fuel cell modules over the next two years. In addition to the cell of these modules,
Speaker Change: Under the Long Term Service Agreement with GGE, we will provide long-term operations and maintenance services for GGE's, Warsaw, and Ballon Industrial Complex, the largest single site, Fielso Power Platform installation, in the world.
Speaker Change: at Quarter In, the agreement with GGE brought our total backlog to 1.2 billion, our largest backlog in two years, allocated it primarily between product and service revenues.
Speaker Change: The order from GGE represents an important milestone for us and a vote of confidence in our company from a major ginco in a country that has embraced fuel cell technology as essential to its energy infrastructure.
Speaker Change: are a manufacturing capabilities allowed us to get off to a quick start and we shipped the first six replacement modules to GGE in August.
Speaker Change: We continue to monitor and adjust production in our turn to facility to reduce costs while managing our carbon and inventory position to meet current and forecast a demand.
Speaker Change: We, along with Exxon Mobile Little Carbon Solutions, are also making progress on our Carving Capture Project at the SO refinery in Rotterdam.
Speaker Change: Exxon Metables major project team is advancing site work in Rotterdam and Fielso Energy is advancing module testing and validation and building the two deployment modules. In a moment, I will share more details on our progress.
Speaker Change: Additionally, we're advancing our recently announced bio-generational project developed by Amarusco for the Sacramento area of sewer district to convert on-site biofuel into clean electricity.
Speaker Change: The project will be powered by one of our 2.8 megawatt carbon if you'll so platforms.
Speaker Change: which will produce carbon neutral electricity and usable heat from bio gas and have the potential for future production of renewable green hydrogen similar to our Port of Long Beach Toyota installation.
Speaker Change: The modules installed at this project site will also be our first commercially deployed CO2 recovery ready modules.
Speaker Change: and the United States, manufactured by Pielso Energy. Under our agreement with Amoresco, we will also provide comprehensive maintenance services for the Pielso system.
Speaker Change: Third, we focused on expanding our reach into the South Korea market, as we have done with our long-term service agreement with GGE. We see a tremendous opportunity to go to upon our presence and establish the reputation and the market.
Speaker Change: through the long-term service agreements and product sales.
Speaker Change: Additionally, applications like electrolysis, time to power, and CO2 as a delivered product are gaining momentum among a broader set of customers and geographies.
Speaker Change: and Ford.
Speaker Change: We are taking proactive steps to maintain the strength of our balance sheet. We are making critical investments to support continuous improvements in our manufacturing process, including safety performance, to position fuel cell energy for a few
Speaker Change: We are doing this while maintaining a discipline approach to managing cash and liquidity to establish investment triggers linked to key milestones.
Speaker Change: As we grow, we will do so in a cost effective way, maintaining the quality and safety of our operations.
Speaker Change: Now let's turn to a couple of operational updates on key commercial and development items.
Speaker Change: Turning to five, six, I would like to give a commercial update on the Korea market where fuel so energy has a long history and is a trusted partner to GGE, no-grain energy, or in GE, and Korea Southern Power Company.
Speaker Change: I've spoken at length about the details of our Greenland GGE, but I think it is also important to look at our relationships in Korea from a wider perspective.
Speaker Change: I would like to highlight our relationship with NGE, for example, which owns a fuel cell park which we are now servicing under a 14-year service agreement.
Speaker Change: Under this long term service agreement, we will oversee Parliament operations and the replacement of 16 Mondals in 2030.
Speaker Change: The NGE Fielso Park is capable of producing approximately 150 million kilowatt hours per year of equal friendly electricity and has been in operation since late 2016.
Speaker Change: This history illustrates the long-term commitment to hydrogen power by the South Korean government and demonstrates the trust placed in feel so energy by NGE to maintain its power production.
Speaker Change: Next, I want to highlight our relationship with Korea's Southern Power Company.
Speaker Change: or Cospo.
Speaker Change: in 2018, we completed construction in just nine months of a platform to produce 20 megawatts of clean sustainable energy. Today, this platform has produced 896,971 megawatt hours of electricity.
Speaker Change: The nine-month build-time demonstrates our ability to meet large scale time to power requirements.
Speaker Change: This past June 28, we held an event in Korea titled Accelerating Korea's Energy Transition with Advanced Fuel Cell Solutions.
Speaker Change: Showcase and Geoso Energy's cutting-edge technology and strategic vision for the nation's energy future.
Speaker Change: The Gathering was attended by approximately 140 liters of the Korean energy industry.
Speaker Change: as well as feel so energy executives.
Speaker Change: and C.O. Andy can legit and C.O. Chang-Sauk Koo of N.G.E. also addressed the group to provide their perspective on fuel-so-energy fuel-cell technology platforms and how they support the needs of their business and commitment toward decarbonization.
Speaker Change: It was a great day that generated extensive and positive press coverage in the Korean market.
Speaker Change: Since Regaining Access to the Asian Market in December of 2021, we have continued to invest in scaling our commercial organization in South Korea in support of building a pipeline of opportunities in the Korean and broader Asian markets.
Speaker Change: where we believe that fuel cell energy's differentiated technology is a desirable choice for utility scale projects.
Speaker Change: The South Korean government has established an aggressive hydrogen economy roadmap, which we believe should continue to create opportunities in this market.
Speaker Change: Turning to slide seven.
Speaker Change: We have an update on the Carbon Capture Recovery Demonstration we are constructing in Toronto and Connecticut.
Speaker Change: As you may recall, since last year, we have been working to add engineered carbon recovery capabilities to the shore source 1500.
Speaker Change: We expected to complete construction later this calendar year, which will allow prospective customers to observe the operating plant and allow for the sampling and testing of coverage to verify quantity, quality, and purity requirements.
Speaker Change: We're really excited about the promise of this technology to capture CO2 emissions from industrial and commercial exhaust dreams.
Speaker Change: We believe our technology can help solve one of the world's biggest environmental challenges, while also providing mission, critical, certainty of price and supply of high quality CO2 for the food and beverage industry.
Speaker Change: Next, on Slide 8, we have an image of what will be the first full-scale commercial unit for carving capture with our gentoo design.
Speaker Change: This is a 600-kilowatt unit, and one of the ways it is differentiated from our traditional carbonate module is the level of balance of plant that is integrated inside the module.
Operator: of Fiscal 2024 Financial Results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you.
Speaker Change: We believe that this modular design will improve large-scale deployment capabilities by enabling multiple units to be stacked or rack mounted vertically.
Speaker Change: The design is also expected to support greater uptime given its modularity and to improve maintenance flexibility.
Tom Gelston: I now like to turn the call over to Tom Gelston, Senior Vice President of Finance and Investor Relations. Please go ahead. Thank you. 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 third quarter of 2024, and our earnings press release on our quarterly report on Form 10Q are available in the investor section of our website at www.fuelcellenergy.com.
Speaker Change: Flexibility is an essential capability to support continuous commercial and industrial operations.
Speaker Change: are first two units are scheduled to shift to Rotterdam in fiscal year 20, 25. And now I would like to turn the call over to our CFO, Mike Bishop.
Mike Bishop: Thank you, Jason and good morning to everyone on the call today. Let's begin on slide 10 by reviewing the financial highlights for the quarter.
Tom Gelston: 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 two 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 Exchange Act of 1934.
Mike Bishop: for the third quarter of fiscal year 2024, we reported total revenues of 23.7 million compared to 25.5 million in the comparable prior year quarter.
Speaker Change: in the third quarter of fiscal year 2024, re-reported in that loss of 35.1 million compared to a net loss of 23.6 million in the third quarter of fiscal year 2023.
Tom Gelston: Such statements express our expectations, believes and intentions regarding the future and include without limitation, statements with respect to our anticipated financial results, our plans and expectations regarding a continuing development, commercialization, and financing our fuel cell technology, and our business plans and strategies. Our actual future results could differ materially from those described 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 Exchange Commission, particularly the risk factor section of the most recently filed annual report on Form 10K and any subsequently filed quarterly reports on Form 10Q.
Speaker Change: The Met Laws in the prior year quarter included the benefit of a gain on early extinguishment of finance obligations and debt of 15.3 million.
Speaker Change: The resulting net loss per share attributable to common stockholders in the third quarter of fiscal year 2024 with negative 7 cents.
Speaker Change: compared to negative six cents in the third quarter of fiscal year 2023, which included the one-time benefit of a gain on early extinguishment of finance obligations and debt net for approximately four cents per share.
Speaker Change: Joseph Ebeda, totaled negative 20.1 million in the third quarter of fiscal year 2024 compared to which Joseph Ebeda of negative 31.6 million in the third quarter of fiscal year 2023.
Speaker Change: Police say the discussion of non-gap financial measures, including adjusted EBITDA in the appendix at the end of our earnings release.
Tom Gelston: During the course of this call, we will be discussing certain non-gap financial measures and we refer you to our website and to our earnings press release and appendix to the slide presentation for your reconciliation. Of those measures to get financial measures. Our earnings press release and a copy of today's webcast presentation are available on our website under investors.
Speaker Change: Finally, we reported a strong total cash and short-term investment position of approximately 326 million consisting of cash, cash equivalents, restricted cash, and investments in U.S. treasuries as of July 31, 2024.
Tom Gelston: For our call today, I am joined by Jason Fiew, fuel cell energies president and chief executive officer and Mike Bishop, our 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.
Speaker Change: Next, on slide 11, you will see additional details on our financial performance in backlog. In the graph, on the left hand side of the slide, revenue is broken down by category.
Speaker Change: Product revenues were 0.3 million during the third quarter of fiscal year 2024 and there were no product revenues in the comparable prior year period. These revenues were recognized under the company's new sales contract with Amarisco that was entered into last quarter.
Jason Few: I will now hand the call over to Jason for opening remarks. Jason? Thank you Tom and good morning everyone. Thank you for joining us on our call today. In the third quarter, we achieve solid performance and continue to advance our powerhouse strategy. Our revenue increased sequentially compared to our second quarter, year over year revenue decreased as expected, given the comparison against three module replacements in the prior year quarter while there were none in this quarter.
Speaker Change: Service Agreement revenues decreased to 1.4 million for the third quarter of fiscal year 2024 from 9.8 million in the prior year period. The decrease was primarily driven by the absence of any module exchanges during the quarter.
Speaker Change: Higher Service Agreement revenues recognized during the prior year third quarter would driven primarily from the module exchanges at the plant's owned by Korea Southern Power Company in Korea, and a module exchange at the plant at Trinity College.
Jason Few: We had strong growth in generation and advanced technology revenues and continued our focus on discipline expense and capital deployment management. We will provide more detail in the financial portion of our presentation. Each quarter, we also like to share some non-financial highlights for FuelCell Energy shown on slide 3, to give an overview of who we are and what we do, in short, all of us at FuelCell Energy are committed to our work and support of our purpose to enable the world empowered by clean energy. We are working to achieve this purpose by deploying our proprietary FuelCell technology platforms for energy delivery and emissions management around the world to accomplish two fundamental technology applications, decarbonizing power and industry and producing hydrogen.
Speaker Change: Generation revenues increased 22% to 13.4 million from 11 million in the prior year period, primarily driven by revenue related to the Toyota and Derby projects, which began operations in the first quarter of fiscal year 2024.
Speaker Change: Advanced Technology Contract revenues increased 84% to 8.6 million from 4.7 million.
Speaker Change: Advanced Technology Contract Revenue.
Speaker Change: Reck-ignized under our Joint Development Agreement with ExxonMobile Technology and Engineering Company or MTech were approximately 1.8 million.
Speaker Change: Revenue's arising from the purchase order received from SO, Netherlands, BV, or SO, and affiliate of MTECH.
Jason Few: Turning to slide 4, let's look at the key messages for the quarter.
Speaker Change: and Exxon Mobil Corporation related to the Rotterdam Project, we're approximately 3.5 million and revenue recognized under government contracts and other contracts, we're approximately 3.3 million for the three months and did July 31, 2024.
Jason Few: First, we announced a significant commercial win during the third quarter, the execution of a long-term service agreement, pursuant to which we will provide Trongi Green energy or GGE in South Korea with 42 upgraded replacement FuelCell modules over the next two years. In addition to the sale of these modules, under the long-term service agreement with GGE, we will provide long-term operations and maintenance services for GGE's Walsh on Ballon Industrial Complex, the largest single site FuelCell Power Platform installation in the world. At quarter in, the agreement with GGE brought our total backlog to 1.2 billion, our largest backlog in two years, allocated primarily between product and service revenues.
Speaker Change: This compares to contract revenues recognized under our joint development agreement with MTECH of approximately 2.8 million and revenue recognized under government contracts and other contracts of approximately 1.9 million for the three months ended July 31, 2023.
Speaker Change: Looking at the top right hand side of the slide, gross loss for the third quarter, total 6.2 million compared to a gross loss of 8.2 million in the comparable prior year quarter. The reduction in gross loss resulted in part from higher favorable margins.
Speaker Change: for Advanced Technologies, a 1.9 million, and lower unfavorable margins for generation of 1.1 million, partially offset by unfavorable product margins of 1 million, service gross margin remained consistent, quarter of a quarter.
Jason Few: The order from GGE represents an important milestone for us and a vote of confidence in our company from a major ginkgo in a country that has embraced FuelCell technology as essential to its energy infrastructure. Our manufacturing capabilities allowed us to get off to a quick start and we shipped the first six replacement modules to GGE in August. We continue to monitor and adjust production at our Torrentive Facility to reduce costs while managing our carbon and inventory position to meet current and forecast a demand.
Speaker Change: Operating expenses for the third quarter of fiscal year 2024 decreased to 27.4 million from 33.2 million in the prior year third quarter.
Speaker Change: Administrative and Selling Expenses decreased by 3 million from the prior year quarter primarily as a result of lower legal consulting and shareholder relations expenses and lower compensation expense.
Speaker Change: Research and Development Expenses decreased by 2.8 million compared to the prior year third quarter reflecting a decrease in spending on commercial development efforts during the quarter as well as a shift in engineering resource allocation towards supporting the increase in funded advanced technology activities.
Jason Few: We, along with ExxonMobile Low-Carbon Solutions, are also making progress on our Carbon Captural Project at the SO refinery in Rotterdam. ExxonMobile's major projects team is advancing site work in Rotterdam and FuelCell Energy is advancing module testing and validation and building the two deployment modules.
Speaker Change: At the bottom right of the slide, you'll see the backlog increase to 1.2 billion as of July 31, 2024 compared to 1.06 billion as of July 31, 2023.
Jason Few: In a moment, I will share more details on our progress.
Jason Few: Additionally, we are advancing our recently announced Bio-Generation Project developed by Amoresco for the Sacramento Area sewer district to convert onsite biofuels into clean electricity. The project will be powered by one of our 2.8 megawatt carbon and fuel cell platforms, which will produce carbon neutral electricity and usable heat from Biogas and has the potential for future production of renewable green hydrogen similar to our Port of Long Beach Toyota installation.
Speaker Change: The increase was primarily as a result of the long-term service agreement entered into with GGE during the third quarter of fiscal year 2024.
Speaker Change: [inaudible]
Speaker Change: Product backlog will be recognized as revenue over time as the company completes commissioning on the replacement modules to be sold to GGE.
Speaker Change: Commissioner of the first six 1.4-megawatt replacement fuel cell modules is expected to be completed.
Jason Few: The modules installed at this project site will also be our first commercially deployed CO2 recovery ready modules manufactured by FuelCell Energy. Under our agreement with Amoresco, we will also provide comprehensive maintenance services for the fuel cell system. System.
Speaker Change: in the fall of calendar year 2024.
Speaker Change: with an additional 30, 1.4 megawatt replacement fuel cell modules, expected to be commissioned throughout the course of calendar year 2025.
Speaker Change: The remaining six 1.4 megawatt replacement fuel cell modules are expected to be commissioned in the first half of calendar year 2026.
Jason Few: Third, we focused on expanding our reach into the South Korea market as we have done with our long-term service agreement with GGE. We see a tremendous opportunity to build upon our presence and establish reputation in the market through the long-term service agreements and product sales. Additionally, applications like electrolysis, time to power, and CO2 as a delivered product are gaining momentum among a broader set of customers and geographies.
Speaker Change: As a reminder, service backlog will be recognized as revenue as the company performs service at the GGE site over the term of the agreement with GGE.
Speaker Change: Next, on Flight 12, we have an update on our cash and liquidity.
Speaker Change: As of July 31, 2024, cash and cash equivalents, investments in U.S. treasuries, and restricted cash and cash equivalents total $326 million.
Jason Few: And fourth, we are taking proactive steps to maintain the strength of our balance sheet. We are making critical investments to support continuous improvements in our manufacturing process including safety performance, to position fuel cell energy for future growth. We are doing this while maintaining a disciplined approach to managing cash and liquidity to establish investment triggers linked to key milestones. As we grow, we will do so in a cost-effective way, maintaining the quality and safety of our operations.
Speaker Change: This includes approximately 159.3 million of unrestricted cash and cash equivalents, 107.8 million of short-term investments in U.S. treasuries, and 58.8 million of restricted cash and cash equivalents.
Speaker Change: During the three months ended July 31, 2024, approximately 95.2 million shares of common stock were sold under the company's amended open market sale agreement at an average sale price of 71 cents per share, resulting in net proceeds to the company of approximately $65.9 million.
Jason Few: Now, let's turn to a couple of operational updates on key commercial and development items. Turning to slide six, I would like to give a commercial update on the Korea market, where fuel cell energy has a long history and is a trusted partner to GGE, no-green energy or NGE, and Korea Southern power company.
Speaker Change: As discussed last quarter, the company has made certain downward adjustments to expected spending during fiscal year 2024.
Speaker Change: as a result of the pace of market development and due to the need to continue the company's work to optimize and focus on optimizing and improving the company's solid oxide technology, including its stack life, performance and efficiency.
Jason Few: I have spoken at length about the details of our agreement with GGE, but I think it is also important to look at our relationships in Korea from a wider perspective. I would like to highlight our relationship with NGE, for example, which owns a fuel cell park, which we are now servicing under a 14-year service agreement. Under this long-term service agreement, we will oversee power plant operations and the replacement of 16 modules in 2030. The NGE fuel cell park is capable of producing approximately 150 million kilowatt hours per year of equal-friendly electricity and has been in operation since late 2016.
Speaker Change: adjustments to expected spending for fiscal year 2024 have included reductions in capital expenditures and company funded research and development expenses.
Speaker Change: The company has also extended the timing and deployment of certain first article Salad Oxide units as a result of the factors that I just mentioned.
Speaker Change: The current spending targets are included on slide 19 in the appendix of this presentation.
Speaker Change: In September 2024, as part of its cost saving measures, the company also made job eliminations in certain areas and reduced its workforce by approximately 4% which is calculated as a percentage of total salaries being reduced.
Jason Few: This history illustrates the long-term commitment to hydrogen power by the South Korean government and demonstrates the trust placed in fuel cell energy by NGE to maintain its power production.
Speaker Change: The company expects to continue to focus its strategy to respond to market conditions which may result in additional spending and head count reductions in future periods.
Jason Few: Next, I want to highlight our relationship with Korea Southern power company, or Costco. In 2018, we completed construction in just nine months of a platform to produce 20 megawatts of clean sustainable energy. Today, this platform has produced 896,971 megawatt hours of electricity. The nine-month build-time demonstrates our ability to meet large-scale time-to-power requirements.
Speaker Change: Finally, as I mentioned on this slide, the company is also pursuing financing to support our commercial efforts which includes deployment of modules to the repowering opportunities in the Korean market including the GGE project.
Speaker Change: We look forward to providing further updates on our cash management and financing activities in the coming months.
Speaker Change: I will now turn the call back to Jason
Jason Few: Thanks, Mike. I will now turn it over to the operator to begin Q&A.
Jason Few: This past June 28, we held an event in Korea titled Accelerating Korea's Energy Transition with Advanced Fuel Cell Solutions, showcasing fuel cell energy cutting-edge technology and strategic vision for the nation's energy future. The gathering was attended by approximately 140 leaders of the Korean energy industry, as well as fuel cell energy executives. Importantly, CEO Andy Kim, LGGE, and CEO Shane Saku of NGE also addressed the group to provide their perspective on fuel cell energies, fuel cell technology platforms, and how they support the needs of their business and commitment toward decarbonization. It was a great day that generated extensive and positive press coverage in the Korean market.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star one again. Your first question comes from the line of George Giannarekis from Canaquard Genuity. Your line is open.
Speaker Change: Hi, good morning everyone and thank you for taking my questions.
George Giannarekis: I think you first just to ask about the Toyota Projects, any update there, and any follow-on interest from other parties who have.
Speaker Change: Look at the facility and under certain performance. Thank you.
Speaker Change: Good morning and thank you for being on the call and thank you for your question. On the Toyota project we are fully operational as we communicated some time ago and we are providing hydrogen and addition of power and water for Toyota at the end.
Jason Few: Since regaining access to the Asian market in December of 2021, we have continued to invest in scaling our commercial organization in South Korea in support of building a pipeline of opportunities in the Korean and broader Asian markets, where we believe that fuel-so-energy differentiated technology is a desirable choice for utility-scale projects. The South Korean government has established an aggressive hydrogen economy roadmap, which we believe should continue to create opportunities in this market.
Speaker Change: and Support of their importation of the Toyota Mariah, their passenger vehicle, as well as class 8 heavy duty trucks that have public access to hydrogen of filling as well. And that's an advanced support of
Speaker Change: The requirement to have zero combustion.
Speaker Change: Heavy duty transportation and the port here in the next couple of years and so we continue to be excited about our efforts there.
Jason Few: Turning to slide seven, we have an update on the carbon capture and recovery demonstration we are constructing in Torrenton, Connecticut. As you may recall, since last year, we have been working to add engineered carbon recovery capabilities to the SureSource 1500. We expect a complete construction later this calendar year which will allow prospective customers to observe the operating plant and allow for the sampling and testing that recovered CO2 to verify quantity, quality, and purity requirements.
Speaker Change: with respect to follow-in projects. There are interest around follow-in opportunities, but one of the things that leaves domestically that is certainly...
Speaker Change: I think having an impact on a number of different hydrogen products and how decisions are being made is waiting for finalization of the tax rules from the Treasury Department and at this point we certainly don't expect to see those in advance of the election cycle.
Thomas Gelston: and Michael Bishop, Thomas Gelston, Thomas Gelston, Thomas Gelston, Thomas Gelston, Thomas Gelston,
Jason Few: We're really excited about the promise of this technology to capture CO2 emissions from industrial and commercial exhaust streams. We believe our technology can help solve one of the world's biggest environmental challenges while also providing mission-critical certainty of price and supply of high-quality CO2 for the food and beverage industry. Next, on slide eight, we have an image of what will be the first full-scale commercial unit for carbon capture with our Gen2 design.
Speaker Change: actually a great segue to my follow-on question. You're one of your competitors, you know, that expressed.
Speaker Change: Thought that we could see 45- the codification relaxation around the three pillars. Any thoughts on that and what the tiding could be of any relaxation there? Thank you.
Speaker Change: Great question, and if I were to crystal ball this, because that's what this would really be. I think that if you look at what happened with the Chevron ruling, I think that likely does.
Jason Few: This is a 600-kilolite unit and one of the ways it is differentiated from our traditional carbonate module is the level of balance of plant that is integrated inside the module. We believe that this modular design will improve large-scale deployment capabilities by enabling multiple units to be stacked or rack mounted vertically. The design is also expected to support greater uptime given its modularity and to improve maintenance flexibility.
Speaker Change: Require that the Treasury Department reassess some of their thoughts around how they want to implement the rules and how that actually comports with the language in the legislation and the intent of the legislation.
Speaker Change: As such.
Speaker Change: I do think that that will probably have some impact in terms of how the Treasury Department thinks about the three pillars that likely.
Jason Few: Flexibility is an essential capability to support continuous commercial and industrial operations.
Michael Bishop: Our first two units are scheduled to ship to Rotterdam in fiscal year 2025 and now I would like to turn the call over to RCFO Mike Bishop. Thank you Jason and good morning to everyone on the call today. Let's begin on slide 10 by reviewing the financial highlights for the quarter. For the third quarter of fiscal year 2024, we reported total revenues of 23.7 million compared to 25.5 million in the comparable prior year quarter.
Speaker Change: A line more to the legislative intent, which should be positive for companies like ours that are, you know, to have the capability of making clean hydrogen.
Speaker Change: But you don't expect any clarity until after the election is set.
Speaker Change: I thought that my guess, surely a guess would be that that clarity doesn't come before the election.
Speaker Change: Thank you.
Michael Bishop: In the third quarter of fiscal year 2024, we reported a net loss of 35.1 million compared to a net loss of 23.6 million in the third quarter of fiscal year 2023. The net loss in the prior year quarter included the benefit of a gain on early extinguishment of finance obligations and debt net of 15.3 million. The resulting net loss per share attributable to common stockholders in the third quarter of fiscal year 2024 was negative 7 cents compared to negative 6 cents in the third quarter of fiscal year 2023, which included the one-time benefit of a gain on early extinguishment of finance obligations and debt net of approximately 4 cents per share.
Speaker Change: Thank you, thanks George.
Speaker Change: Your next question comes from the line of Ryan Thanks from B Riley, your line is open.
Ryan Thanks: Hey, good morning guys. Thanks for taking my questions.
Ryan Thanks: Morning. How are you thinking about worrying? How do you think about manufacturing expansion for solid oxide in the US today? And are you still working with the DOE potential funding there?
Speaker Change: Yes, so maybe I'll start with the first part of your question first, Danceries.
Speaker Change: Yes, there are a number of programs from 48C to the DOE loan program that we continue to be active in our efforts there.
Michael Bishop: , Justin Ibada, totaled negative 20.1 million in the third quarter of fiscal year 2024, compared to adjusted Ibada of negative 31.6 million in the third quarter of fiscal year 2023. Please see the discussion of non-GAAP financial measures, including adjusted Ibada in the appendix at the end of our earnings release.
Speaker Change: and as a relates to manufacturing in the US, we obviously believe that's important to be able to capitalize on the full.
Speaker Change: Denton of the RA, and as a company, we are a US-based manufacturer today and have been so for the last 20-plus years, so that's an important part of just who we are as a company.
Michael Bishop: Finally, we reported a strong total cash and short term investment position of approximately 326 million consisting of cash, cash equivalence, restricted cash, and investments in US treasuries as of July 31st, 2024. Next, on slide 11, you will see additional details on our financial performance and backlog. In the graph on the left hand side of the slide, revenue is broken down by category. Product revenues were 0.3 million during the third quarter of fiscal year 2024, and there are no product revenues in the comparable prior year period.
Speaker Change: but as we indicated in our, you know, published materials, we are being very thoughtful about how we're deploying capital and scaling and, you know.
Speaker Change: and with the last question, you know, getting some more clarity around this, you know, we think is an important aspect, you know, as one of the milestones we look at in terms of when we're going to trigger additional capital to build out additional manufacturing capacity.
Michael Bishop: These revenues were recognized under the company's new sales contract with Amorosco that was entered into last quarter. Service agreement revenues decreased to 1.4 million for the third quarter of fiscal year 2024 from 9.8 million in the prior year period. The decrease was primarily driven by the absence of any module exchanges during the quarter. Higher service agreement revenues recognized during the prior year third quarter were driven primarily from the module exchanges at the plants owned by Korea Southern Power Company in Korea, and a module exchange at the plant at Trinity College.
Speaker Change: and then for my second question, can you just talk a little bit about the E-Fuel's projects in Canada where you announced?
Speaker Change: of Grant a couple weeks ago and a similar project for a present, a meaningful opportunity for you guys.
Speaker Change: Yeah, so in Canada, you know, the opportunity is to partner around leveraging our technology and nuclear.
Speaker Change: to produce e-fuel, what really makes that a interesting opportunity for us. And we think one that is a medium to longer term opportunity for us as a company is leveraging.
Michael Bishop: Generation revenues increased 22% to 13.4 million from 11 million in the prior year period, primarily driven by revenue related to the Toyota and Derby projects which began operations in the first quarter of fiscal year 2024. Advanced technology contract revenues increased 84% to 8.6 million from 4.7 million. Advanced technology contract revenues recognized under our joint development agreement with Exxon Mobile, Technology, and Engineering Company, or MTEC, were approximately 1.8 million. Revenues arising from the purchase order received from SO, Netherlands, BV, or SO, an affiliate of MTEC and Exxon Mobile Corporation related to the Rotterdam project were approximately 3.5 million and revenue recognized under government contracts and other contracts were approximately 3.3 million for the three months ended July 31st, 2024.
Speaker Change: The core strength of our technology, which includes really high efficiency electrosis.
Speaker Change: and then coupled with that the ability to take advantage of heat and when you're doing if you'll heat is obviously part of that process and we can leverage that heat, even be more efficient. And so we think as these things continue to emerge and as
Speaker Change: Technology components are integrated to make those economics better to be able to compete more effectively with traditional fuels. We think that certainly creates an opportunity for us, given our technological advantages.
Speaker Change: Thanks for joining us.
Speaker Change: Thank you.
Michael Bishop: This compares to contract revenues recognized under our joint development agreement with MTEC of approximately 2.8 million and revenue recognized under government contracts and other contracts of approximately 1.9 million for the three months ended July 31st, 2023. Looking at the top right hand side of the slide, gross loss for the third quarter totaled 6.2 million compared to a gross loss of 8.2 million in the comparable prior year quarter. The reduction in gross loss resulted in part from higher favorable margins for advanced technologies of 1.9 million and lower unfavorable margins for generation of 1.1 million, partially offset by unfavorable product margins of 1 million, service gross margin remained consistent quarter Award.
Speaker Change: You are next question comes from line of Tom Eugene from UBS, your line is open. Hey, I was just wondering, do you guys have any updates on the data center front? I guess how feels those playing out in that, and we're about to that.
Speaker Change: Good morning and thank you, great question, you know we continue to see
Speaker Change: The largest amount of growth in our pipeline coming from data center opportunities in our ourselves teams engaged in a number.
Speaker Change: of Conversation or Project Opportunities, and we're really excited about that. And the reasons we're excited about that really center on a couple of things that, again, we think play really nicely to our strengths.
Speaker Change: One is time to power and we think that's an important aspect and it's clearly a challenge for data centers and in particular the hyper-scanners. Number two, we think that some of the opportunity that has existed.
Michael Bishop: Operating expenses for the third quarter of fiscal year 2024 decreased to 27.4 million from 33.2 million in the prior year third quarter. Administrative and selling expenses decreased by 3 million from the prior year quarter. Primarily as a result of lower legal consulting and shareholder relations expenses and lower compensation expense. Research and development expenses decreased by 2.8 million compared to the prior year third quarter reflecting a decrease in spending on commercial development efforts during the quarter as well as a shift in engineering resource allocation towards supporting the increase in funded advanced technology activities.
Speaker Change: Here, most recently, to leverage, you know, shuttered coal plants or shuttered gas plants where you've got infrastructure already in place.
Speaker Change: that real estate is starting to look a lot more like ocean front real estate. There's only so much of it. And so the need to really find solutions that are on site generation is really a growth opportunity for us as a company.
Speaker Change: Thirdly, when you look at these
Michael Bishop: At the bottom right of the slide you will see the backlog increased to 1.2 billion as of July 31st 2024 compared to 1.06 billion as of July 31st 2023. The increase was primarily as a result of the long-term service agreement entered into with GGE during the third quarter of fiscal year 2024. Backlog for the agreement with GGE was allocated between product backlog of 126 million and service backlog of 33.6 million. Product backlog will be recognized as revenue over time as the company completes commissioning on the replacement modules to be sold to GGE.
Speaker Change: You know, eggs, data centers and typical sizes of power generation needs and let's let's call that, you know, the 30 to the mega watt range.
Speaker Change: We will very good about our ability to demonstrate
Speaker Change: Proving Track Record.
Speaker Change: Long run periods of large scale projects of 20 megawatts plus up to 58 megawatts of showing that we have the ability to deploy those large-scale solutions.
Speaker Change: and then the last piece of that we think were our technology really plays quite advantageously.
Speaker Change: is the fact that these days, data centers have significant cooling requirements.
Speaker Change: and our thermo-energy of our platform and the ability to integrate with absorption chilling.
Michael Bishop: Commissioning of the first six 1.4 megawatt replacement fuel cell modules is expected to be completed in the fall of calendar year 2024 with an additional 30 1.4 megawatt replacement fuel cell modules expected to be commissioned throughout the course of calendar year 2025. The remaining six 1.4 megawatt replacement fuel cell modules are expected to be commissioned in the first half of calendar year 2026. As a reminder service backlog will be recognized as revenue as the company performs service at the GGE site over the term of the agreement with GGE.
Speaker Change: is going to be part of the solution for those data centers. Again, give us a unique advantage to provide.
Speaker Change: A really holistic solution to a customer and even to the degree that the customer chooses to use electro-chilling, the fact that they would have on-site base flow reliable power.
Speaker Change: Also meets that need if that's the direction the customer goes and then
Speaker Change: Finally, one of the things I think that's also really a big benefit for us that we can offer a customer is advantages from a permitting perspective.
Speaker Change: A lot of AIDS, AIDS, data centers, or needing to be in cities where there's air-taming issues. And the fact that we don't combust fuels, we don't emit socks and socks and other particulates. And if you just use California.
Michael Bishop: Next on slide 12 we have estimates in U.S. Treasuries and restricted cash and cash equivalents total $326 million. This includes approximately 159.3 million of unrestricted cash and cash equivalents 107.8 million of short-term investments in U.S. Treasuries and 58.8 million of restricted cash and cash equivalents. During the three months ended July 31st 2024, approximately 95.2 million shares of common stock were sold under the company's amended open market sale agreement at an average sale price of 71 cents per share, resulting in net proceeds to the company of approximately $65.9 million.
Speaker Change: as a tough case, right? We compare to rest of the country, the fact that, you know, we're carb certified. We are products are air permitted in California. We feel really good about being a customer.
Speaker Change: Shorten the permitting issues, or enable them to deploy a data center.
Speaker Change: Closer to the edge in an urban area, where that may not be possible for them to do with gas fire generation as an example or diesel backup generation, and so we think all of those things create avenues for us to offer a compelling solution.
Speaker Change: And the final thing I would say is, you know, our demonstrated capabilities around microgrid and where you start to really shift the paradigm, where the grid becomes the backup power and being able to integrate our technology in a microgrid as well with other
Michael Bishop: As discussed last quarter, the company has made certain downward adjustments to expected spending during fiscal year 2024 as a result of the pace of market development and due to the need to continue the company's work to optimize and focus on optimizing and improving the company's solid oxide technology, including its stack life, performance, and efficiency. Agency. Adjustments to expected spending for fiscal year 2024 have included reductions in capital expenditures and company-funded research and development expenses. The company has also extended the timing and deployment of certain first-article solid oxide units as a result of the factors that I just mentioned.
Speaker Change: Generation Aftets, whether those be solar, or batteries, or all things to complete a really robust resiliency and reliable solution. So we're really excited about the data center opportunity.
Speaker Change: I'm going to thank you.
Speaker Change: You are next question comes from a line of null parks from two e-brothers. Your line is open.
Speaker Change: Good morning.
null parks: Good morning, no.
Speaker Change: I just found a couple of things I am.
Michael Bishop: Current spending targets are included on slide 19 in the appendix of this presentation.
Speaker Change: It was the touchdown, I'll indirectly a little earlier, but I, I'm just going to say you could talk about what you're seeing specifically with wastewater projects.
Michael Bishop: In September 2024, as part of its cost-saving measures, the company also made job eliminations in certain areas and reduced its workforce by approximately 4%, which is calculated as a percentage of total salaries being reduced. The company expects to continue to focus its strategy to respond to market conditions which may result in additional spending and headcount reductions in your periods.
Speaker Change: in your pipeline, just whether that's sort of on the increase in terms of the increase you're seeing or, you know, using up a little bit or the same.
Speaker Change: You know, great question. I mean, I think the, you know, the Amarisco project we're doing is just an example of our platforms capability, take advantage of.
Michael Bishop: Finally, as I mentioned on this slide, the company is also pursuing financing to support our commercial efforts, which includes deployment of modules to the repowering opportunities in the Korean market, including the GGE project. We look forward to providing further updates on our cash management and financing activities in the coming months.
Speaker Change: You know, what is a growing...
Speaker Change: Movement to leverage anaerobic digesting at wastewater treatment facilities and then to utilize that fuel as a way to generate carbon neutral power.
Jason Few: I will now turn the call back to Jason. Thanks, Mike.
Speaker Change: and we have demonstrated our capabilities to do that on a number of wastewater projects in one of the core.
Operator: I will now turn it over to the operator to begin Q&A. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
Speaker Change: and a Fits that we have there.
Speaker Change: is our ability to directly utilize that fuel. In other words, we don't need to upgrade that fuel to pipeline quality, so that fuel never leaves the premise if you will.
George Gianarikas: Your first question comes to the line of George Gianaricus from Canacorn Genuity. Your line is open.
Speaker Change: in addition to that again, you know, just like I just talked about absorption chilling and the benefit to leverage our thermal energy, we're able to use that thermal energy to feed back into.
Jason Few: Hi, good morning, everyone, and thank you for taking my questions. Maybe first just to ask about the Toyota Project, any update there, and any follow-on interest from other parties who have looked at the facility and understood its performance. Thank you.
Speaker Change: and the other thing that I would say there that I would just want to point out and I mentioned in my
Speaker Change: Prepare for Marks
Jason Few: George, good morning, and thank you for being on the call, and thank you for your question. On the Toyota Project, we are fully operational as we communicated some time ago, and we are providing hydrogen in addition to power and water for Toyota at the point where they can support of their importation of the Toyota Marai, their passenger vehicle, as well as class 8 heavy-duty trucks that have public access to hydrogen fueling as well.
Speaker Change: with the solution that we're doing with Amoresco. There's two other opportunities there that, you know, we could potentially leverage our technology too.
Speaker Change: to take advantage of and that's the production of hydrogen, similar to what we're doing at Toyota and then also
Speaker Change: These modules that are being deployed are carbon recovery capable and so to the degree that we can utilize that carbon or there's a need for that rather before a product or sequestration or otherwise, that's just another value stream that can be created there and so.
Jason Few: That's in advance support of the requirement to have zero combustion, heavy-duty transportation, and the port here in the next couple of years. We continue to be excited about our efforts there. With respect to follow-on projects, there are interest around follow-on opportunities, but one of the things at least domestically that is certainly, I think, having an impact on a number of different hydrogen projects and how decisions are being made is waiting for finalization of the tax rules from the Treasury Department. At this point, we certainly don't expect to see those in advance of the election cycle.
Speaker Change: along with the Amoresco Project, that's near-term revenue opportunity for us. And we see that as a market that will continue to grow.
Jason Few: Actually, great segue to my follow on question. You're one of your competitors. I had expressed thought that we could see 45V quantification relaxation around the three pillars. Any thoughts on that and what the timing could be of any relaxation there. Thank you. George, it's a great question. And if I were to crystal ball this because that's what this would really be. I think that if you look at what's happened with the Chevron ruling, I think that likely does require that the Treasury Department reassess some of their thoughts around how they want to implement the rules and how that actually comports with the language in the legislation and the intent of the legislation.
Speaker Change: Where the module will be located it's all about how youre going to move the flu gas from a direct air capture standpoint.
Speaker Change: To feed that into our platform and that's the work that's being done.
Speaker Change: DSO plan on our side.
Jason Few: As such, I do think that that will probably have some impact in terms of how the Treasury Department thinks about the three pillars that likely align more to the legislative intent, which should be positive for companies like ours that are, you know, have the capability of making clean hydrogen. But you don't expect any clarity on that until after the election. Is that your thought? My guess, surely a guess would be that that clarity doesn't come before the election. Thank you. Thanks George.
Speaker Change: We're in the commissioning and building process of the modules and we included a picture in the slide deck. If you looked at that that shows.
Speaker Change: One of the modules at our conditioning facility here in Danbury, Connecticut on the joint marketing side.
Speaker Change: We fuel cell energy and Exxon low carbon solutions business are engaged in a number of conversations with customers about leveraging the technology in these early stages, it's more around demonstration scale type projects.
Speaker Change: But we see that is all part of the overall product development and ultimate ultimately, how we will commercialize the product and so those conversations I would say our.
Speaker Change: Going well and we have a number of them in play.
Speaker Change: Okay, and just one other sort of general question just wondering.
Speaker Change: Since we finally reached the point that it looks like the interest rate environment could be improving a bit.
Speaker Change: I'm wondering having reached that inflection point has.
Speaker Change: Got anything as far as.
Ryan Pfingst: Your next question comes from a line of Ryan. Thanks from B Riley. Your line is open. Hey, good morning guys. Thanks for taking my questions. Morning. How are you thinking about worrying? How are you thinking about manufacturing expansion for solid oxide in the US today? And are you still working with the DOE on potential funding there?
Speaker Change: The financing discussions are or.
Speaker Change: Other sorts of investment whether those parties any of those.
Speaker Change: We're kind of waiting for this point too.
Speaker Change: Start thinking about.
Speaker Change: Regarding investment.
Yeah, No I'll, let Mike give you some color on that is the one thing I would just say before I hand, it over to Mike.
Speaker Change: We're going to hope this is not like the sports illustrated Jinx, we're going to stay there.
Jason Few: Yes, so we'll start with the first part of your question first. The answer is yes. There are, you know, there are a number of programs from 48C to the DOE loan program that we continue to be active in our efforts there. And as it relates to manufacturing in the US, we obviously believe that's important to be able to capitalize on the full intent of the RA. And as a company, you know, we are a US based manufacturer today and have been so for the last 20 plus years.
Speaker Change: Go ahead go ahead.
Speaker Change: But we're hoping at this next September fed made it it actually happens, but I'll turn it over to Mike here.
Mike Bishop: Thanks, Jason Hi, no and thank you for joining the call yes. So.
Mike Bishop: So obviously, we're excited about the changing potentially changing rate environment.
Mike Bishop: We've been able to navigate through this with actually doing project financing on on our projects.
Mike Bishop: Being able to lock in relatively low interest loans.
Mike Bishop: Loans, given the cash flow profile of our projects.
Jason Few: So that's an important part of just who we are as a company. But as we indicated in in our, you know, published materials, we are being very thoughtful about how we're deploying capital and scaling. And, you know, consistent with the last question, you know, getting some more clarity around this, you know, we think it's an important aspect. You know, it was one of the milestones we look at in terms of when we're going to trigger additional capital to build out additional manufacturing, and Capacity. Got to appreciate that color, Jason.
Mike Bishop: As I mentioned in my remarks, we're also pursuing.
Mike Bishop: Commercial financing to support.
Work that we're doing in Korea and elsewhere around Repowering. We have we have a number of interested parties in supporting those contracts says as we bring those into our backlog. So we feel like we're well positioned to execute on new financing here as we go forward.
Mike Bishop: Great. Thanks, a lot.
Mike Bishop: Yes. Thank you.
Speaker Change: Again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of Jason Jeffrey Campbell from Seaport Research Partners. Your line is open.
Jason Few: And then for my second question, can you just talk a little bit about the E-Fuel projects in Canada where you announced a grant a couple weeks ago, and it's similar projects represent a meaningful opportunity for you guys? Yeah, so in Canada, the opportunity is to partner around leveraging our technology and a nuclear to produce E-Fules. What really makes that an interesting opportunity for us, and we think one that is a medium to longer term opportunity for us as a company is leveraging the core strength of our technology, which include really high efficiency electrolysis, and then coupled with that, the ability to take advantage of heat, and when you're doing E-Fules, heat is obviously part of that process, and we can leverage that heat to even be more efficient.
Speaker Change: Good morning.
Speaker Change: Good morning, I wanted to I wanted to ask you if you could expand a bit on the call electrolysis projects.
Speaker Change: Reference to the Canadian nuclear laboratory projects it sounds like an alternative approach to dealing with carbon emissions versus your concentration of sequestration efforts on the molten carbonate.
Speaker Change: Yes.
Speaker Change: It's a great question Geoffrey the way the way that we think about it is that in.
Speaker Change: In order to achieve.
Speaker Change: The emission reductions.
Speaker Change: We have as a global community youre going to need to do a number of different things.
Speaker Change: One of those is leveraging nuclear in this case.
Speaker Change: And the ability to create.
Speaker Change: E fuels as an alternative or in addition to existing.
Speaker Change: Fuels that are available today.
Speaker Change: I don't think though that that is an absolute total replacement for.
Jason Few: And so we think as these things continue to emerge, and as technology components are integrated to make those economics better to be able to compete more effectively with traditional fuels, we think that certainly creates an opportunity for us given our technological advantages.
Speaker Change: How youre going to decarbonize industry or industrial customers. We think that there is a number of industries that are just going to be really challenged.
Speaker Change: To decarbonize without.
Speaker Change: Actually capturing the emissions from their operations in what is unique or different jaded about the solution that we worked with Exxon on is leveraging one of the core.
Ryan Pfingst: I thought, thank you, I'll turn it back. Thank you.
Saumya Jain: Your next question comes from the line of Saumya Jain from UBS. Your line is open. Hey, as just wanted, do you guys have any updates on the data center front? I guess how fuel cells playing out in that immigrants to that?
Speaker Change: Capabilities of our carbon and platform and thats the ability to directly capture.
Speaker Change: Carbon and we certainly believe that directly capturing carbon at the point source is always going to be more efficient and effective than than capturing it in some other way, but our ability to capture that carbon produced power and <unk>.
Jason Few: Good morning, and thank you, great question. We continue to see the largest amount of growth in our pipeline coming from data center opportunities, and our sales teams engaged in a number of conversation or project opportunities, and we're really excited about that. And the reasons we're excited about that really center on a couple of things that, again, we think play really nicely to our strengths. One is time to power, and we think that's an important aspect, and it's clearly a challenge for data centers, and in particularly hyper-skellers.
Also if there is a need for to produce hydrogen and then you could talk about that would be another opportunity in which you could do things around E fuels or synthetic fuels because you've got all of the elements now of the recipe to do that and so we think that our technology gives us.
Speaker Change: An opportunity to leverage different sources of energy and different sources of emissions to drive.
Jason Few: Number two, we think that some of the opportunity that has existed here most recently to leverage, you know, shuttered coal plants or shuttered gas plants where you've got infrastructure already in place, that real estate is starting to look a lot more like ocean front real estate. There's only so much of it. And so the need to really find solutions that are on site generation is really a growth opportunity for us as a company.
Speaker Change: The carbonization of those operations or leverage non carbon Jenna.
Generation like nuclear but yet to create other value streams that will help decarbonize. Some other aspect of the value chain through the use of those fuels.
Speaker Change: Last quick one just wondering whats the initial response, you're receiving from the food grade two effort.
Jason Few: Thirdly, when you look at these, you know, edge data centers and the typical sizes of power generation needs, and let's let's call that, you know, the 30 to 50 megawatt range, we feel very good about our ability to demonstrate proven track record, long run periods of large-scale projects of 20 megawatts plus up to 58 megawatts of showing that we have the ability to deploy those large-scale solutions. And then the last piece of that we think where our technology really plays quite advantageously is the fact that these edge data centers have significant cooling requirements, and our thermal energy of our platform and the ability to integrate with absorption chilling, where absorption chilling is going to be part of the solution for those data centers.
Speaker Change: I've seen the.
Speaker Change: Unit going up myself in this very impressive and I think you recently.
Speaker Change: Florida World Brewer Association, so I'm, just kind of wondering what sort of initial response to you Dennis.
Speaker Change: Yes, I think so far the response has been really positive about the opportunity and the work that we're doing I think if you look at Cotwo utilization I think it's roughly about 70% of the <unk> utilization goes to food and beverage category. So, it's a pretty sizable opportunity, but as <unk>.
Speaker Change: You can imagine.
<unk> offering <unk> as a core ingredient to a product.
Speaker Change: There is a there is a different test that a customer wants in that case and as we've learned even the cotwo itself in the source of the.
Jason Few: Again, gives us a unique advantage to provide a really holistic solution to a customer, and even to the degree that the customer chooses to use electric chilling, the fact that they would have on-site base load reliable power also meets that need, if that's the direction the customer goes. And then Finally, one of the things I think that's also really a big benefit for us that we can offer a customer is advantages from a permitting perspective.
Speaker Change: Can have impacts to taste and for those that are.
Speaker Change: Semi as relative to beer drinking or other things thats really important that we get that right and so this demonstration will give us the ability to offer customers the opportunity to.
Speaker Change: Sample and the actual <unk> that would be produced from our platform. The purification process, they get to witness stat and sample and test the <unk> for purification and taste.
Jason Few: A lot of age data centers are needing to be in cities where there's erotation issues. And the fact that we don't combust fuels, we don't emit socks and no other particulates. And if you just use California as a tough case, right, compared to rest of the country, the fact that, you know, we're carbs certified, our products are air permitted in California. We feel really good about helping a customer shorten the permitting issues or enable them to deploy a data center closer to the edge in an urban area where that may not be possible for them to do with gas fire generation as an example or diesel backup generation.
Speaker Change: And so we think that that's going to be a catalyst for us to to get there.
Speaker Change: The food and beverage customers to move forward with our technology.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: At this time there are no other questions I will now turn the call back over to Jason few for final closing remarks.
Speaker Change: Thank you Rob and thank all of you for joining US today, we will continue to execute our powerhouse business strategy with the goal of delivering growth and optimizing returns. We remain committed to this strategy, which will allow us to develop technologies as we have done with some of the largest companies.
Jason Few: And so we think all of those things create avenues for us to offer a compelling solution. And the final thing I would say is, you know, our demonstrated capabilities around micro grids and where you start to really shift the paradigm where the grid becomes the backup power and being able to integrate our technology in a micro grid, as well with other generation assets, whether those be solar or batteries or all things that complete a really robust resiliency and reliable solution. So we're really excited about the data center opportunity. Got it. Thank you.
Speaker Change: In the world. Thank you again for joining our call today.
Speaker Change: Have a great day.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Noel Parks: Your next question comes from a line of Noel Parks from Tweet Brothers. Your line is open. Hi, good morning. Good morning, Noel. I'm just on a couple of things.
Jason Few: I, it was touched on a little indirect near a little earlier, but I just wanted you could talk about what you're seeing specifically with waste water projects in your pipeline, just whether that's sort of on the increase in terms of the interest you're seeing or, or, you know, using up a little bit or the same. You know, great question, Noel. I mean, I think you, you know, the Amoresco project we're doing is just an example of our platform's capability, take advantage of, you know, what is a growing movement to leverage anaerobic digesting at wastewater treatment facilities and then to utilize that fuel as a way to generate, you know, carbon neutral power.
Jason Few: And, you know, we have demonstrated our capabilities to do that on a number of wastewater projects in one of the core benefits that we have there is our ability to directly utilize that fuel. In other words, we don't need to upgrade that fuel to pipeline quality, so that fuel never leaves the premise, if you will. In addition to that, again, you know, just like I just talked about absorption chilling and the benefit to leverage our thermal energy, we're able to use that thermal energy to feed back into...
Jason Few: Feedback into the anaerobic digester to accelerate that process. So the other thing that I would say there that I would just want to point out, and I mentioned in my prepare remarks, with the solution that we're doing with Ameresco, there's two other opportunities there that we could potentially leverage our technology to take advantage of, and that's the production of hydrogen. You know, similar to what we're doing at Toyota, and then also these modules that are being deployed are carbon recovery capable.
Jason Few: And so to the degree that we can utilize that carbon, or there's a need for that, whether it be for a product or sequestration, or otherwise, that's just another value stream that can be created there. And so along with the Ameresco project, that's near-term revenue opportunity for us and we see that as a market that will continue to grow.
Jason Few: Great. And you mentioned in Rotterdam, for example, that there was site work going on there. I wonder if you could just maybe talk a little bit more about progress there. And maybe if you have any thoughts on what you might be seeing from the joint marketing agreement aspect of your partnership with Exxon. Yeah. So, you know, the Rotterdam facility is an SO facility, which is an Exxon company. It's located in Rotterdam and part of being able to do this carbon capture project or for that matter any carbon capture project.
Jason Few: The site work that's needed to be done is all about preparing where the modules will be located. It's all about how you're going to move the flu gas from a direct air capture standpoint to feed that into our platform. And that's the work that's being done at the SO plan on our side. You know, we are in the commissioning and building process of the modules. And we included a picture in the slide deck, if you looked at that, that shows one of the modules at our conditioning facility here in Danberry, Connecticut.
Jason Few: On the joint marketing side, you know, we fuel cell energy and Exxon low carbon solutions business are engaged in a number of conversations with customers about leveraging the technology. In these early stages, it's more around demonstration scale type projects, but we see that as all part of the overall product development and ultimately how we will commercialize the product. And so those conversations, I would say, are going well and we have a number of them in play.
Noel Parks: Okay, and just one of the general question, just wondering since we finally reached the point that it looks like the interest rate environment could be improving a bit. I wonder if having reached that inflection point has done anything as far as financing discussions or or other sorts of investment, whether those parties were kind of waiting for this point to start thinking about reserving investment. Yeah, no, Mike could give you some color on that.
Noel Parks: I, the one thing I would just say before I hand it over to Mike, you know, we're going to, we're going to hope this is not like the sports illustrated jinx. We're going to say they're going to do it, but we're hoping at this next September 5th meeting it actually happens, but I'll turn it over to Mike here. Thanks Jason, hi, hi, Noel, and thank you for joining the call. Yes, so, so obviously we're excited about the changing, potentially changing rate environment.
Noel Parks: We've been able to navigate through this with actually doing project financing on, on our projects, being able to lock in relatively low interest loans, given the cash low profile. Of our projects, as I mentioned in my remarks, we're also pursuing commercial financing to support work that we're doing in Korea and elsewhere around repowering. We have, we have a number of interested parties in supporting those contracts as we bring those into our backlog. So we feel like we're well positioned to execute on new financing here as we go forward.
Michael Bishop: Great, thanks a lot. Yep, thank you.
Operator: Again, if you'd like to ask a question, press star one on your telephone keypad.
Jeffrey Campbell: Your next question comes from a line up, Jeffrey Campbell from Seaport Research Partners. Your line is open. Good morning. Morning. I wanted to, I wanted to ask you if you could expand a bit on the co electrolysis project and reference to the Canadian nuclear laboratory projects. It sounds like an alternative approach to dealing with carbon emissions versus your concentration and sequestration efforts on the molten carbon dioxide. Yeah, no, that's a, that's a great question.
Jeffrey Campbell: Jeffrey, the way, the way that we think about it is that in order to achieve the emission reductions that, you know, we have as a global community, you're going to need to do a number of different things. One of those is leveraging nuclear in this case and the ability to create e fuels as an alternative or in addition to existing fuels that are available today. We don't think though that that is an absolute total replacement for how you're going to decarbonize industry or industrial customers.
Jeffrey Campbell: We think that there is a number of industries that are just going to be really challenged to decarbonize without actually capturing the emissions from their operations and what is unique or differentiated about the solution that we worked with Exxon on is leveraging one of the core capabilities of our carbon at platform. And that's the ability to directly capture the carbon and we certainly believe that directly capturing carbon at the point source is always going to be more efficient and effective than capturing it in some other way.
Jeffrey Campbell: But our ability to capture that carbon and produce power, and also if there's an need for produced hydrogen and then you could talk about that would be another opportunity in which you could do things around e-fules or synthetic fuels because you've got all of the elements now of the recipe to do that. And so we think that our technology gives us an opportunity to leverage different sources of energy and different sources of emissions.
Jeffrey Campbell: Decarbonization of those operations or leverage non-carbon generation like nuclear but yet to create other value streams that will help decarbonize some other aspect of the value chain through the use of those e-fules. As a last quick one just wondering what's the initial response you're receiving from the Food Grade CO2 effort? I've seen the unit going up myself and it's pretty impressive and I think you recently did a presentation for the World Brewer Association.
Jeffrey Campbell: So it's kind of wondering what sort of initial response you're getting? I think so far the response has been really positive about the opportunity and the work that we're doing. I think if you look at CO2 utilization I think it's roughly about 70% of CO2 utilization goes to the Food and Beverage category so it's a pretty sizable opportunity. But as you can imagine offering CO2 as a core ingredient to a product there's a different test that a customer wants in that case and as we've learned even the CO2 itself and the source of the CO2 can have impacts to taste.
Jeffrey Campbell: And for those that are you know semiae rather than the beer drinking or other things it's really important that we get that right. And so this demonstration will give us the ability to offer customers the opportunity to sample in the actual CO2 that would be produced from our platform. The purification process they get to witness that and sample and test the CO2 for purification and taste. And so we think that that's going to be a catalyst for us to get the food and beverage customers to move forward with our technology. Great. Thank you.
Jason Few: At this time there are no other questions that will now turn the call back over to Jason few for final closing remarks.
Jason Few: Thank you Rob and thank all of you for joining us today. We'll continue to execute our powerhouse business strategy with the goal of delivering growth and optimizing returns. We remain committed to this strategy which will allow us to develop technologies as we have done with some of the largest companies in the world.
Operator: Thank you again for joining our call today. Have a great day.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.