Q4 2024 FuelCell Energy Inc Earnings Call
Fourth quarter revenue more than doubled year over year, mainly driven by module sales to going get green energy or G. G E in South Korea.
And while full fiscal year 2024 revenue was down compared to the prior year, we expect to deliver meaningful revenue growth in fiscal year 2025.
And we will continue to exercise cost discipline and deploying capital for growth opportunities.
As I do every quarter I would like to start by underscoring our business and purpose for those of you who are new to our story as well as for those who know us well.
Our purpose is to enable a world empowered by clean energy.
So what does this mean.
It means leveraging our proprietary fuel cell technology platform, our considerable intellectual property portfolio, including hundreds of patents, our geographic footprint and our talented team to provide energy solutions for our customers.
Next on slide four I'd like to provide an overview of our key messages for the quarter.
First subsequent to the end of the fourth fiscal quarter fuel cell announced a global restructuring plan that aims to realign our team and capital to focus on our core technologies and target sales, where we see the strongest demand in the near term.
Datacenters distributed power generation grid, resiliency and carbon recovery for utilization.
We believe the actions we've taken will better position us from the perspective of focused product solutions and cost helping us to start fiscal year 2025 building on our fourth quarter 2020 for momentum.
I will speak in more detail about the restructuring plan on the next slide.
Second we continued to make progress on the operations front in the quarter, we delivered and installed six repowering fuel cell modules for our customer GE and we also made significant advancements on our biogas project with <unk> in Sacramento, California.
In addition, our solid oxide electrolysis unit that is heading to Idaho National Laboratory crossed a significant milestone passing the ILS acceptance test that unit is being prepared for shipment as we speak.
In addition to delivering for our current customers. We are focused on winning new opportunities and our third theme underscores that there is plenty of opportunity with the global power demand remains robust across utilities commercial and industrial sectors.
From Mega trends like the growth of data centers, driven by AI blockchain and crypto currency to the ongoing global drive to create a more reliable and resilient grid and the need to reduce dependency on permitting and building high voltage transmission across local landscapes the world.
Needs more clean Baseload power and we believe we have the solutions.
This leads into the fourth theme.
Which is the growing global adoption of fuel cell technology.
Countries like South Korea are leading the way and adding clean fuel cell energy into their power mix and we expect others to follow their example.
The large scale utility and commercial deployments, we have implemented globally allow us to demonstrate the reliability and functionality of our long running platforms, representing positive case studies as we work to win future orders.
And finally as we develop these energy solutions, we will continue our disciplined approach to capital allocation and cost control in order to maintain a strong balance sheet.
We ended the fourth quarter with $318 million of cash cash equivalents and short term investments putting us in a position to invest in growth platform development, even as we bring added focus and reduce expenses as we execute our strategy.
Now looking more closely at our global restructuring plan.
I want to underscore that we executed this plan in a way that is intended to put us in the best position possible to capitalize on the growth themes I just outlined.
We are prioritizing our technologies that are proven.
Speaker Change: Commercially available and operating since 2003.
Speaker Change: Centered on our carbonate fuel cell technology, which has been a longtime backbone of our platform and is core to what we believe are significant growth opportunities for carbon recovery and carbon capture.
Speaker Change: We are expanding our manufacturing capabilities for our molten carbonate technology in an effort to capture the increasing opportunity in distributed power solutions and we aim to increase our fiscal year 2025 annualized production rate at our Torrington manufacturing facility relative to fiscal year 2024.
Speaker Change: Alongside our molten carbonate platform.
Speaker Change: We will continue to invest in the continued development and commercialization of our solid oxide platform. However, our strategy will focus on developing strategic partnerships and opportunities that would enable us to deploy this technology as part of a larger scale energy emissions reduction and <unk>.
Speaker Change: Aegean generation projects, we believe that the upcoming demonstration of our solid oxide electrolyze or at the Idaho National Lab Laboratory in 2025 will be demonstrative of our technology and ability to execute that strategy.
Speaker Change: We are actively seeking strategic options to develop and work with partners for our solid oxide technology large scale enablement and we will continue to do so in fiscal year 2025.
Speaker Change: The path to growth is not always direct or linear.
Speaker Change: We are proactively taking action to respond to what has been a challenging environment for our industry, we are reducing spending hyper focusing on tangible commercial opportunities and progressing toward profitability.
Speaker Change: While the restructuring was a difficult decision. We believe it is the right decision to protect our competitive position and put us in the best position to close market opportunities.
Speaker Change: Every decision we make feeds into our purpose and we carry out this purpose through our powerhouse business strategy.
Speaker Change: Which we instituted in 2019.
Speaker Change: Those of you, who know us well are familiar with our strategy and we continue to believe in the powerhouse framework.
Speaker Change: I would call your attention to an update we have made to the first pillar of our strategy, which we now call focus.
Speaker Change: To grow in the current market environment, we narrowed our focus we focused on streamlining our business operations running our company as efficiently as possible optimizing our platform and maintaining commercial excellence.
Speaker Change: This will enable us to uphold the second and third pillars of our strategy scaling our platform.
Speaker Change: And innovating for the future.
Speaker Change: I would now like to turn to the next section of our presentation to discuss all the ways. We are working to improve our operations at fuel so energy and continuing to execute on our current slate of opportunities.
Speaker Change: On page eight we eliminate the solution applications, where and how we excel at building and operating large scale distributed clean energy platforms, and why our demonstrated past positions as well as a proven solution at meeting that.
Speaker Change: Time to power applications opportunity or from a customer's perspective shortening their time to revenue.
Speaker Change: Have a history of delivering distributed power solutions at scale with eight sites generating 10 megawatts or more for an aggregate nameplate capacity of approximately 180 megawatts. We are the only fuel cell manufacturer with demonstrated platforms of 10 megawatts 20 megawatts.
Speaker Change: And even almost 60 megawatts with seven or more years.
Speaker Change: Club operating time, delivering reliable and efficient energy services.
This strong historic performance I believe positions us well to take advantage of what we view as one of the biggest market opportunities for our company micro grids in support of data center growth.
Micro grids enabled many of the world's fastest growing power consumers such as data centers run more efficiently with higher availability lower emissions compared to grid power reduced customer dependency on utilities and accelerate their time to revenue by leveraging onsite generation as prime power.
Speaker Change: Sure.
Speaker Change: <unk> Energy's technology can meet these customers' micro grids needs. We currently maintain five operating micro grids, which provide reliable base load power that is critical in the event of utility outages. We do this against a range of applications from Manufacturing's schools.
Speaker Change: Communities and mission critical nuclear submarine base.
Speaker Change: We've also exhibited our ability to integrate with other generation sources, including a ranking cycle asset at our Bridgeport fuel cell Park.
We can integrate seamlessly with other micro grid assets, including battery gas turbines diesel generators and solar and wind power sources.
Speaker Change: To give you a sense of the scale of this market opportunity I'd invite you to take a look at the data visualization on slide nine showing the sharp growth in interconnection Qs generated by the massive strains on our current U S grid.
Speaker Change: Many of these areas are corridors, where data center growth has been the highest including the mid Atlantic region, The Great Lakes region, Texas.
Southwest and the Pacific Northwest There is a clear need for distributed power solutions to help relieve the strains the kind of solutions provided by fuel cell energy.
Speaker Change: The same story is playing out worldwide across grids.
Speaker Change: Moving to slide 10.
Speaker Change: As I mentioned earlier, our work to deliver and install modules for GE continues apace, we have installed the first six modules and the remaining 36 module will be manufactured and delivered over the next two years pace by an intentional repowering schedule.
Speaker Change: We are pleased to have secured financing from the export import bank of the United States, which provided working capital funding for the initial module deliveries, we look forward to continuing our relationship with <unk>.
Speaker Change: Our generation operating portfolio remains strong and gives us line of sight into our potential revenue for the next fiscal year, which we expect to be significantly higher than our revenue for fiscal year 2024.
Speaker Change: The size of our portfolio has grown significantly in the past two years totaling $62 eight megawatts at the end of fourth quarter compared with $36 three megawatts at the same time in fiscal year 2022.
Speaker Change: We have added our service contract with GE to our backlog representing over $34 million in revenue over the term of the agreement with GE.
Speaker Change: In other operational news, our sacramental sewer project with <unk> is nearing completion.
Speaker Change: Additionally module production for the carbon capture project at the Port of Rotterdam is ahead of schedule with module is expected to ship in mid calendar year 2025.
Speaker Change: These are positive building blocks as we begin fiscal year 2025.
Speaker Change: I would like to conclude my portion of the call by reflecting on the 2024 U S election results and how they affect us as a company and as an industry.
Speaker Change: The conventional wisdom may say that one political party favors that fuel cell industry versus the other.
Speaker Change: But I'm here to tell you that we firmly believe that our solutions are bipartisan and deliver value to our customers no matter, which party is in power.
Speaker Change: Support for our industry has historically been bipartisan and legislators of all affiliations are focused on developing a resilient and reliable U S power grid, which our industry helps provide.
Speaker Change: Our Bolton carbonate platform is able to utilize a number of fuels as feedstock, including natural gas, which we believe benefits from energy policies that promote this clean domestically plentiful transition fuel.
Speaker Change: Above all we're a global company and the global energy transition continues no matter what happens in domestic politics.
Our platform is commercially proven and doesn't depend on one party or another to be economically viable in.
Speaker Change: In short regardless of the direction political winds are blowing DSO energy will be positioned to provide clean and reliable energy to the world.
Speaker Change: We wish the incoming administration success, just as we did for the current administration with that I'd 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 by reviewing the financial highlights for the quarter shown on slide 12 for the fourth quarter of fiscal year 2024, We reported total revenues of $49 3 million compared to $22 5 million in the fourth quarter of fiscal year <unk>.
23, an increase of 120%.
Mike Bishop: Net loss was $39 6 million in the fourth quarter of fiscal year 2024, compared to a net loss of $29 5 million in the fourth quarter of fiscal year 2023, the resulting net loss per share attributable to common stockholders in the fourth quarter of fiscal year 2024 was negative $2 and 21.
Mike Bishop: Compared to negative $2 and seven.
Mike Bishop: In the fourth quarter of fiscal year 2023 adjusted.
Mike Bishop: EBITDA totaled negative $25 3 million in the fourth quarter of fiscal year 2024, compared to adjusted EBITDA of negative $30 8 million in the fourth quarter of fiscal year 2023.
Mike Bishop: Please see the discussion of non-GAAP financial measures, including adjusted EBITDA in the appendix at the end of our earnings release. Finally, the company held total unrestricted cash restricted cash cash equivalents and short term investments of $318 million as of October 31 2020.
Mike Bishop: Four.
Mike Bishop: Next please turn to slide 13 for additional details on our financial performance and backlog.
Mike Bishop: The chart on the left hand side graphically shows our fourth quarter revenue composition by line item.
Mike Bishop: Product revenues for the fourth quarter increased to $25 4 million compared to $10 5 million in the prior year quarter. This increase was primarily driven by $18 million of revenue recognized under the long term service agreement with GE for the replacement of six fuel cell modules. Additionally, we.
Mike Bishop: $97 7 million of revenue under the company's sales contract with <unk> under which the company is to provide a two eight megawatt platform to the sacramental sewer district.
Mike Bishop: But that product revenues for the prior year quarter reflect recognition of revenue related to a performance guarantee which was part of the settlement agreement with Posco energy and its subsidiary Korea fuel cell or KFC.
Mike Bishop: Service agreement revenues in the fourth quarter increased to $5 6 million from a loss of <unk> 8 million in the prior year quarter with the increase primarily driven by two module exchanges during the fourth quarter of fiscal year 2024 there.
Mike Bishop: There were no module exchanges in the fourth quarter of fiscal year 2023 revenue for the prior year quarter was impacted by accruals due to higher cost estimates related to future module exchanges compared to the company's prior estimates, which more than offset revenue recognized for the prior year quarter.
Mike Bishop: Service agreements revenue can be variable from period to period, depending on the number of module exchanges during the period and changes to future cost estimates used to recognize revenue in the period.
Mike Bishop: Generation revenues increased by 43% to $12 million from $8 5 million, reflecting revenue from the Toyota in Derby projects, which began operations in the first quarter of fiscal year 2024.
Advanced technology contract revenues increased to $6 4 million from $4 3 million benefiting from revenues recognized under the purchase order received from Esso, Netherlands, BV or Esso and affiliate of Exxon Mobil Corporation related to the Rotterdam project.
Mike Bishop: Looking at the top right hand side of this slide I will walk through the changes in gross loss and operating expenses during the fourth quarter of fiscal year 2024.
Mike Bishop: Gross loss for the fourth quarter of fiscal year, 2024 totaled negative $10 9 million compared to a gross loss of negative $1 $5 million in the comparable prior year quarter. The increase in gross loss for the fourth quarter of fiscal year 2024 reflects the costs associated with the increased product revenues.
Mike Bishop: Whereas there were no costs associated with the product revenues of $10 5 million recognized in the fourth quarter of fiscal year 2023 related to a performance guarantee that was part of the settlement agreement with Posco energy and its subsidiary KFC.
Mike Bishop: Additionally, the company had higher generation cost of sales during the fourth quarter of fiscal year 2024, as it recorded a derivative loss of $1 8 million compared to a derivative gain of $4 1 million in the prior year quarter as a result of net settling certain natural gas purchases. These items were partially.
Offset by benefits from improved service profitability as a result of our module exchange in the fourth quarter of fiscal year 2024, while there were no module exchanges during the comparable prior year quarter.
Mike Bishop: Operating expenses for the fourth quarter of fiscal year 2024 decreased to $30 1 million from $34 9 million in the fourth quarter of fiscal year 2023, administrative and selling expenses decreased to $15 9 million during the fourth quarter of fiscal year 2024.
Mike Bishop: <unk> from $16 9 million during the fourth quarter of fiscal year 2023, the decrease in administrative and selling expenses is primarily a result of the fact that the comparable prior year quarter included closing costs related to a tax equity financing, which was partially offset by higher compensation.
Mike Bishop: In the fourth quarter of fiscal year 2024.
Mike Bishop: Research and development expenses decreased to $11 6 million during the fourth quarter compared to $18 million during the fourth quarter of fiscal year 2023. This decrease reflects the previously announced decrease in spending on the Companys ongoing commercial development efforts related to our solid oxide platform.
Mike Bishop: And carbon separation and carbon recovery solutions compared to the prior year period as well as the allocation of resources to funded advanced technology projects.
Mike Bishop: On the bottom right of slide you will see that we finished the fiscal year with backlog of approximately 1.1 dollars 6 billion an increase of approximately 13, 1% compared to backlog as of October 31 2023.
Mike Bishop: The increase in backlog is primarily a result of the long term service agreement with GE, which was allocated between product and service backlog.
Mike Bishop: Backlog will be recognized as revenue as the company completes commissioning of its replacement modules commissioning of the first 614 megawatt replacement modules was completed in the fourth quarter of fiscal year 2024, and additional 31 four megawatt replacement modules are expected to.
Mike Bishop: To be commissioned throughout the course of calendar year 2025, and the remaining 614 megawatt replacement modules are expected to be commissioned in the first half of calendar year 2026 service backlog will be recognized as the company performs service at the GTA.
Mike Bishop: <unk> over the term of the agreement.
Mike Bishop: On slide 14 is an update of our liquidity position.
Mike Bishop: As of October 31, 2024, we had total cash cash equivalents and short term investments of $318 million. This includes $148 million of unrestricted cash and cash equivalents $109 1 million of short term investments.
Mike Bishop: <unk> and $60 8 million of restricted cash and cash equivalents. The short term investments represent the amortized cost of U S. Treasury Securities Outstanding as of October 31, 2024.
Mike Bishop: We were pleased to close on a financing transaction in the fourth quarter with the export import bank of the United States in which we received approximately $9 2 million of net proceeds. In addition, we raised approximately $20 million sales of common stock during the fourth quarter of fiscal <unk>.
Mike Bishop: 2024.
Mike Bishop: In the fourth quarter, we announced a global restructuring plan, which we expect will reduce operating costs approximately 15% in fiscal year 2025, compared with fiscal year 2020 for the restructuring plan included a reduction of workforce of approximately 13% or 75 employees.
In November 2024, and includes reduced spending for product development overhead and other costs. This followed a 4% or 17 employee reduction in September 2024.
Mike Bishop: In addition to reducing costs in fiscal year 2025, we believe we have good visibility into contracted revenue drivers for fiscal year 2025, including with respect to revenues expected to be recognized upon delivery of replacement modules to GE as a result, we.
Mike Bishop: To see a material improvement the company's revenues for fiscal year 2025 compared to fiscal year 2024.
Mike Bishop: Next please turn to slide 15, where we are providing greater detail on investments we plan to make during fiscal year 2025, which are intended to support our growth plans over the medium and longer term capital expenditures are expected to be 20% to $25 million, which <unk>.
Mike Bishop: <unk> the continuation of solid oxide capacity expansion work in our Calgary, Canada facility.
Mike Bishop: We are also increasing the carbon and capabilities in our touring to facility, including expected completion of the carbon recovery demonstration plant.
Mike Bishop: Internally funded research and development expenses for fiscal year 2025 are projected to range from $40 million to $45 million, which is lower than our R&D expenditures of $55 4 million in fiscal year 2024.
Mike Bishop: Priorities for R&D are to improve fuel cell stack design in light enhance our solid oxide module design and advanced commercial demonstrations of carbon capture and carbon recovery platforms.
In closing I am pleased with the steps that we've taken to prioritize our commercially available technologies to.
Mike Bishop: Reflect the changing market opportunities with an updated strategic plan. We believe these steps will help to ensure that we have the balance sheet strength required to support our growth objectives, and we will continue to take a highly disciplined approach to managing cash and allocating capital from a financial perspective.
Mike Bishop: We believe we remain well positioned to execute on our near medium and long term powerhouse business strategy.
Speaker Change: With that I'd like to turn it back to the operator to begin our question and answer session.
Speaker Change: Operator.
Speaker Change: Thank you.
Speaker Change: And we will now begin the question and answer session.
If you have dialed in we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question Press Star one a second time.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Would you be able to take as many questions as possible. We do ask that you. Please limit yourself to one question and one follow up.
Speaker Change: Again, it is star one if you would like to join the queue.
Speaker Change: And your first question comes from the line of George <unk> with Canaccord Genuity. Your line is open.
Speaker Change: Okay.
Speaker Change: Hi, Good morning, everyone. Thank you for taking my questions.
George how are you good morning.
Speaker Change: Doing great how are you.
Speaker Change: Doing great. Thank you.
Speaker Change: I'd like to ask about the recent restructuring.
Speaker Change: And the growth expected in fiscal 'twenty five can you just sort of talk about what the new operating model of the firm is breakeven levels growth profiles et cetera, I know that the 25% growth is being impacted by some module shipments but.
Speaker Change: Yes, just generally what you think about the growth trajectory of the firm and what the restructuring does for your profitability profile. Thank you.
George: George Thank you for the question.
So as we've.
George: Move forward on the restructuring part of that was.
George: Focused on shortening the horizon to us getting to profitability secondly.
George: Secondly, it's an acknowledgment of narrowing our focus from a product standpoint, and where we see the market place going in terms of adoption of clean energy technologies, and so by going through the restructuring we've been able to more.
George: One <unk>.
George: Reduce our cost to about 15% is what we expect for 2025, we have also realigned resources against the opportunities that we see as short and medium term opportunities given the current market dynamics, and we think that thats going to help us.
George: Stronger growth as we've talked about we expect to see growth in 2025. In addition to that we think thats going to allow us to better position and leverage are our sales pipeline to turn those that pipeline into closed transactions and thats going to help us get to.
George: A positive.
George: EBITDA sooner than what we had originally thought we would do given the investments, we're making to really take advantage of the clean energy transition that we had originally seen or I think even the market had seen that we now know is going to move at a different pace.
Speaker Change: Can you help us quantify those level just in terms of what the revenue profile look I think to get to EBITDA.
Speaker Change: And maybe even a free cash flow breakeven. Thank you.
Mike Bishop: So good morning, George This is Mike.
Mike Bishop: Just to add on to what Jason said beyond what we're doing on the operating cost side and you mentioned, reducing operating costs by 15% also looking across the business we have.
Mike Bishop: <unk> targets in our material for Capex spending that's going to be in the 2000 $20 million to $25 million range down from last year. So looking to take costs out of the business specific to your question around revenue.
Mike Bishop: We do have good visibility to revenue going into 2025, we said, we expect a material increase in revenue really being driven by the <unk>.
Mike Bishop: By the GE module deliveries, you've seen that come through in our fourth fiscal quarter and you'll certainly see that come through next year. So all of those things together help us bring down our EBITDA use we saw a good step forward this quarter compared to last year about $5 million.
Mike Bishop: Reduction in EBIT use as far as when we will get there from a breakeven perspective, we have not put out an exact date, yet but the goal of the company is to continue to drive cost reduction across the business, whether that be product cost operating cost or managing our capex spending very tightly.
Thank you.
Speaker Change: Yes. Thank you.
Speaker Change: And your next question comes from the line of Sarnia Jane with UBS. Your line is open.
Speaker Change: Hey, good morning, guys.
Speaker Change: Can you provide more detail on the opportunities for <unk> is how you guys are seeing.
Speaker Change: Play out.
Good morning, and thank you for the question.
Speaker Change: Maybe I'll start with 45.
Speaker Change: <unk>.
Speaker Change: We are hearing rumblings that 45.
Speaker Change: There will be something that comes out before Christmas, but we certainly don't know that for sure that's kind of the word on the street if you will.
And we anticipate that there'll be some modifications to the original.
Speaker Change: Released by the Treasury that had this notion of a three pillar strategy, we think that that will probably change.
Speaker Change: With respect to try Gen, then specifically and hydrogen there has certainly been a.
Speaker Change: Our move to the right we think in terms of adoption of <unk>.
Speaker Change: Clean or zero.
Speaker Change: Carbon hydrogen as as part of this uncertainty around things like <unk> 45.
Speaker Change: So we anticipate as the rules get clearer.
Speaker Change: That will.
Speaker Change: We opened the door for opportunity is around platforms like our Tri Gen platform.
Speaker Change: Which has the ability to produce low to zero carbon or carbon neutral hydrogen still by utilization of fuels and we continue to see strong commitment on the transportation side, both from heavy duty.
Speaker Change: Class eight vehicles as well as you know firm commitments from major automobile manufacturers like Toyota and Honda that are committed to.
Speaker Change: Hydrogen based transportation and we think those things will continue to create opportunities for that platform. In addition to.
Speaker Change: Platforms that generate hydrogen leveraging electrolysis.
Speaker Change: Got it thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And your next question comes from the line of Noel Parks with Tuohy Brothers. Your line is open.
Speaker Change: Hi, good morning.
Speaker Change: A couple.
Speaker Change: Sure.
We wanted to pick up our manufacturing capacity and your plans beyond I wonder from a timing standpoint.
Speaker Change: As you have discussions around power generation datacenter demand and so forth.
Speaker Change: Is there an inflection point you see.
Speaker Change: Maybe that you are particularly trying to guide the.
Speaker Change: Capacity growth toward.
Speaker Change: I was wondering if there is a bulge ahead sort of a bulge year ahead in terms of contracts deployment timeframes. So any thoughts there would be great.
Sure No. Good morning, this is Mike and thanks for the thanks for the question so.
Speaker Change: Really good good question, a really good opportunity for the company as we sit here today from a production and capacity perspective, we talked about last year, reducing the production volumes that we had in our factory given given the timing of certain orders and now that we have the GE order in backlog, where we're able to.
To increase our production rate from where we were.
Speaker Change: At the end of 2024, as we go into 2025% to fulfill that order and potentially other other orders down the road.
Speaker Change: You alluded to so from and obviously, increasing the production rate lowers lowers costs gives us more ability not only to lower costs in the factory, but across the supply chain from an overall. So so that's kind of setting the stage were operating we were operating at 25 megawatt looking to increase a bit from there.
Speaker Change: When you look at capacity of our factory in Torrington today, we have machinery that can do 100 megawatts, we have a footprint and we have certain certain processes in torrington. They can do up to 200 megawatts. So that's an opportunity.
Speaker Change: <unk> for the company as these.
Speaker Change: Potential orders get larger and of course, we're fulfilling the GTE project right now, which is a 60 megawatt project.
Speaker Change: We look at the data center opportunity that you alluded to as <unk>.
Speaker Change: 20 megawatt and bite sizes that we can be that we can deploy assets into so our factory is here, it's ready and is as those opportunities become backlog, we will be able to deliver quickly on those and again be able to bring down costs as we're doing that.
Speaker Change: And be competitive with our offerings.
Okay.
Speaker Change: Great and just you mentioned.
Speaker Change: Being able to deploy sort of bite sized manner.
Speaker Change: Do you.
Just in general terms.
Speaker Change: Sort of see that as.
Speaker Change: A set of customers or.
A steady set of customers.
That are looking to build out in that manner or I'm thinking as opposed to.
Speaker Change: Hyperscale are looking for.
Speaker Change: A large a large project.
Speaker Change: That there.
Speaker Change: Maybe to get to them all at once so just curious what you think the deployment pace might look like.
Speaker Change: Yes, no. This is Jason thanks for that question.
Speaker Change: We see it as an opportunity across both segments. As you described it I mean, we certainly see in the conversations that we're having if you take hyperscale or as an example.
Speaker Change: The way in which they build out those data centers, what we're seeing is block sizes.
Speaker Change: Anywhere between 16 to 30 megawatt block sizes too, even though a particular data center may be planning to get to over a gigawatt.
Speaker Change: Size, they're not they're not starting there, but what you need to be able to do is demonstrate your ability to be able to scale on the same delivery timeline that that data center provider has and we feel very comfortable in our ability to do that if you refer back to the slide.
Speaker Change: The page in our deck, which is slide nine I think we demonstrate where we've got.
Speaker Change: Large platforms deployed today in the 20 megawatt block size and larger we've got those today deployed and configurations that are commensurate with what Youre seeing data center customers ask for including micro grid configurations in order to deliver the level of reliability.
Speaker Change: And resiliency that you need in a data center operation So rather those orders come with a single customer in our block size or in multiple customers in those block sizes, we feel very confident in our ability to deliver.
Speaker Change: We feel even more confident in the fact that we can show customers.
Speaker Change: Demonstrated examples of us doing exactly what they are asking for in these data center applications and we've been doing it for a number of years.
Speaker Change: We feel really strong and good about our use cases that we can show customers.
Speaker Change: Yeah.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: And as a reminder, it is star one if you would like to ask a question.
Speaker Change: And your next question comes from the line of Vishal.
Speaker Change: With Jefferies. Your line is open.
Speaker Change: Hey, guys. Thanks for taking my question.
Speaker Change: First one just wanted to talk a little bit about the gross margin profile I know you touched on margins a little bit more in earlier question, but how do we.
Speaker Change: And going into 'twenty 25, how do we think about <unk>.
Speaker Change: Margins for product.
Speaker Change: And you know.
Speaker Change: The other segments.
Speaker Change: Sure Vishal. This is Mike I'll take that one so when you look at our product margin for this quarter negative product margin I would say that the GE did the GTE deliveries are profitable but.
Speaker Change: And given some of the comments I made earlier given the current production volume of the factory, we're still dealing with overcapacity costs manufacturing variances. So that's what's driving the overall corporate product margin negative give.
Speaker Change: Given our restructuring and increasing volumes, we expect that to improve over time and as far as generation margins.
Speaker Change: When you look at the comparison there are couple of things.
Speaker Change: One we had a.
Speaker Change: A derivative gain coming through last year. This year Theres a derivative loss when we look at generation, we really look at that and add it on an EBITDA basis. So essentially this quarter when you Peel out depreciation when you Peel out the derivative impact to EBITDA margin is around 22% range and obviously.
Speaker Change: We will be looking to drive that higher as we continue to optimize our fleet and work to take costs out of the business.
Speaker Change: No. That's helpful. And then my second question was just.
Speaker Change: On the capital raise of 21 million was the rationale behind that and then how do you think about.
Speaker Change: Into 2025 do you think that that's something you will tap into more or do you feel comfortable with the liquidity.
Speaker Change: So good question the company feels comfortable with our liquidity as we sit here today, we've really had had a several pronged approach in raising capital one is to really make sure that we're smart about monetizing the assets that we have on balance sheet as we announced.
Speaker Change: At the end of the fiscal year, we closed a financing with the U S export import bank around GJ. So that's that's providing us working capital financing for that for that project. That's at a fixed interest rate of about five 8%.
And we've also as you've seen on our balance sheet also done project financings around operating assets that that the company owns whether it be tax equity and monetize monetizing the tax benefits or back leverage debt at a fixed interest rate. In addition to that the company has raised capital in the public markets through an aftermarket.
Speaker Change: <unk> program that has been to augment the balance sheet and keep us in a strong cash position and I would say, we continue to monitor our liquidity on a quarter by quarter basis, and we will and we will do prudent financing when it makes sense for the company.
Speaker Change: Got it thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: And ladies and gentlemen that concludes our question and answer session. I will now turn the conference back over to Mr. Jason <unk> for closing remarks.
Thank you Abby. Thank you all for listening in today I Hope you come away from this call understanding the important steps, we have taken as a company to position ourselves for the future all while remaining optimistic about the opportunities in front of us I wish everyone, a wonderful holiday season, and our prosper.
Speaker Change: This new year. Thank you again for joining.
Speaker Change: And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.