FuelCell Energy (NASDAQ:FCEL) has just reported a much anticipated earnings report. For its fourth quarter, we were looking for $45 million in total revenues and a loss of $0.19 per share. We were very pleasantly surprised on both ends here.

What do we meant? Well, total revenues for the fourth quarter  were $47.9 million, compared to $24.5 million for the fourth quarter of 2016. That is a massive improvement, and although we expected a sizable gain, revenues beat our estimates $by 2.9 million. Product sales totaled $39.9 million compared to $8.4 million for the fourth quarter of 2016. That is a huge increase but it is mostly a result of the 20 megawatt order to a South Korean construction company for a utility project.

While the product sales made up the bulk of revenues there were a few other sources of sales as well. Service agreements and license revenue were a bit weaker than anticipated and totaled $2.7 million focompared to $10.7 million for the fourth quarter of 2016.  The difference between the periods reflects the timing of scheduled module replacements under service agreements.   Generation revenue totaled $1.8 million compared to $0.7 million for the fourth quarter of 2016.  Finally, advanced technologies contract revenue totaled $3.5 million for the fourth quarter of 2017 compared to $4.7 million for the fourth quarter of 2016.

Operating expenses totaled $11.3 million, flat from last year.  Thre was an increase in administrative and selling expenses year-over-year due to higher business development and professional fees. Overall, gross profit was $3.2 million and the gross margin 6.6 percent, compared to a gross loss of ($0.5) million incurred for the fourth quarter of 2016 and a gross margin of (1.9) percent for the fourth quarter of 2016.  Net loss was $10.8 million, or $0.17 per share, surpassing our estimates of a loss of $0.19 per share, on the back of flat operating expenses and better than anticipated revenues. This compares to a loss of $13.7 million, or $0.41 per share last year.

The company continues to invest in itself. Capital spending was $1.9 million in the fourth quarter of 2017 and depreciation expense was $2.0 million, including depreciation of property, plant and equipment as well as project assets.

“We are well-positioned for delivering projects in 2018 supported by expanding backlog and announced project awards that exceed $1.6 billion,” said Chip Bottone, President and Chief Executive Officer, FuelCell Energy.  “We are continuing to pursue large projects on a global basis.”

Backlog remains sizable. Services backlog totaled $182.3 million and includes future contracted revenue from routine maintenance and scheduled module exchanges for power plants under service agreements. Generation backlog totaled $296.3 million and represents future contracted energy sales under contracted power purchase agreements between the company and the end-user of the power. Product sales backlog totaled $31.3 million mostly due to the 20 megawatt Korean utility order. FInally, Advanced technologies contracts backlog totaled $44.3 million.

Looking ahead, we continue to monitor cash burn. That said, we remain bullish on the company.

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