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FuelCell Energy's CEO Discusses Q1 2012 Results - Earnings Call Transcript

As these new relationships demonstrate, our flexible proven business model is being replicated successfully on a global scale. We are executing on our strategic plan to drive growth through global expansion and penetration of key markets.

Our margins continue to expand during the quarter, and we achieved our third consecutive quarterly gross profit. We have lowered year-over-year operating costs and refined our operating profile. We recently executed new service agreements including another with the California Utility, contributing to the growth of our services business. These results are consistent with our growth plans as we continue moving towards company profitability.

I will discuss our strategy and results in more detail after Mike Bishop, our Chief Financial Officer, reviews our financial results for the quarter. Mike?

Michael S. Bishop

Thank you, Chip. Good morning, and thank you for joining our call today. Please turn to Slide 5 titled Financial Highlights. FuelCell Energy reported total revenues for the first quarter of 2012 of $31.3 million compared to $28.1 million in the same period last year. Product sales and revenues for the first quarter increased to $29.6 million compared to $25.8 million reported in the prior year.

Research and development contract revenue was $1.7 million for the first quarter of 2012 compared to $2.3 million. We generated gross profit from product sales and research and development contracts in the first quarter of $2.1 million. This is our third consecutive quarterly gross profit resulting from increased production volume and lower product costs.

Gross profit for product sales and revenues improved by $4.2 million compared to the first quarter of 2011. The product gross margin was 6.6% for the first quarter of 2012 compared to a negative 8.9% in the prior-year period. Improvements in margins are primarily attributable to increased production volume, lower product costs achieved from manufacturing and supply chain efficiencies and improved service margins.

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