Image source: Getty Images.

FuelCell Energy (FCEL -3.39%) is set to release its third-quarter earnings on Sept. 7. Are you finding yourself interested but equally worried about drowning in a flood of facts and figures? It's not uncommon during earnings season. Let's prepare by keying in on three things we can expect management to address in its report.

Any bids?

Unlike its fuel-cell peer, Plug Power, which concentrates on material handling equipment applications, FuelCell Energy primarily focuses on utility-scale applications. To that end, the company has partnered with NRG Energy (NRG -0.64%), one of the largest independent power producers in the United States. With a 5% stake in FuelCell Energy's stock, NRG has also provided FuelCell Energy with a $40 million project finance facility. 

In June, management reported that it had submitted bids for more than 125 MW of fuel-cell projects through the first half of 2016, and it expected to submit even more bids throughout the summer. One project that FuelCell Energy believes it is well positioned to win is the Beacon Falls Energy Park -- a 63 MW project that management estimates could be worth more than $500 million in revenue between equipment and service. 

Management noted that the winner of the Beacon Falls project would be notified in late summer or early fall, so the company may report either its win or loss of the project. And even if the winner is still unknown, management will surely reiterate its expectation of winning the award. Similarly, management will likely comment on the company's backlog. In the second quarter, it reported that the backlog had increased for the fourth consecutive quarter, so it will be worth noting if that trend extended into the third quarter. 

EPC as easy as ABC?

Another topic which is likely to appear in the earnings report is how the distancing from POSCO Energy, a subsidiary of POSCO (PKX 0.21%), is affecting the company. Accounting for 67% of revenue in fiscal 2015, POSCO has been FuelCell Energy's largest and most important customer for many, many years. Although the relationship is coming to an end of sorts, management recognizes that it's for the best.

FuelCell Energy's partnership with POSCO was a low-margin business, which management expects to replace with the higher-margin business of engineering, procurement, and construction (EPC) orders from North America and Europe. 

With its current order of kits due to POSCO finished by the end of 2016 and the expectation of higher-margin EPC orders, management believes that it is a bit closer to achieving breakeven on an EBITDA basis -- something which the company has never achieved. Reflecting this optimism, management provided revised guidance during its Q2 earnings presentation, improving its target for megawatts of complete plants to 50MW to 60MW, down from 70MW to 80MW. 

This 14.9 MW fuel cell park can power about 15,000 homes. Image Source: FuelCell Energy corporate website

It's likely that management will comment on its business with POSCO and how the transition away from it is progressing -- perhaps even noting if it has achieved any success in supplanting this business with the EPC orders from the U.S. and Europe that it is anticipating. 

Capturing a new market

Although FuelCell Energy has experienced numerous successes in its history, one area in which it is facing significant hurdles is growing its top line. According to Morningstar, the company reported revenue of $163 million in fiscal 2015 -- a 13.7% decline from the $188 million it reported in fiscal 2013. But there's one deal looming in the wings that could easily change that.

In May, management announced a partnership with ExxonMobil (XOM -0.88%) in which the two companies would explore the development of fuel-cell-driven carbon capture systems. According to Chip Bottone, FuelCell Energy's president and CEO, the opportunity that carbon capture systems afford the company is tremendous. On the company's Q2 conference call, he noted: "ExxonMobil is measuring the size of this global market in gigawatts, bearing in mind that a single gigawatt is equal to 1,000 MW. One thousand MW of projects will translate into multibillion dollars of revenue for FuelCell Energy."

There's a long way to go before the company begins to recognize revenue in the billions. The first step, which the company expected to complete in the third quarter, is to identify the location of its megawatt-scale pilot plant project. Although management hasn't announced the location yet, this may come during the earnings report. Even if the site and partner haven't been selected, management will surely comment on any progress made.

The takeaway

FuelCell Energy is in the midst of a significant transition as it moves away from POSCO Energy and toward the higher-margin EPC projects in North America and Europe. Although the company is forecasting lower break-even targets for both EBITDA and net income, history suggests that the company will fail to achieve them, further proving that success in a nascent industry -- such as fuel cells -- is far from definite.

During the earnings report, there may be mention of some wins here and there, but I'd be surprised if there's anything monumental. Winning the Beacon Falls project, for example, would certainly help with the company's lagging revenue, but whether the company can parlay that into actual profits remains to be seen.