Company Reports Positive Trends from Revenue
Diversity, New Distributor Support System and Newly Expanded
Factory Rental Program
Capstone Turbine Corporation (www.capstoneturbine.com) (Nasdaq:
CPST), the world’s leading clean technology manufacturer of
microturbine energy systems, reports financial results for its
fiscal third quarter ended December 31, 2018.
Financial Highlights of Fiscal 2019
Third Quarter and Subsequent Event:
- Capstone continued to achieve increased diversity with new
orders secured from 20 distributors, representing 14
countries
- Book-to-bill ratio improves to 1.3:1, compared to 0.7:1 in the
year-ago third quarter
- Capstone received $1.4 million for calendar year 2018, or
99.5%, of the expected funds from its new Distributor Support
System, or DSS program, and announces the potential for
approximately $2.4 million in funds from this innovative program
for 2019
- Capstone deploys 3.6 megawatts of microturbines under the newly
expanded factory rental program into the Permian Basin for one of
the world’s largest oil and gas producers
- Subsequent to the end of the quarter, Capstone entered into a
new $30.0 million three-year term note with Goldman Sachs to
replace the company’s existing $15.0 million asset-based revolving
credit facility and provide funding for growth initiatives
Business Update for Fiscal 2019 Third
Quarter
During the quarter, Capstone further diversified its revenue mix
and positioned its distribution channel for future revenue growth
with a strategic focus on growing new business opportunities in
Latin America, the Caribbean, Africa, and the Middle East.
Simultaneously, the company is intensifying its efforts to reduce
direct material costs, increase spare parts margins, expand
long-term service contract attachment rates and develop new sources
of recurring revenue, including a newly expanded factory long-term
rental program and its DSS program.
The DSS program, which was initiated in January 2018, is
expected to drive product revenue, accelerate distributor training
and development, and drive a higher volume of customer lead
generation and global brand awareness. These efforts coupled with
the recent elimination of the Carrier perpetual royalty; the new
liquidity provided by the Goldman Sachs $30.0 million term note;
the pending Chatsworth facility cost elimination; ongoing
collection of the previously reserved Russian receivable; tight
cost controls; lean manufacturing practices and improved overhead
absorption should yield stronger operating leverage and improve
cash flow in the new fiscal year.
Despite headwinds in the quarter that included macroeconomic
uncertainty, volatile commodity prices, geopolitical events, and an
ongoing trade war with China, Capstone’s management team remained
focused on the parts of the business it can directly control to
facilitate improved results in the near future. Capstone continued
to be focused on its mission to both generate positive cash flows
and deliver a positive impact on the environment.
During the third quarter of fiscal 2019, Capstone shipped 10.3
megawatts across a diverse set of geographies and distributors with
an additional 3.6 megawatts shipped for use in its new, high
margin, recurring factory rental program. This totaled 13.9
megawatts of microturbines deployed in the quarter. The company
booked new gross orders of approximately $13.2 million for a
book-to-bill ratio of 1.3:1 in the third quarter. This compared
with $10.2 million of new gross product orders booked during the
year-ago third quarter for a book-to-bill ratio of 0.7:1.
During the third quarter management continued to make progress
on several of its four key, strategic, long-term objectives as
detailed below:
1. Improve Quarterly Working Capital, Cash Flow
and Balance Sheet
During the third quarter, the company generated cash of
approximately $2.2 million from changes in working capital and net
cash used in operating activities was $2,000, which was the lowest
net cash used in operating activities in the last three quarters.
This included approximately $0.7 million of revenue recognized in
the quarter from its DSS program. Additionally, Capstone collected
the scheduled payment of $400,000 from Turbine International which
was recorded as bad debt recovery.
Subsequent to the end of the third quarter, on February 4, 2019,
the company entered into a $30.0 million three-year term note with
Goldman Sachs to replace the company’s existing $15.0 million
revolving credit facility with Bridge Bank as part of its ongoing
goal to support quarterly working capital, cash flow and liquidity,
and to strengthen the balance sheet in support of the company’s
revenue growth initiatives.
2. Double-Digit Revenue Growth Through
Accelerating Product Sales
Product revenue for the quarter was $10.1 million. The company
builds to a fixed number of production slots for our microturbines
each quarter, and during the third quarter, Capstone allocated four
C1000 Signature Series systems production slots to its factory
rental program. This was the primary driver in the lower product
revenue as the rental units accounted for 3.6 megawatts valued at
approximately $4.0 million. Despite not reaching our long-term
revenue growth target in this quarter, management is encouraged by
the company’s book-to-bill ratio of 1.3:1 in the third quarter of
fiscal 2019 compared to 0.7:1 in each of the second quarter of
fiscal 2019 and third quarter of fiscal 2018.
3. Diversify the Company
into New Market Verticals and New GeographiesOne of the
most important principles of building and managing a successful
business over the long-run is diversification. This means ensuring
that Capstone spreads its sales and marketing efforts across
different geographies and market verticals to protect the company
from being overly dependent upon a small set of geographies or
market verticals. During the third quarter, Capstone continued to
see increased interest from all over the world as demonstrated by
the fact that orders were secured from 20 distributors,
representing 14 countries.
- Energy Efficiency Vertical – CHP/CCHP - The
company received energy efficiency orders from a global
pharmaceutical company in California; an optical polymer
manufacturer in Florida; a luxury resort in Jamaica; a global
contract manufacturing leader; a pet food manufacturer and a
plastic glove manufacturer in Mexico.
- Natural Resources Vertical – Oil & Gas -
The company received orders for microturbines to power a gas
gathering station that transports natural gas through the pipelines
in the Utica Shale region; an onshore oil and gas production using
associated or “flare” gas to provide electricity during onshore
production in Southern California; an expanding midstream company’s
natural gas operations in the Mid-Atlantic area of the United
States; a variety of offshore platforms located off the coast of
Malaysia and Brunei. Additionally, 3.6 megawatts of factory rental
units were deployed to one of the world’s largest oil and gas
producers in the Permian Basin.
- Renewable Energy Vertical - The company
secured an order to power a landfill in Northern France using
biogas as a fuel source. The units will be deployed with the
company’s pre-engineered, integrated, combined heat and power
(ICHP) configuration and equipped with a Capstone roof-mounted heat
exchanger to produce electricity and thermal energy for the
facility.
- Critical Power Supply Vertical - The company
secured an order to upgrade multiple Capstone microturbines to a
C200 microturbine for Benz Research & Development, a customer
seeking to improve their resiliency in a hurricane-prone region in
the United States.
- Microgrid Vertical - Notable orders during the
quarter included a microturbine in China as part of a local utility
microgrid project that also furthers the company’s presence in this
key region. Other orders included nine ICHP microturbine systems
with Capstone supplied onboard gas compression and for a
manufacturer at a facility in Mexico.
4. Increase Service/OpEx Absorption Percentage
Driving Toward 100% Absorption
Gross margin for the third quarter of fiscal 2019 improved
sequentially as a direct result of the improvements in the
aftermarket service business which includes the Factory Protection
Plan (FPP) long-term service contracts, DSS program and the newly
expanded factory rental program. The high margin recurring revenue
growth in Capstone’s aftermarket service business is key to
reaching the company’s long-term profitability goals. Growth in
these areas are the underlying drivers to Capstone’s path to
achieving 100% absorption.
During the quarter, Capstone’s distribution partner, E-Finity
Distributed Generation signed three separate long-term FPP
multi-year service contracts representing 3.1 megawatts. These new
contracts are for up to 15 years of scheduled and unscheduled
maintenance coverage and will generate predictable long-term
recurring revenue with high margins.
Financial Results for Fiscal 2019 Third
Quarter
Total revenue for the third quarter of fiscal 2019 was $18.0
million, compared with $22.8 million in the year-ago third
quarter.
Gross margin was $2.2 million, or 12% of revenue, compared with
$5.0 million, or 22% of revenue, in the year-ago third quarter. The
decrease in the gross margin was primarily the result of lower
product revenue, an increase in warranty expense and higher
unscheduled maintenance activities in the third quarter of fiscal
2019 compared to the same period last year.
Operating expenses for the quarter were $5.5 million compared
with $5.0 million in the year-ago third quarter.
Net loss was $3.5 million compared with a net loss of $0.3
million in last year’s third quarter.
Loss per share was $0.05 compared to last year’s third-quarter
loss per share of $0.01. Weighted average shares outstanding at the
end of the third quarter of fiscal 2019 were 69.5 million compared
with 46.8 million in the year-ago quarter.
Adjusted EBITDA loss was $2.3 million, compared to Adjusted
EBITDA of $0.4 million a year ago third quarter. Adjusted EBITDA
for the third quarter of fiscal 2019 compared to the same period
last year was primarily impacted by the decrease in gross margin
and less bad debt recovery. Adjusted EBITDA loss per share of $0.03
compared to last year’s third quarter Adjusted EBITDA per share of
$0.01.
Cash, cash equivalents and restricted cash were $16.7 million as
of December 31, 2018, compared to cash, cash equivalents and
restricted cash of $19.4 million as of March 31, 2018..
Conference Call and WebcastCapstone will host a
live webcast February 7, 2019, at 1:45 PM Pacific Time (4:45 PM
Eastern Time) to provide the results of the third quarter fiscal
2019 ended December 31, 2018. Capstone will discuss its financial
results and will provide an update on its business activities. At
the end of the conference call, Capstone will host a
question-and-answer session to provide an opportunity for financial
analysts to ask questions. Investors and interested individuals are
invited to listen to the webcast by logging on to Capstone’s
investor relation’s webpage at www.capstoneturbine.com. A replay of
the webcast will be available on the website for 30 days.
About Capstone Turbine CorporationCapstone
Turbine Corporation (www.capstoneturbine.com) (Nasdaq: CPST) is the
world's leading producer of low-emission microturbine systems and
was the first to market commercially viable microturbine energy
products. Capstone has shipped over 9,000 Capstone
Microturbine systems to customers worldwide. These award-winning
systems have logged millions of documented runtime operating
hours. Capstone is a member of the U.S. Environmental
Protection Agency's Combined Heat and Power Partnership, which
is committed to improving the efficiency of the nation's energy
infrastructure and reducing emissions of pollutants and greenhouse
gases. A DQS-Certified ISO 9001:2015 and ISO 14001:2015 certified
company, Capstone is headquartered in the Los Angeles area
with sales and/or service centers in the United States, Latin
America, Europe, Middle East and Asia.
For more information about the company, please visit
www.capstoneturbine.com. Follow Capstone Turbine on Twitter,
LinkedIn and YouTube.
Safe Harbor StatementThis press release
contains “forward-looking statements,” as that term is used in the
federal securities laws. Forward-looking statements may be
identified by words such as “expects,” “believes,” “anticipates,”
“objective,” “intend,” “targeted,” “plan” and similar phrases.
These forward-looking statements are subject to numerous
assumptions, risks and uncertainties described in Capstone’s
filings with the Securities and Exchange Commission that may cause
Capstone’s actual results to be materially different from any
future results expressed or implied in such statements. Capstone
cautions readers not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. Capstone undertakes no obligation, and specifically
disclaims any obligation, to release any revisions to any
forward-looking statements to reflect events or circumstances after
the date of this release or to reflect the occurrence of
unanticipated events.
Financial Tables Follow
CAPSTONE TURBINE CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share
amounts)(Unaudited)
|
|
|
|
|
|
|
|
|
|
December 31, |
|
March 31, |
|
|
|
2018 |
|
2018 |
|
Assets |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
10,681 |
|
|
$ |
14,408 |
|
|
Restricted cash |
|
|
6,000 |
|
|
|
5,000 |
|
|
Accounts
receivable, net of allowances of $5,356 at December 31, 2018
and$5,744 at March 31, 2018 |
|
|
13,225 |
|
|
|
15,968 |
|
|
Inventories, net |
|
|
18,375 |
|
|
|
15,633 |
|
|
Prepaid
expenses and other current assets |
|
|
3,905 |
|
|
|
2,803 |
|
|
Total
current assets |
|
|
52,186 |
|
|
|
53,812 |
|
|
Property, plant,
equipment and rental assets, net |
|
|
5,150 |
|
|
|
2,859 |
|
|
Non-current portion of
inventories |
|
|
1,083 |
|
|
|
1,041 |
|
|
Intangible assets,
net |
|
|
243 |
|
|
|
411 |
|
|
Other assets |
|
|
3,077 |
|
|
|
250 |
|
|
Total
assets |
|
$ |
61,739 |
|
|
$ |
58,373 |
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
15,686 |
|
|
$ |
13,503 |
|
|
Accrued
salaries and wages |
|
|
1,357 |
|
|
|
1,588 |
|
|
Accrued
warranty reserve |
|
|
2,569 |
|
|
|
1,682 |
|
|
Deferred
revenue |
|
|
4,749 |
|
|
|
6,596 |
|
|
Revolving
credit facility |
|
|
10,736 |
|
|
|
8,527 |
|
|
Current
portion of notes payable and capital lease obligations |
|
|
190 |
|
|
|
192 |
|
|
Total
current liabilities |
|
|
35,287 |
|
|
|
32,088 |
|
|
Deferred revenue -
non-current |
|
|
1,163 |
|
|
|
— |
|
|
Long-term portion of
notes payable and capital lease obligations |
|
|
246 |
|
|
|
130 |
|
|
Other long-term
liabilities |
|
|
369 |
|
|
|
396 |
|
|
Total
liabilities |
|
|
37,065 |
|
|
|
32,614 |
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’
Equity: |
|
|
|
|
|
|
|
Preferred
stock, $.001 par value; 10,000,000 shares authorized; none
issued |
|
|
— |
|
|
|
— |
|
|
Common
stock, $.001 par value; 515,000,000 shares authorized,
71,803,478shares issued and 71,593,269 shares outstanding at
December 31, 2018;57,062,598 shares issued and 56,916,646 shares
outstanding at March 31, 2018 |
|
|
72 |
|
|
|
57 |
|
|
Additional paid-in capital |
|
|
901,261 |
|
|
|
889,585 |
|
|
Accumulated deficit |
|
|
(874,928 |
) |
|
|
(862,225 |
) |
|
Treasury
stock, at cost; 210,209 shares at December 31, 2018 and 145,952
sharesat March 31, 2018 |
|
|
(1,731 |
) |
|
|
(1,658 |
) |
|
Total
stockholders’ equity |
|
|
24,674 |
|
|
|
25,759 |
|
|
Total
liabilities and stockholders' equity |
|
$ |
61,739 |
|
|
$ |
58,373 |
|
|
CAPSTONE TURBINE CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product,
accessories and parts |
|
$ |
13,310 |
|
|
$ |
18,876 |
|
|
$ |
49,022 |
|
|
$ |
50,373 |
|
|
Service |
|
|
4,720 |
|
|
|
3,885 |
|
|
|
12,371 |
|
|
|
11,403 |
|
|
Total revenue |
|
|
18,030 |
|
|
|
22,761 |
|
|
|
61,393 |
|
|
|
61,776 |
|
|
Cost of goods
sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product,
accessories and parts |
|
|
12,534 |
|
|
|
15,471 |
|
|
|
45,109 |
|
|
|
43,059 |
|
|
Service |
|
|
3,256 |
|
|
|
2,333 |
|
|
|
10,185 |
|
|
|
8,505 |
|
|
Total cost of goods
sold |
|
|
15,790 |
|
|
|
17,804 |
|
|
|
55,294 |
|
|
|
51,564 |
|
|
Gross margin |
|
|
2,240 |
|
|
|
4,957 |
|
|
|
6,099 |
|
|
|
10,212 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
|
891 |
|
|
|
957 |
|
|
|
2,713 |
|
|
|
3,244 |
|
|
Selling,
general and administrative |
|
|
4,574 |
|
|
|
4,057 |
|
|
|
15,535 |
|
|
|
13,815 |
|
|
Total
operating expenses |
|
|
5,465 |
|
|
|
5,014 |
|
|
|
18,248 |
|
|
|
17,059 |
|
|
Loss from
operations |
|
|
(3,225 |
) |
|
|
(57 |
) |
|
|
(12,149 |
) |
|
|
(6,847 |
) |
|
Other income
(expense) |
|
|
(23 |
) |
|
|
(12 |
) |
|
|
(44 |
) |
|
|
(8 |
) |
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
Interest expense |
|
|
(202 |
) |
|
|
(170 |
) |
|
|
(506 |
) |
|
|
(489 |
) |
|
Change in warrant
valuation |
|
|
— |
|
|
|
(84 |
) |
|
|
— |
|
|
|
(741 |
) |
|
Loss before provision
for income taxes |
|
|
(3,450 |
) |
|
|
(323 |
) |
|
|
(12,699 |
) |
|
|
(8,076 |
) |
|
Provision for income
taxes |
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
7 |
|
|
Net loss |
|
$ |
(3,450 |
) |
|
$ |
(323 |
) |
|
$ |
(12,704 |
) |
|
$ |
(8,083 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share—basic and diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.18 |
) |
|
Weighted average shares
used to calculate basic and diluted net loss per
common share |
|
|
69,542 |
|
|
|
46,760 |
|
|
|
65,469 |
|
|
|
45,465 |
|
|
CAPSTONE TURBINE CORPORATION AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL
MEASURE(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
Net loss, as
reported |
|
$ |
(3,450 |
) |
|
$ |
(323 |
) |
|
$ |
(12,704 |
) |
|
$ |
(8,083 |
) |
|
Interest
expense |
|
|
202 |
|
|
|
170 |
|
|
|
506 |
|
|
|
489 |
|
|
Provision
for income taxes |
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
7 |
|
|
Depreciation and amortization |
|
|
388 |
|
|
|
272 |
|
|
|
957 |
|
|
|
854 |
|
|
EBITDA |
|
$ |
(2,860 |
) |
|
$ |
119 |
|
|
$ |
(11,236 |
) |
|
$ |
(6,733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
292 |
|
|
|
102 |
|
|
|
743 |
|
|
|
409 |
|
|
Restructuring charges |
|
|
300 |
|
|
|
58 |
|
|
|
1,072 |
|
|
|
277 |
|
|
Change in
warrant valuation |
|
|
— |
|
|
|
84 |
|
|
|
— |
|
|
|
741 |
|
|
Adjusted EBITDA |
|
$ |
(2,268 |
) |
|
$ |
363 |
|
|
$ |
(9,421 |
) |
|
$ |
(5,306 |
) |
|
To supplement the company’s unaudited financial data presented
on a generally accepted accounting principles (GAAP) basis,
management has used EBITDA and Adjusted EBITDA, non-GAAP
measures. These non-GAAP measures are among the indicators
management uses as a basis for evaluating the company’s financial
performance as well as for forecasting future
periods. Management establishes performance targets, annual
budgets and makes operating decisions based in part upon these
metrics. Accordingly, disclosure of these non-GAAP measures
provides investors with the same information that management uses
to understand the company’s economic performance year-over-year.
The presentation of this additional information is not meant to be
considered in isolation or as a substitute for net income or other
measures prepared in accordance with GAAP.
EBITDA is defined as net income before interest, provision for
income taxes, and depreciation and amortization expense. Adjusted
EBITDA is defined as EBITDA before stock-based compensation
expense, restructuring charges and the change in warrant valuation.
Restructuring charges include facility consolidation costs and
costs related to the company’s cost reduction
initiatives.
EBITDA and Adjusted EBITDA are not measures of the company’s
liquidity or financial performance under GAAP and should not be
considered as an alternative to net income or any other performance
measure derived in accordance with GAAP, or as an alternative to
cash flows from operating activities as a measure of its
liquidity.
While management believes that the non-GAAP financial measures
provide useful supplemental information to investors, there are
limitations associated with the use of these measures. The
measures are not prepared in accordance with GAAP and may not be
directly comparable to similarly titled measures of other companies
due to potential differences in the exact method of
calculation. Management compensates for these limitations by
relying primarily on the company’s GAAP results and by using EBITDA
and Adjusted EBITDA only supplementally and by reviewing the
reconciliations of the non-GAAP financial measures to their most
comparable GAAP financial measures.
Non-GAAP financial measures are not in accordance with, or an
alternative for, generally accepted accounting principles in the
United States. The company’s non-GAAP financial measures are
not meant to be considered in isolation or as a substitute for
comparable GAAP financial measures and should be read only in
conjunction with the company’s consolidated financial statements
prepared in accordance with GAAP.
CONTACT:Capstone Turbine CorporationInvestor and investment
media inquiries:818-407-3628ir@capstoneturbine.com
Integra Investor RelationsShawn M.
Severson415-226-7747cpst@integra-ir.com
Capstone Turbine (NASDAQ:CPST)
Historical Stock Chart
From Jun 2024 to Jul 2024
Capstone Turbine (NASDAQ:CPST)
Historical Stock Chart
From Jul 2023 to Jul 2024