Cash Usage Decreased 56% on a 35% Increase in
Revenue from the Prior Quarter
In an effort to increase investor transparency, Capstone Turbine
Corporation (www.capstoneturbine.com) (Nasdaq:CPST), the world's
leading clean technology manufacturer of microturbine energy
systems, announced its preliminary third quarter financial results
indicating that cash usage decreased 56% on a 35% increase in
revenue from the prior quarter.
In addition, the Company stated that net product orders
increased and inventory levels decreased relative to the prior
quarter and that the Company set a new record for Factory
Protection Plan (FPP) service contract backlog. The Company also
reported that the gross margin was negatively impacted during the
quarter as the Company recorded a one-time non-cash warranty
reserve based on its decision in the third quarter to retrofit
proactively select fielded non-Signature Series C200 microturbines
in order to improve performance, reliability and customer
satisfaction. The proactive retrofit has the potential to decrease
future warranty and FPP expense significantly.
Darren Jamison, President and Chief Executive Officer of
Capstone Turbine, said, “Overall, I am very happy with our
preliminary third quarter results as business improved in almost
every focus area. I am particularly happy with our 56% lower cash
burn on 35% higher revenue as cash and revenue are my primary focus
in today’s market conditions.”
Cash usage, excluding net proceeds from equity issuances,
decreased 56% in the third quarter compared to the prior quarter.
Cash and cash equivalents increased $3.3 million to $19.4 million
as of December 31, 2016, compared to cash and cash equivalents of
$16.1 million at the end of the prior quarter. Each of these
balances includes $5 million of restricted cash related to our
Wells Fargo credit facility and the net proceeds from equity
issuances.
“We continue our focus on decreasing our cash burn by looking at
areas where we can reduce expenses, increase inventory turns and
improve our cash cycle. We have made tremendous strides in this
area as business expenses are down dramatically over last year, but
we must continue to lean out our business operations in order to
achieve the lowest EBITDA breakeven point possible without
compromising customer satisfaction,” said Mr. Jamison.
The Company reported total revenue of approximately $20 million
for the third quarter of fiscal 2017. This represents a 35%
improvement compared with total revenue of $15.0 million for the
second quarter of fiscal 2017. Inventories dropped an estimated
$2.5 million quarter over quarter as the Company reduced on-hand
finished goods inventory and increased total inventory turns.
The Company booked net product orders of approximately $11
million during the third quarter, for a 0.9:1 book-to-bill ratio,
compared with $8.9 million of net product orders booked during the
prior quarter for a 1.1:1 book-to-bill ratio.
“We remain focused on diversifying our customer base and
geographic presence while increasing our revenue from the
CHP/energy efficiency markets as our oil and gas business continues
to rebound gradually,” added Mr. Jamison.
The Company reported that the FPP service contract backlog
continued to grow during the quarter and achieved record levels of
approximately $77 million, while service revenue for the quarter
was approximately $4 million with an estimated gross margin of
35%.
“While the size of the installed microturbine fleet expands
worldwide, we continue to focus on growing our FPP service contract
business because this FPP growth trajectory is one of the keys to
achieving profitability and reducing our cash usage with its high
margin recurring revenue. Capstone’s FPP service contract backlog
has grown approximately 19% over the last 12 months despite lower
product sales as our energy efficiency customers are entering into
service agreements at a higher rate than our oil and gas end
users,” stated Mr. Jamison.
In accordance with general accepted accounting principles, the
Company recorded a one-time non-cash warranty reserve for the
estimated future retrofit costs, as it is considered a contingent
liability. This one-time non-cash warranty charge increased the
warranty reserve by approximately $3 million at the end of the
third quarter. The impact of this one-time warranty charge during
the third quarter, along with timing of inventory adjustments and
the closeout of certain purchasing agreements, is expected to
result in a reduction of the total gross margin from approximately
5% in the prior quarter to approximately negative 20% in the third
quarter.
“Our newly designed Signature Series product employs more
durable components that can be retrofitted into older vintage C200
microturbines in the field, thus improving customer satisfaction
and lowering future warranty and potentially decreasing FPP expense
by as much as $5 million. Proactively upgrading vintage C200
microturbines with new Signature Series generator components in
certain high-stress applications that are under warranty or covered
by our FPP is a win-win proposition for Capstone because it not
only improves product performance and increases customer
satisfaction, but will also lower and/or avoid future Capstone
repair costs,” said Mr. Jamison.
“As a team, we remain firmly focused on shortening our path to
profitability by lowering our expenses, growing our product and
service revenue, diversifying our business, launching new products,
creating new partnerships and managing our balance sheet,” added
Mr. Jamison.
Conference Call and Webcast
The company will host a live webcast February 9, 2017, at 1:45
PM Pacific Time (4:45 PM Eastern Time) to provide the results of
the third quarter fiscal 2017 ended December 31, 2016. The company
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 the company'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 Corporation
Capstone 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
approximately 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 UL-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.
This press release contains "forward-looking statements," as
that term is used in the federal securities laws, about our third
quarter financial results for fiscal 2017, which are preliminary
and subject to adjustment in the ongoing review and audit
procedures by Capstone’s external auditors, the impact of the
retrofitting of non-Signature Series C200 microturbines on warranty
and FPP expense and on total gross margin, achieving profitability,
and growing our service business. Forward-looking statements may be
identified by words such as "expects," “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.
"Capstone" and "Capstone Microturbine" are registered trademarks
of Capstone Turbine Corporation. All other trademarks
mentioned are the property of their respective owners.
CONTACT:
Capstone Turbine Corporation
Investor and investment media inquiries:
818-407-3628
ir@capstoneturbine.com
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