Capstone: Q1 Fiscal 2018 Financial Results
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CHATSWORTH, California - Capstone Turbine Corporation (www.capstoneturbine.com) (Nasdaq:CPST), the world’s leading clean technology manufacturer of microturbine energy systems, reported financial results for its first quarter of fiscal 2018 ended June 30, 2017.
The company reported total revenue of $19.2 million for the first quarter of fiscal 2018 and a net loss of $4.1 million, or $0.10 per share. This compares with total revenue of $19.1 million and a net loss of $4.5 million, or $0.17 per share, for the first quarter of fiscal 2017. Although total revenue for the first quarter of fiscal 2018 increased $0.1 million to $19.2 million from the first quarter of fiscal 2017, service revenue for the first quarter of fiscal 2018 increased $0.4 million, or 12%, to $3.7 million from $3.3 million for the first quarter of fiscal 2017.
Cash used in operating activities decreased 76% to $0.7 million for the first quarter of fiscal 2018 compared to the fourth quarter of fiscal 2017, which was the lowest cash used in operating activities in the past six quarters. Working capital change for the first quarter of fiscal 2018 was positive $1.9 million as compared to a negative $0.5 million working capital change for the fourth quarter of fiscal 2017. The company reported that its cash, cash equivalents and restricted cash decreased $0.6 million during the first quarter of fiscal 2017 to $19.1 million as of June 30, 2017.
Orders for new products for the first quarter of fiscal 2018 were positive with a book-to-bill ratio of 1.3 to 1. Capstone booked $37.1 million in net product orders for the six-month period ended June 30, 2017 compared to $20.4 million in the preceding six months, an increase of 82% period-over-period indicating a rebound in the business.
“At first glance, the first quarter financial results of fiscal 2018 look very similar to that of the first quarter of fiscal 2017, however, the first quarter of fiscal 2017 benefited from almost a million dollars in bad debt recovery,” said Ms. Jayme Brooks, Capstone’s Chief Financial Officer and Chief Accounting Officer. “When you exclude bad debt recovery from our operating expenses for both periods, our net loss improved by approximately $1.3 million from a net loss of $5.4 million in the first quarter of fiscal 2017 to $4.1 million for the first quarter of fiscal 2018 on similar revenue levels. This highlights the overall improvement in our underlying business during the first quarter of fiscal 2018 compared to the year-ago first quarter,” added Ms. Brooks.
Operating expenses for the first quarter of fiscal 2018 decreased 18% to $6.1 million from $7.4 million in the year-ago quarter. Operating expenses excluding bad debt recovery decreased 27% for the first quarter of fiscal 2018 to $6.1 million from $8.3 million for the first quarter of fiscal 2017. Bad debt recovery for the first quarter of fiscal 2017 was $0.9 million compared to $13 thousand for the first quarter of fiscal 2018.
“This year’s first quarter results reflect a solid start to the current fiscal year as we continue to see an increase of orders from a diverse mix of markets for the second consecutive quarter. Other positive contributing factors to note are having a progressive aftermarket service business with a record level of long-term service contract revenue and the decrease in our operating expenses primarily as a result of our ongoing war on costs. We absolutely believe that we are on the path to deliver strong sustainable growth and near-term profitability,” said Darren Jamison, President and Chief Executive Officer of Capstone.
“Several of our new fiscal 2018 growth programs are expected to contribute to the company’s future positive working capital, such as the new Sell-to-Win bundled ICHP program with its 5 and 9-year prepaid service contracts and the growing adoption of Signature Series retrofit upgrade kits for fielded C1000 Series systems. These programs are specifically designed to grow revenue, improve margins and generate positive working capital,” said Jeff Foster, Capstone’s Senior Vice President of Customer Service.
The Adjusted EBITDA for the first quarter of fiscal 2018 was negative $3.4 million, or a loss of $0.08 per share, compared to an Adjusted EBITDA of negative $3.7 million, or a loss of $0.14 per share, for the first quarter of fiscal 2017. Weighted average shares outstanding for the quarter ended June 30, 2017 were 41.1 million compared with 27.2 million in the year-ago quarter.
Mr. Jamison continued, “The loss from operations in the first quarter of fiscal 2018 was $3.9 million, an improvement of 11% compared to the first quarter of fiscal 2017. Moreover, this quarter’s loss from operations was the lowest in the past 15 quarters and I expect it will decrease even further as we ship the recently booked product orders and our new sales and service initiatives deliver increased revenue in the back half of fiscal 2018.”
“Compared to the first quarter of fiscal 2017, both our loss from operations and Adjusted EBITDA continued to improve this quarter, especially when you exclude the bad debt recoveries. I believe that the higher gross margins generated from our growing aftermarket service business, the rebound in our product shipments and the continued decline in our operating expenses gives Capstone a clear path to profitability,” added Mr. Jamison.
Financial Highlights of Fiscal 2018 First Quarter:
Total revenue for the first quarter of fiscal 2018 was $19.2 million, an increase of 1% compared with $19.1 million in the year-ago first quarter
Cash used in operating activities decreased 76% to $0.7 million for the first quarter of fiscal 2018 compared to the fourth quarter of fiscal 2017, which was the lowest cash used in operating activities in the past six quarters
Accounts receivable decreased 28% to $12.2 million from $17.0 million as of March 31, 2017
Net product orders for the first quarter were $16.9 million compared to $10.9 million in the year-ago first quarter
Book-to-bill for the quarter was 1.3 to 1 compared to 0.9 to 1 in the year-ago first quarter
The number of megawatts shipped for the first quarter grew approximately 4% compared to the first quarter of fiscal 2017
Total operating expenses in the first quarter of fiscal 2018 were $6.1 million, down 18% year over year – excluding bad debt recoveries in each period, operating expense were down 27% year-over-year
Loss from operations in the first quarter of fiscal 2018 was $3.9 million, down 11% compared to the first quarter of fiscal 2017
The loss from operations in the first quarter of fiscal 2018 was the lowest in the last 15 quarters indicating an improvement in the overall business
Net loss for the first quarter of fiscal 2018 compared to the year-ago first quarter improved $0.4 million, or 9%, to $4.1 million, or $0.10 per share from a net loss of $4.5 million, or $0.17 per share
Net loss, excluding bad debt recovery, improved $1.3 million on similar revenue levels for the first quarter of fiscal 2018 compared to first quarter of fiscal 2017
“You have three ways to drive profitability in a business: higher revenue, better margins and lower operating costs. At Capstone, we are employing all three of these strategies to help us reach profitability as quickly as possible. We are driving future revenue growth through our new Signature Series product lineup and new Sell-to-Win bundled ICHP program, which is heavily concentrated on the energy efficiency market. Furthermore, we expect to drive future revenue growth through our Capstone Energy Finance business, which as it comes online, will start contributing to the overall top-line. As it relates to margin, our aftermarket service business revenue, which includes long-term comprehensive factory protection plan (FPP) service contracts, spare parts and product accessories, is growing as a percentage of total revenue and carries higher margins compared to our new microturbine products. Last, as it relates to operating cost, we have substantially reduced our marketing and service expenses by transferring those associated costs and responsibilities from Capstone directly to our distribution channel and we have substantially reduced our development efforts. Once Capstone is completely consolidated under one roof, we will realize an additional decrease in our annual operating expenses and see an additional boost in productivity and efficiency,” Mr. Jamison concluded.
About Capstone Turbine Corporation
Capstone Turbine Corporation (www.capstoneturbine.com) (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 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.
“Capstone” and “Capstone Microturbine” are registered trademarks of Capstone Turbine Corporation. All other trademarks mentioned are the property of their respective owners.