Capstone Green Energy Corporation

Good day, ladies and gentlemen, and welcome to your Capstone Green Energy Earnings Conference call and webcast for the financial results for the first quarter fiscal year 2022, ended on June 30th, 2021. All lines have been placed in a listen-only mode, and there will be a question and answer session following the presentation. As a reminder, today's program will be recorded. At this time, it's my pleasure to turn the floor over to Mr. Colby Peterson. Corporate Counsel, sir, the floor is yours.

Thank you very much. Good afternoon, and thank you for joining today's fiscal 2022 first quarter conference call. On the call with me today is Darren Jameson, Capstone Green Energy's president and chief executive officer, and Eric Hankin, chief financial officer. Today, Capstone Green Energy issued its earnings release and filed its quarterly 10-key report with the Securities and Exchange Commission for the fiscal 2022 conference. first quarter ending on June 30, 2021. We will be referring to slides today that can be found on our website under the Investor Relations section during the call. I want to remind everyone that this call contains estimates and forward-looking statements representing the company's views as of today, August 11, 2021. Capstone disclaims any obligations to update or revise these statements to reflect future events or circumstances. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control. Please refer to the Safe Harbor provisions set forth on slide two and in Capstone's filings with the Securities and Exchange Commission for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. Please note that if Darren and Eric go through the discussion today, When they mention EBITDA, they are referring to adjusted EBITDA and the reconciliations in our presentation appendix. I would now like to turn the call over to Darren Jamieson, President and Chief Executive Officer.

Thank you, Colby. Good afternoon, everyone. Thank you for joining today for a review of our first quarter fiscal 2022 results ending June 30th, 2021. If you turn to slide four, I will quickly run through the financial highlights before giving an overview of our fiscal 2022 goals. Total revenue for the quarter is $16.1 million, up 13%, compared to $14.2 million in the first quarter last year, as orders and shipments have gradually started to rebound, despite continued negative impacts from the ongoing COVID-19 pandemic. Bookville ratio was 1.1 for the quarter, and new gross product orders was $8.2 million, despite the continued impacts from the pandemic. in key markets like Europe, Latin America, Asia, and Australia, not to mention the U.S. The long-term micro-term rental fleet increased 1.5 megawatts to 12.1 megawatts from 10.6 megawatts during the quarter, as the company continues to execute against its plan to increase the fleet to 21 megawatts by the end of the fiscal year, March 31, 2022. Turning to the balance sheet, total cash and cash equivalents as of June 30, 2021, were $49.2 million, a slight decrease of $0.3 million compared to $49.5 million at the end of the last quarter. Cash provided by Finance Activities was $11 million during the quarter as the company continued to focus on strengthening liquidity as it ramps up the remediation of the defective vendor part in the field and accelerates the expansion of the long-term rental fleet. Let's go ahead and turn to slide five. As a reminder, we've recently laid out our goals for fiscal 2022. We remain sharply focused to deliver on our strategic business goals, enhance our competitive advantages, and expand our total addressable market or TAM around the globe. Our strategy is set out, and I believe by executing on the goals, Capstone will be positioned as a green energy leader in fiscal 2022 and beyond. Let's quickly run through our goals. First is broadening our diverse energy products and services, which we've started to do and will continue to do through the fiscal year. New direct solution sales team focus on growing the top line revenue as we continue to add more headcounts in that space for that strategic goal. Expanding our long-term rental fleet, as discussed, to the 21 megawatts. Increasing aftermarket margins and escalating parts availability to drive improved customer satisfaction and more repeat orders. focusing on managing working capital and improving inventory terms. And lastly, growing the distributed support system, or DSS, subscription program to drive marketing, branding, and customer acquisition efforts. Now let's go ahead and turn to slide six. In April 2021, we transitioned from Capstone Turbine Corporation to Capstone Green Energy. We now view our business in four key strategic business lines. This is important because it goes hand in hand with our strategic goals of growing our offerings to expand our revenue opportunity with each customer and accelerate top line growth. Let's begin with energy of the service or EAS. This is critical to continuing our transition to a more predictable cash flows and higher margin rates. This business line includes long-term rental contracts, long-term service contracts or FPPs, installation services, service, spare parts, leasing, PPAs, and project financing, in addition to our DSS, distributor subscription fee. The one common denominator among all these businesses is steady cash flows, increased visibility, and higher margin rates. Next is our energy conversion technologies, or ECT. This is the foundation on which Capstone was built, and it's based on Capstone's core microturbine technology, which you're all familiar with. and can operate on a wide range of fuels. These products produce high-efficiency CHP and CCHP, generating electricity and multiple forms of thermal energy. We've recently added two key products to our offering. First is the Baker Hughes turbine lineup, ranging from 5 megawatts to 16 megawatts. This gives us a solution for much higher power needs where needed. This is important as many of our target customers' loads are under 5 megawatt but target customers also have loads over five megawatts, which you've been unable to address before now. The second is B plus K. B plus K is an OEM partner in Europe, which is now moving into commercial production of their innovative decentralized heat systems that convert wood residues into electricity and heat from an externally fired capstone micro turbine. Moving on to energy storage solutions or ESFs. Energy storage is one of the first and most important additions to a micro grid or even a nano grid. We'll be using a custom-tailored combination of multiple technologies, energy storage, and monitoring software that maximize energy efficiencies, lower emissions, and create resilient systems that meet client-specific needs. I'll talk about the fourth business line, hydrogen, sustainable products, in a few minutes. But now let's go ahead and turn to slide seven. Many of you have seen slide seven before, as we previously set out our six key growth factors. I know that we've mentioned them earlier, but I always want shareholders to see them and understand exactly what we're doing. First is the new direct sales team, which we started approximately a year ago, which is one of our strategic goals for the year. As mentioned earlier, we are targeting new microgrid products, long-term rentals, and large repeat customers. Second is our new part supplier. This is simply about better building part quality to improving reliability, lower warranty, which I think you've seen in the quarter, higher FPP margins, which you'll see going forward, and simply put, getting repeat more customers. Third, new target pricing programs. This is focused on national and key accounts, and our new gold key account program, which is targeted at customers that can deploy at least four megawatts per year. Fourth initiative is adding new distributors and new geographies, particularly in Eastern Europe, Africa, and the Middle East. These large markets are prime for our microgrid services, and we need to fire more shots on goal, which means more and better distributors. Fifth is the new hydrogen product released with the goal of operating on 100% hydrogen. The hydrogen economy is coming, and we will be here to run with it in greater detail in a moment. Sixth is expanding our digital marketing to our website update, customized campaigns, unique IndyCar branding strategy, and building awareness of capstone green energy, and what we can do cannot be overlooked. On slide eight, we wanted to try to find a way of illustrating significant business impacts of expanding the long-term rental fleet. This slide shows both revenue and contribution margin over a five-year period for the C-1000 product line with spare part sales, a C-1000 product with an FPP contract, and a C-1000 long-term rental. Over the five-year period, the C-1000 product with spare parts could generate approximately $1 million of revenue with approximately $200,000 of margin or a 20% margin as a percentage of revenue. C-1000 product sale with a capstone FPP contract can generate approximately 1.2 million of revenue with approximately $300,000 of margin with 25% margin as a percentage of revenue, which is good. But the C-1000 rental can generate approximately 1.8 million of revenue and approximately 1.1 million of margin with a 61% margin as a percentage of revenue. We think the numbers speak for themselves, and here is the clear illustration of why we've been building the long-term rental fleet and why it's one of our key strategic goals for the year and beyond. I will now turn the call over to Eric to discuss the details of our financial results for the first quarter. Eric?