Capstone Green Energy Corporation

Thank you for holding, and please remain on the line. The Capstone Green Energy Conference call will begin shortly. Thank you for your patience. Bye. Thank you. 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 2026, ended on June 30th, 2025. 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 is my pleasure to turn the floor over to Ms. Janet Duderstadt, Capstone's General Counsel. Janet, the floor is yours.

Thank you very much. Good afternoon, and thank you for joining Capstone Green Energy Holdings, Inc.' 's first quarter fiscal year 2026 earnings conference call. On the call with me today are Vince Canino, the company's president and chief executive officer, and John Jurek, the company's chief financial officer. On August 8th, Capstone Green Energy Holdings, Inc. issued its earnings release for its first quarter fiscal year 2026 financial results, which ended June 30th, 2025. During today's call, we will be referring to slides that can be found on the company's website under the investor relations section. This conference call contains forward-looking statements representing the company's views as of today, August 15th, 2025. Other than is required by federal securities laws, the company disclaims any obligation 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 provision set forth in slide two of the accompanying presentation in today's earnings release 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 as Mr. Canino and Mr. Jurek go through the discussion today, when they mention EBITDA, they are referring to adjusted EBITDA, which is a non-GAAP financial measure. The reconciliation to net loss can be found in the earnings release and the appendix to the presentation slides. I would like to now turn the call over to Vince Canino, the company's president and chief executive officer.

Thank you, Janet, and good afternoon, everyone. Thank you for joining today's earnings call. In addition to reviewing our first quarter fiscal 2026 results, we'll also take this opportunity to highlight some of the key achievements we've made so far this year, along with a candid look at the challenges we continue to navigate. We've made meaningful progress across several areas of the business, and we're excited to share those updates with you today. If you turn to slide three, I would like to run through today's agenda. Today's call will cover Capstone's current business environment. Then I will turn it over to John Jurek for a detailed review of our Q1 fiscal year 26 financial results. We will then discuss a milestone change to our business model. And as always, we will then conclude with questions from our investors and analysts. I do wish to remind you that today's presentation includes an appendix which provides additional information for your review. Let's now move on to slide five to begin the discussion on Capstone's business environment. We've just wrapped up a strong first quarter of fiscal year 2026, and the momentum is clear. This quarter reflects not only continued progress in operational discipline and performance, but also a meaningful step forward in the revenue generation. In fact, Our Q1 revenue came in over $12.2 million higher than the same period last year. That's the result of steady improvements in bookings throughout fiscal 25, which are now clearly showing up in our top line. Let's take a closer look at the performance by segment. Systems revenue was up 190% year over year. A key driver here was the successful delivery of of a 6-megawatt order of CARB-compliant units for a microgrid project at a recycling facility in California. Our energy-as-a-service business also had a strong quarter, delivering a 77% year-over-year increase driven by improved utilization rates and stronger market pricing. This kind of performance was made possible by the improvements we've made in manufacturing and supply chain executions. Those teams played a crucial role in enabling us to deliver reliably and at scale. Now let's shift to profitability. We delivered an adjusted EBITDA of nearly $2.7 million this quarter, a $2 million improvement over the $700,000 we posted in Q1 of fiscal 2025. And we did this while managing through tariff impacts and ongoing market volatility. But here's what really stands out. Q1 marks our fifth consecutive quarter of positive adjusted EBITDA. That is a historic achievement for Capstone. Over these five quarters, we've now generated more than $10 million in adjusted EBITDA, with three of those quarters delivering well above $2.7 million each. This consistency demonstrates that our three pillars of strength strategy is working. More importantly, It shows we've built a team that thinks proactively, adapts quickly, and executes with discipline, even in challenging market conditions. Looking ahead, we are entering a phase that Capstone has never seen before, one marked by real, sustained profitability. And this level of performance doesn't just fuel growth. It gives us the ability to reinvest in our technology, expand and refine our operations, and strengthen our sustainable competitive advantage, ultimately creating long-term confidence among our shareholders. Now on to slide six. Over the trailing 12 months, we've continued to build momentum in bookings. During that time, we secured 41 megawatts of orders, totaling 126 units across 19 different countries. That's meaningful global traction. Our book-to-bill ratio, measured in megawatts, came in at 1.32 over the trailing 12 months, a strong indicator of healthy demand and strengthening backlog. As expected, North America remains our largest contributor, representing 62% of the total bookings. That said, we are also seeing encouraging growth signals from both South America and Europe, a positive trend we will continue to monitor. In Q1 of fiscal 2026, we delivered over 13 million more in bookings compared to Q1 of 2025. But remember, at that time, we were still feeling the Chapter 11 hangover effects. Interestingly, unit volumes were roughly the same, which tells us we had a stronger mix of big box units in Q1 of fiscal 2026. That's yet another sign that the distributed generation market is gaining strength largely driven by capacity constraints across the grid. To stay ahead of this momentum, we've developed a pipeline management tool that helps us track and forecast full-year performance against our annual revenue goals. Here's how it works. First, it captures year-to-date revenue and adds it to the revenue from our convertible backlog. Convertible backlog is calculated by applying our projected backlog conversion rate, or BCR, against the current fiscal year backlog. Then, we subtract the year-to-date revenue and convertible backlog revenue from our annual target, thus giving us the remaining go-get revenue needed to meet our goal. We compare that number to our high-confidence pipeline and apply historical win rates to answer two key questions. One, do we have enough pipeline coverage to hit our full-year target? And two, What is the monthly order pace required through mid-January to generate enough revenue from convertible bookings for the fiscal year? This tool is reviewed in our weekly priority meetings, yet another example of the business discipline and operational rigor we are embedding in our daily execution. This level of visibility and discipline gives us the confidence that we're not just chasing growth, we are managing it strategically. Let's move on to the next slide. I'd like to take a moment to talk about tariffs on slide seven. Not just how they impacted our financials this quarter, but more importantly, how they've helped shape our strategy going forward. While a significant portion of the components used in our products are sourced from the U.S., we also rely on low-cost country strategies and European suppliers for certain parts. The recent tariff changes had a real impact on our bottom line. Some of our non-U.S. suppliers were unable to absorb the increases, which ultimately eroded an estimated $400,000 in potential profit this quarter. But here's the silver lining. These challenges pushed us to look harder and smarter at ways to optimize our landed component costs. We took action. We developed dual and even triple sourcing strategies with comparable landed costs that not only reduce exposure, but also increase scalability and resilience. One important point I want to emphasize is this. We are building a business that's resilient to any administration and its policies. Governments will always act in the best interest of their constituents, and rightly so. Our job is to build a company that delivers value regardless of those changes. one that can withstand volatility and adapt quickly as market dynamics evolve. And I am proud to say we are building that kind of team and that kind of company. Tariffs will always be part of global commerce. As shown in the chart on this slide, they've historically and consistently shifted over time, and they will continue to do so. Our role as a business is to be able to bend, not break. to navigate these headwinds with discipline, strategy, and resilience. Let us take a moment to spotlight yet another successful DFMA initiative on slide eight. This one focused on the battery enclosure. This enclosure is critical. It houses the batteries that support our onboard inverter-based technology. These batteries play two key roles. They enable startup when the grid isn't available, and they stabilize power delivery by buffering voltage and current swings at the customer site. That said, the original cost of this enclosure was high, about $900 per unit, sourced from a local supplier in California. So we asked the question, can we do better? Using our DFMA process, we ran a should-cost analysis and discovered we are paying far above what the part should realistically cost. Our supply chain team went to work. engaging international suppliers, and ultimately partnered with one who not only beat the should-cost target, but also optimized material and labor costs, streamlined production, and reduced shipping costs by maximizing 40-foot container loads. All of this added up to a new price of just $350 per unit. That's a 61% cost savings. And it's fully loaded. Materials, labor, logistics, and even tariffs as of August 2025 are all accounted for. Just as important, this savings was achieved before we made any changes to simplify the part design or reduce part count. Looking ahead, Phase 2 of this DFMA project will target exactly that, design simplification and part count reduction. And because each C1000 system requires 10 of these enclosures, the financial impact here is significant. This is a textbook example of how DFMA thinking plus global sourcing plus commercial rigor translates into real savings without compromising quality or performance. Now I would like to turn the call over to John Jurek.