Capstone Green Energy (CGRNQ) 13 Feb 232023 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to your Capstone Green Energy Earnings Conference Call and Webcast for the Financial Results for the Third Quarter Fiscal Year 2023 that ended on December 31, 2022. [Operator Instructions] As a reminder, today's program will be recorded.

At this time, it's my pleasure to turn the floor over to Mr. Don Ayers, Vice President of Technology. Sir, the floor is yours.

much. very you Thank thank call. joining and third fiscal quarter conference you afternoon, today's for XXXX Good

call me and the President Chief On with Officer. and Green Jamison, Financial Chief Energy's Capstone Executive Officer; Scott Interim today Robinson, are Darren

release Today, XXXX its XXXX. third its XX, fiscal December for Capstone ended issued Green Energy earnings quarter

statements Investor views slides call the during call to of This conference referring circumstances. We be or XX, disclaims on section will to XXXX. be company's our future reflect update any Relations found estimates representing and today, February obligations forward-looking contains events can statements as or that website the under the Capstone these revise today. to

other our these should statements unknown involve because factors place control. in they and and that cases, some reliance You are, not beyond on forward-looking known uncertainties undue risks,

Exchange note from provisions Please Capstone's Please slides the release this X to safe refer with actual factors the results filings forth differ the by for reconciliations the and on Slide are materially when today's to release of the to mention they set or as Darren through slides. implied discussion and presentation such appendix they that EBITDA, statements. could Scott in presentation today, and Commission EBITDA earnings in information cause in concerning the accompanying those the harbor adjusted referring the and earnings expressed to go and Securities that

Jamison, over Darren call I the President Chief would Executive like now to to and Officer. turn

XXXX. afternoon, fiscal results a of quarter review Thank everyone. XXXX you for today XX, December our you, Thank Don, and for good joining ending third

will discussion with through Slide update Energy-as-a-Service X. on and today's our fleet a turn brief If you agenda. like I'd to environment go to growth. ahead then rental strategic you business now run start I and

remains business which As are stronger foundation EaaS upon reminder, our Energy-as-a-Service, we building our a the Capstone. a

where the the details we're results, charging vehicle third will quarter deeper market, into and charging Scott exciting us. opportunities electric will for I on dive provide financial seeing more very Next, then

to on We that providing the our our is conclude information appendix from an want you remind with also presentation I will there bill. then today's and questions products and more details IRA new additional analysts. And of

X. that go in our to shows today. Slide and we're jump business environment X current Slide Let's ahead

quarter $X compared last year, business. the XX% to and the outperform the EaaS Third revenue same can up rest to be of revenue grown revenue has off Energy-as-a-Service business, attributed X.X%. our was million to was to period growth but date, which This or continue approximately

our contracts long-term spare As you when critical know, is FPP the say rentals which our parts service nine of revenues the mainly are approximately maintenance up and million happy almost due months contracts, and for of is the $X.X an our XX% I to fiscal long-term FPP $X Energy revenues business, Service first $XXX,XXX. And am to foundation. 'XX, higher at million of rental

we to very a this addition, are tough environment, improvements supply navigated chain we have area the see In significant year. in and expecting

our excited what to for the ahead, calendar of and Looking rest fiscal expect I start fourth we've I'm that seen XXXX. quarter

nine fiscal the fiscal of months to gross for margins nine first 'XX, the expanded months from For first XX% XX% 'XX. of

more However, and costs I'll to expediting freight charges note was as than supply I play chain ongoing this that anticipated less guess continue we expenses, than anticipated.

by megawatts year-over-year. a represents XX, the December XXX% increase to Energy-as-a-Service from and contract company's XXXX, can March megawatts there of that to still XX.X was long-term which let's under Slide XX, rentals re-rental XX you units contract under under is about target a X, XXXX, XX on increase we're proud say meet December see XXXX. megawatts On on Now on that substantial move schedule I'm on X. contract to of which Slide XX,

the of Scott, our to through some now Scott? the over I'll results. call CFO, go specific turn financial interim to

you, afternoon, Thank and Darren, good everyone.

now third the quarter will fiscal of in detail XXXX. I for more results financial our review

X. Moving Slide to

contracts million 'XX to second our Financial -- revenues FPP this compared You rental of was and of Product in revenue the 'XX. results for in the $XX subscription primarily rental, excuse to fiscal quarter $XX.X results compared down had million $XX.X decrease were 'XX. QX down $XX.X to fiscal to me, quarter QX our $XX.X revenue can second down of of the due which 'XX, fees $XX.X 'XX. were spare million support of parts quarter million includes see sanctions. from $X.X revenue, million Russian in from in service services long-term the and fiscal and million, the $X.X fiscal second third million, 'XX accessory And million due quarter a distributor from Parts,

percentage as 'XX, previous in due a compared Net to supply EBITDA quarter increased Total margin for loss up of adjusted million revenue XX% XX% fiscal 'XX. was $X.X of quarter Gross quarter. negative operating 'XX, from in 'XX. the primarily in second was $X.X million million of easing of in a second a was the QX in from $X.X compared $X.X million net the to of challenges. expenses the chain to negative a QX million million to the slightly EBITDA of loss fiscal quarter $X.X Adjusted $X.X

last which compared third see quarter was million, third year down you to compared 'XX to of fiscal Product financial of to Turning in and prior at revenue fiscal will revenue X, year results quarter the the $XX.X $XX the 'XX. period, were $XX.X accessory million percentage the XX% contribution from for million million from a same the Slide from million year. as was was due primarily last and greater services rental to $XX.X higher-margin margin Gross revenue ago XX%, period, from business. $X.X year the up the of rental revenue in up period our Parts year. $X.X in million,

of prior $X activities. period. at current banking refinancing the Net the year debt of $X.X Total the year in the costs three was expenses $X.X The relating prior million period. million Adjusted was net fees months for to a $X million EBITDA to loss $X in and from EBITDA include to compared were for operating million staggering our million expenses of ended ago year period. million $X.X in a investment December XX loss a loss compared adjusted negative other

expenses offset reduction million $X.X a $XX.X from by loss direct Energy-as-a-Service to price from $X.X the efforts increases versus $XX.X mentioned. EBITDA decreased from Energy-as-a-Service financial increased to fiscal the fiscal the to previously Top $XX.X improved Gross margin million $XX shows Operating million from business. million million our to 'XX the to line 'XX cost XX revenue to due Slide product in contributions year-to-date adjusted results. year-to-date XX% to from line, year due and million loss. material increased XX% due growth

to Turning XX. Slide

that XX, You XXXX, used selected see loss flow to collection of XX quarter. primarily the will largely certain from our loss offsetting from the activities $XX.X dropped operating as inventory. This due receivable net at in our reduction quarter. price quarter decreased due cash lead and against million to variation cash during declined the in items. units $X.X $XX.X balance receivable benefited in fleet. investments funding, September were additions accounts days rental to time was XX $XX.X sheet million was our funding DSO efforts purchase million net long fleet nearly to of The Cash by $XXX,XXX the to days $XX.X driven December rental and to accounts inventory provided in Cash from Accounts of from was million and also rental million and to purchase September purchases. compared

the shortages due price to inventory to supply from previously continued the chain Total necessity to of $X.X advance other due in and mentioned million by vendors challenges. increases forecasted increased levels and due purchase inventory to demand

more In XX. XX products addition, megawatts growing by March and ramp as we on rental fleet the new do inventory we production both need of to focus

will back Darren. over to it I turn you,

Scott. you, Thank

of strategy to remind of part few update, take let's achieve our As a goals. working minutes quarterly and profitability overall how our our investors to we're

go to XX. Slide Let's and turn ahead

detail Slide XX where over portable our seeing do I demand to which energy for currently category, go on are charging want renewable include EV applications remind won't and and markets but stationary each both is we I deployed. slide. your and draw are in we're industries smart the I solutions various being this this our now to of on investors are because microgrids, concentrating solutions. showing in technology new and diversified and charging every EV attention to want I especially the

of XX. market, to to that charging solution XX microgrids. to energy of look who take the we EV demand for is the to there revenues our Slide United in for utility. forward Europe customers local right move and advantage solutions global There our opportunity and EV Slide providing much and generate infrastructure get on as go both for charging market readily can. will market displays is cannot EV Let's projected the a global be DERs to the now, and plan This we smart States to for for for

key a natural grid the are you we're EV stress and intelligent charging environment, we shows reduce can XX and new around the This bus need substantially meet see the grid the for users quicker. and gas, the them coupled charge enables using opportunities EV the much without starting renewable provide on some Slide infrastructure, industry. charging power when to to needs, with truck This vehicles the a option natural to gas solutions, electric developing or extra solution to solution or and EV charging infrastructure. renewable biogas fleets a payments gives fleet deploy great to

points the use mention gas can the are avoided. access it's natural not avoids of natural that high Furthermore, allows demand to to be rental utility or key these most users Some pipelines a for virtual and capital units, transportable places and so pipeline, gas scalable costly EaaS have expenditures Capstone fees can

for fourth what XXXX the fiscal climate. line some of and analysts, over able our thoughts. with remainder to our an extremely observed though challenging want I'm the I year about Even you what our calendar unchanged, essentially survive chain to it we look turning bottom anticipate beginning the ahead. supply Before from are quarter leave was for enthusiastic as I've of we in questions I

January are I balance supply hikes this rising prices, and dealing that out. chain start problems We to with anticipate pricing our but still from will

and costs anticipate beyond. the levels we stabilize, more results fourth and normal to quarter in quarter input saw adjusted to we to first the EBITDA and continue in As QX the hopefully return

the Reduction developments, hikes new of over markets implementation effect, will months, anticipate EV be our a and including of favorable new XX price taking growth the Act charging. the next convergence like Inflation We the of there

move service and to solely business flows. profitability, rental continue predictable firm, predictable and us to manufacturing a our revenue, like away revenues will focus As energy being benefits be main deliver our we from strong cash should

deliver can contract, strategy significant need shift. to the meeting As that needs The we have profits we solution our XX making and demonstrate that the our of we progress for our results our shareholders. show under facts closer it customers target to megawatts get that their generating and made

with to Now I'd call from the our that, like open for analysts. Operator? questions up

Street Rob Instructions] [Operator Your Lake is question from Brown first Capital Markets. coming from

Your line live. is

Hi, Darren. Scott. Hi,

a Just at XX little but think the I wanted ago. at trajectory bit that a about the just you've this to year megawatts. how XX on pipeline year close, end some recently in your the And talk you the How get does had to update to announcements get you from your confidence XX point? look the there of an rental the

under we'll that then contract and Yes. Obviously, oil between between got right with to in negotiation month, and We've and expect need now, gas five would be XX by to pipeline megawatts megawatts mostly fill the fill the gap will XX-megawatt in No, it's this projects question. trying at of We're a and we're into end February great a XX. into space several U.S. March. we XXX-plus XX a projects. of I

trajectory we're highly So the on. that on confident

You should releases end now quarter. more expect to see the and the between press of

gas -- And say I crypto say, January. opportunities that, seeing would since that that's up most more oil especially market the a and for right gas seen I and than but softening, space, made we're the the is definitely, think now of are of I would we've oil in

yet, But coming. then I any seen of next have you yet, And haven't IRA Great. in how few assume out demand the it's does Okay. the play that if still you months? driven

had We Yes. January. bookings great in

one more In we month. in fact, quarter January we in entire product actually did sales booked than the third

So to say the starting indicator of I of those see leading we're opportunities. would some

But for to bill. people going to to I comfortable we've the be rerun get got and it's very new numbers customers that with need I think significant. think

more well biggest at and look our market you that of piece If the is of business U.S. has CHP than been in half the renewables.

our hitting definitely a that's biggest So incentive. with market huge

very parts also again. We're But oil very So gas seeing got -- as for projects strong. well gas to tax taking activity strong. time from first in oil from that Asia. Europe. also is and going IRA U.S. Latin and significant. I market years in just We've being XX% I'd on XX% back and actually incentive as the America. say of is in the Europe products Australia got

at my does of Great. Okay. last out? took pretty And of does that? roll the magnitude Or quickly? that that the is take question of sort you end pricing January. happen to that What's time And on

ship definitely No, products and we -- we typically force, mean, implement quarters a couple but a one I happens we them of there lag, it quickly, quarter because update is it and sales book later. obviously,

those higher to orders So new a going P&L. there's go pricing when and be our lag between will through

being X% more increase. U.S. the dollar is as bill because new a January it So and be the IRA influence was fairly well. obviously, then like In was XX%. market, U.S. the the price was it Overseas, just strong XX

significant increase. did other year of getting the which So well. We down one still last We're costs our working price fairly vendors. the a is on equation, side as from

are come fans, down to some some freight especially the of on high-grade commodities, the down. We We come shipping printed work to though, boards, some times things costs still wiring circuit nicely. do, that, and seeing need IGBTs, costs freight like and other back got

the we -- there. to I still backside issues, bell get do we're the of to to some but would work when comes it's it So have supply on say curve chain

Okay. Thank turn I'll over. you.

Thanks Rob. Great questions.

you. Thank

Severson from Tower coming is Research. question next Your Shawn from Water

live. Once your again line is is Shawn, live. line Your

you. Thank

Darren. do pathway I you understand said of Just I'm look have questions, the started mean to been do you sort a as in and to look any modeling what But year see we I we IRA showing in strong starts this year, of we little follow a the how know and Rob's a bit the you're would question coming of out seeing wanted up big from for about bulk really the this orders. you calendar on where up later trying I And to that couple year. develop? big the in? the it's surges

Yes.

look capital definitely XX for cases, it's purchase, longer. cycle, be XX you think product have months, projects life sales in our project at which even to I to these some where normal can

through inquiries. a it's cycle, longer seeing a projects definitely Salesforce clip. So an at in sales We're but better seen we've move uptick

to it of summer we're but this should and that's And see really starting so fall indicator into I and strengthen for think the the leading it, exciting us.

inventory Scott the sales we as a product so what And for trying mentioned, megawatts. we're trying as to especially in XX get to U.S. year build see as to pipeline, growing this as well

So chain. we're pulling supply our on hard pretty

EaaS our are than And defense purchases chain, build our dramatically our side. revenue supply up of because of much more on the year-over-year the

back half definitely going So the for very though of strong. look be year the to

XX this to under of half megawatts that all first XX deployed. megawatts getting focused and The year, on contract then getting really we're

a commissioned, there is that is typically. important another getting to and point actually and a from rental be that built, lag the and XX product days anywhere XX think shipped that's contract I can between signing

of And bias the And has the is question are towards know this? national then and customers between to any that push the force appetite my there last of any specifically. are back customers just, in a this? towards that Are large engaging types step differences then internal been customers I in global sales responding obviously, types the on queue. customers seeing you with I'll

long. interesting didn't talking mean people the are being because go statement. think paybacks have data that right forward I to had don't projects make most of enough Shawn, question. of too that folks it's an we we're to I a now

to back reaching folks. those we're out So

In drops are couple those the touched who've the IRA the of years. in years, two simple last economics. rerunning people general, by So bill the payback

four was years year a six or now year it So payback. a not It's seven payback five.

forward we've got in interested customers. project. get run those out to we the see them reach and to can if moving So economics We the in

interested not in instead looking they an at in EaaS they're purchase capital if or And solution. the

Europe the what's I by I IRA interesting, returned also think bill. stunned and just from pretty

as ahead as developing Europe U.S. transformation. it energy green and far of energy think puts I the

not I to think a being. they're place that's that used

you're think up more try catch ahead out of try of going do to they to to U.S. I get see to come hopefully the U.S. So as and Europe the

Russia And very because locations. supply I challenging get more natural that we're mentioned, also cost from they all gas think gas And up other to so of they of activity there's as find opportunities war I realize as gas other Europe in pick is the Ukraine, can't there. oil their and back and the and natural seeing in

in the in of the between times impacts interesting Europe times interesting and U.S., think, the the Ukraine and War. build So IRA I

you. Thank

is Your Wainwright. H.C. next Sameer coming from question from Joshi

is line Your live.

Thanks taking Scott. my Darren, for questions. Hi,

get just So your upfront on the long in the you your following targeted discussion, target of term are your the EaaS track benefit change the to XX for like deployment year fiscal and Does you EaaS are on up increasing and megawatts. to strategy year? next incentives XXXX IRA increased

great So question. it's a

I think to getting right focused now, on XX we're megawatts. really

look queue, numbers if EBITDA products, for the you be in just the for year. neutral our were the on kind we of kind at margins If neutral of

to our positive. on be to the adjusted EBITDA dragged chain EBITDA EBITDA our positive margin we're and the we or gross we deployed, just get has down XX megawatts because positive or negative just So If positive. ability slightly zero products get margin back the gross issues supply solidly

that's forward. cost we short-term need short-term to going growth of really goal really the the see So and capital

we looks Goldman do what think XX that we what drive and refinancing And forward work going on like, will so I megawatts. how beyond

a the QX in territory positive at to like XX have We're rollout place after again on plan fourth think deployed. in XX. have to into were go we beyond where year I megawatts say hopefully of I already we EBITDA this next we back and then a quarter. strategy a talk So solid we're the when hope

executing that started off very fairly we XX. think about because years really today, it's but as a getting it is had on and ago But on quickly. of focused lift And three we we're business this accelerating insignificant. When not trouble COVID,

now XX activity for a which that's U.S. of lot the XX undertake deploying machines so around closer XX internationally, is short period and of us time. in a to to And megawatts, or moving

Thanks that. for Understood.

is question certain of with independent in done Moving will the to status you and is And to development the target are then initiative, any customers development EV is product? of mind as first present being this audiences the well, -- what mind or potential customers? the in it developing the and

No. the largest the of kind of providing in portable a the picture presentation, as also that. U.S. We're microturbines. the They're our working as as now. the REITs saw partner you right We've providing commercial We're version a one in chargers. of generated,

little So these the board microturbine. battery with and of it in to lot bit turn black power around they a to able and country people We're deploy their was be solar utility need. that PV. some and then a We've folks fleets. a charger starting they bring electric can't trucks, XXX-kilowatt a the is But got on buses as of CXXX to the for additional get the getting feed finding and utility they goal

new, sudden fleet a it. with of all can't charge brand they but so they find And a themselves

now. we've stuff going doing so stuff got opportunities right California. we've Chicago some here Jersey, in And on got in We're

big got of We're So are. pretty kind a as customer coattails large They've bit. a denture base company. they're as little riding they obviously their big a

natural And us. it's days. early good it's for a so But I think fit

how this So we'll see expands.

permanent to charging for infrastructure. and electrify that to of going number is utilities the only rather is keep up EV portable are more And that great. with unable We'd we grow. buildings, Obviously, demand demand increases think more I do

continue us. that's And with so great work But at and we'll you to for as I somebody clients. to figure landscape a look the or think out it want few and just if adjusts opportunity key a grows partner

or during this? from expect we year revenues initial calendar XXXX Understood. XXXX Should

right quarter. we of absolutely. permanent that we've forward We've Europe No, on rent trailers. got installations Yes. installations on move now megawatts -- think We've couple permit some we'll got done we're X or quoted EV for out solutions. We've a this here X charging that in

is over this EaaS the yes, sales be product both So through to at is could the and to infrastructure grow really how vehicle And our the that's for think they're business. electric a and going something put and new grow this is exciting part projected pace next continue if not to this place that is years in I driving several us. grow, revenue, huge EVs opportunity

Understood.

Just the sub-million slightly a dollars? which a parts Was we in Or impact the impact? should sanctions. scale couple it million was dollar like were Russian range? think this that the few impacted on of like revenues, by of of How

microturbines there. on markets. upon once Russia of over one No, was got biggest Yes. time, it our We've X,XXX

over So sanctions definitely to supply get not stay if quarter, couple dollars U.S. shipments the to megawatts not last a all make is and new us in more. the that the ability chain sell of few issues spare we line impacted million quarter. sure parts or there a a I'd of struggle product say some with definitely impacting

another of dollars probably there well. there's million macule So as of couple

So things for definitely those two us. challenging are

we in part, we're chain our our much seeing some production the today, our enough On the with imbalance and the target not various inability inventories got and Unfortunately, one of others when can, too vendors. side, to meet that of of where hit vendors can't continue kind other supply to meet deliveries we've we levels.

in major for that the been us. will quarter. last focus a So It has be

where We to more we major our continue to X.X next want couple our get balanced see them not until compared for to the to and quarters are today. turns we chain inventory be a we focus where of and supply back

really receivables COVID. out of side. receivables focused coming the We've Very happy, though, on on

going to XX COVID. high as of We're days XX recall, we COVID kind today. hit you were DSO, days down we back during into As XXX days

make work team these So receivables that with distributors work the finance and the that's of been by a myself and the to to customers and happen. lot up clean

story success So there. good

side, and continue keep focus to supply and to then service need balance business. sheet on we energy growing side that the the and chain Now

taking Thanks it. Got for and good questions luck. my

Thank you.

Thank will conference to go the our for session. you. That back concludes closing ahead. remarks. I now Please Jamison hand Q&A Darren

Well, Great the questions Great. thank you. by analysts.

you think to lot the wanted a on of I touched I touch things on.

me XX contract thing at most at is March the to That's under be thing important think most transformational target quarter our megawatts look important I we to thing, most on business. we're hitting for that XX. do still the this can for our the

as And sure so is we keep Energy-as-a-Service that dates so we we get sure that need fleet target get grow hitting make more those we to customers. well, business, make product deployed the repeat and running

you We long-term refinancing three Goldman for or process, Company. next are capital conclusion needs Energy-as-a-Service to and figure in as drive to We with note do in doing of keep know, the least two business. what months the here the out to Greenhill then & growing we're at that need

to not Inventory behind better job job of an as We hopefully, But like bit challenging better quarter that fourth excuse. we that's to out our manufacturers year, as is need supply get the of the whack a new of quarter well. around said, and have a chain been the world. do a this we'll and vendors and first need us do and issues

and for soon looking Energy-as-a-Service talking Thank press forward you. we of the be look conclusion to more fourth our to releases, quarter. So everybody

This everyone. concludes event. today's Thank you,

wonderful your a have and time, this at disconnect participation. Thank you for may day. You