Executives at Capstone Green Energy Corp. are pleased with the company’s financial health, even if all the company’s efforts are not yet reflected in its earnings.
Darren Jamison, chief executive of the Van Nuys microturbine manufacturer, said during a November conference call with analysts that there was a lot of hard work that Capstone employees were doing that “unfortunately” could not be seen yet in the results, but should appear in the following quarter.
He was so excited about the company that he bought more shares than he has ever done in 15 years.
“I see the future is extraordinarily bright, not only for Capstone, but for anybody in the green energy space, energy efficiency, energy resiliency,” Jamison said during the call to discuss fiscal 2022 second quarter results. “That is the where the world is going, and we’re excited to be part of it.”
Capstone reported on Nov. 10 a net loss of $6 million (40 cents a share) for the quarter ending on Sept. 30, compared with a net loss of $4.2 million (38 cents) in the same period a year earlier. Revenue increased by 15 percent to $17.2 million.
Shares of Capstone have steadily eroded over the past 52 weeks, losing about 76 percent of their value through Jan. 6 when shares closed at $3.30. Capstone stock closed Jan. 12 at $3.61.
‘Nicely on track’
Analysts who follow Capstone were pleased with the quarterly results.
Robert Brown, senior research analyst with Lake Street Capital Markets, said in a research report that the second quarter results were in line with expectations and that order activity had improved.
“Rental revenue is growing nicely and several large orders in October put Capstone nicely on track to meet its goal of a fleet of 21 (megawatts) by the end of its fiscal year (in March),” Brown wrote in the report.
Capstone’s long-term rental microturbine fleet stood at 13.1 megawatts at the end of the second quarter and was projected to grow to 17.1 megawatts by the end of December.
“With that in mind, we do not expect to have any issues getting to the 21.1 megawatts by the end of our fiscal year,” Jamison said during the conference call.
Shawn Severson, president and co-founder of Water Tower Research in St. Petersburg, Florida, said in his research note that building its rental fleet was one of the key strategic goals at Capstone because it offered higher margins vis-à-vis other options, namely sales of microturbines.
“Other revenue growth drivers are expertise of direct sales team, improving build quality to attract and retain customers, target pricing strategy, exploring new geographies and widening the distributors network,” Severson said in his note.
Michael Heim, senior research analyst with Noble Capital Markets Inc. in Boca Raton, Florida, said in his research report on Capstone from Nov. 11 that he was encouraged to see the topline starting to grow again and especially encouraged to see sales come from the Energy-as-a-Service division.
“Costs were a bit higher than we would like, but we will give the company a pass given the sharp cuts the company made last year and the fact that they are ramping up operations,” Heim wrote.
Growing fleet
Eric Hencken, the chief financial officer for the company, outlined the importance of the rental fleet to Capstone’s finances.
Describing a slide in a presentation to the analysts, Hencken noted that over a five-year period, the sale of a C-1000 microturbine with spare parts sales brought in $1 million in revenue, while the sale of a C-1000 with a factory protection program contract can generate $1.2 million in revenue.
“But the C-1000 rental can generate approximately $1.8 million of revenue,” Hencken said. “We think the numbers speak for themselves here to illustrate why we’ve been building our rental fleet and why it’s one of our key strategic goals for the year.”
During the conference call, nearly all the analysts brought up the rental program, including H.C. Wainwright & Co. LLC equity analyst Sameer Joshi. He asked whether there would be any cash flow pressure because of inventory buildup, including from the microturbines made for rental.
Jamison responded that yes, the company was seeing cash flow pressure from a buildup in inventory.
Capstone is manufacturing microturbines for new product sales and also building the rental fleet up, he said.
“We always need to make sure that we have more units built in the rental fleet than we have deployed to make sure that any short-term rentals we can handle – not lose any business – and so that’s happening|,” Jamison added.