Capstone pipeline project fuels potential revenue growth to support Adjusted EBITDA breakeven model

E-Finity Distributed Generation (E-Finity) previously secured this shale gas order and has now confirmed delivery of all 5.2 MW in Capstone’s third quarter. E-Finity is Capstone’s exclusive distributor for the mid Atlantic and southeastern US. The order is comprised of two C1000 and four C800 Signature Series microturbines, totalling 5.2 MW of clean and reliable power. The natural gas fuelled microturbines will provide power along a new US shale gas pipeline currently under construction.

“The confirmation of this large product order affords Capstone a chance to securely expand product production rates during the upcoming two quarters, thus fuelling the opportunity for the revenue growth necessary to support our Adjusted EBITDA breakeven model,” said Darren Jamison, President and Chief Executive Officer of Capstone. “We recently announced that we are expecting to see an expansion of our accessories, parts and service business over the next two quarters, as well as lower expenses and significant bad debt recovery. All of which, when added together, should significantly contribute to our Adjusted EBITDA breakeven goal.”

Capstone recently provided several updates on key elements of its multi-point strategic plan to achieve near-term Adjusted EBITDA breakeven:

• On 10 October 2017, Capstone announced a new plan to further lower total operating expense by an additional US$500 thousand per quarter. As a result, the new management quarterly total operating expense target is set at US$5 million.
• On 12 October 2017, Capstone announced it was winding down its US$5.2 million field upgrade retrofit program and anticipated reduced cash burn, additional revenue growth and gross margin expansion in its aftermarket business.
• On 18 October 2017, Capstone announced entering into an agreement with a new distribution partner for the Russian oil and gas market in exchange for US$6.4 million in cash. The initial payments under the agreement, totalling US$2.5 million, are scheduled to be received over the next two quarters and will be recorded as bad debt recovery.
• Capstone recently announced the successful completion of its consolidation plan for its two manufacturing facilities into a single manufacturing facility allowing for an immediate increase in operational efficiency and reduced facility expense when the exited facility is subleased.

“The confirmed shipment of 5.2 MW for a large pipeline project within this quarter, in conjunction with the significant progress we have made recently on our multi-point strategic path, gives us a substantial opportunity to accelerate our goal of reaching Adjusted EBITDA breakeven in the near-term,” said Jayme Brooks, Capstone’s Chief Financial Officer and Chief Accounting Officer.

“The Capstone management team is extremely focused on reaching Adjusted EBITDA breakeven as quickly as possible through executing our multi-point strategic plan and sees the upcoming 31 December and 31 March end quarters as opportunities for hitting the milestone,” said Jamison. “Several factors will need to come together over the next two quarters to reach our accelerated goals, nonetheless management believes that we have implemented the strategic plans that are necessary in order to achieve this very significant milestone for all Capstone stakeholders.”

Adjusted EBITDA is defined as net income before interest, provision for income taxes, depreciation and amortisation expense, stock-based compensation expense and the change in warrant valuation. Adjusted EBITDA is not a measure of its liquidity or financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of its liquidity.

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