Jefferies 11 th Annual Industrials Conference August 10, 2015 Reliable power when and where you need it. Clean and simple.
Safe Harbor Statement This presentation contains “forward-looking statements” regarding future events or financial performance of the Company, within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things -- growth and diversification of our end markets; strengthened distribution channels; ongoing new order flow; reduced cash usage; growth in revenue, gross margin and backlog; attaining profitability; adequacy of liquidity and capital resources; improved operating leverage and organizational efficiency; new product development; product reliability; shifts to larger markets for our products; benefits from our cost reduction initiatives; performance in light of macroeconomic headwinds; advantages over competing technologies, continued Nasdaq listing; implementation of a new Capstone finance business; collection of reserved accounts receivable; continued opportunities in Russia; improved brand equity and product recognition; and leveraging of lean manufacturing practices. Forward-looking statements may be identified by words such as “expects," "objective," "intend," "targeted," "plan" and similar phrases. These forward-looking statements are subject to numerous assumptions, risks and uncertainties described in Capstone's Form 10-K, Form 10-Q and other recent filings with the Securities and Exchange Commission that may cause Capstone's actual results to be materially different from any future results expressed or implied in such statements. Because of the risks and uncertainties, Capstone cautions you not to place undue reliance on these statements, which speak only as of today. We undertake no obligation, and specifically disclaim any obligation, to release any revision to any forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. 2
Why Capstone? Capstone Turbine is the world’s leading developer and manufacturer of clean-and-green microturbine power generation systems. With over 100 patents and years of advanced engineering, Capstone offers a comprehensive product line, providing scalable solutions from 30kW to 30MW. Capstone serves six major market verticals, including Oil & Gas, Energy Efficiency, Renewable Energy, Critical Power Supply, Transportation and Marine. These award-winning, low-emission energy systems operate on a variety of fuels and are compliant with all current emissions regulations without after-treatment. Capstone microturbines provide reliable power when and where you need it. Clean and Simple. 3
Capstone Investment Highlights • Microturbines are scalable from 30kW to 30MW and can operate on a variety of gaseous or liquid fuels: natural gas, propane, landfill gas, digester gas, diesel, aviation and kerosene Leading Manufacturer of Low Emission, • Four major design features: advanced combustion technology, patented air-bearing technology, digital Ultra Reliable, Highly Efficient, Electric/ power electronics, remote monitoring and advanced control capability Thermal Generators • Optimized performance results in lower emissions, higher reliability and higher total system efficiency over a variable power range and harsh environmental conditions • Annual addressable market of approximately $15 billion; potential capture of $1.5 billion Large, Underpenetrated Vertical Markets • Diversified across end markets and geographies – currently in 73 countries, over 8,500 units shipped and Geographies • Favorable macro trends such as corporate and regulatory trends towards energy efficiency and stringent emission and fuel standards • Microturbines are more environmentally friendly and offer lower total cost of ownership versus standard internal combustion engine solutions and lower cost than fuel cells without incentives Growing Installed Base and Compelling • Growing installed base helps drive new customer adoption across verticals and geographies Environmental and Value Proposition • Broad and scalable product range supporting a number of end markets Enables Increased Market Penetration • Poised to penetrate new verticals (marine, transportation and critical power) and geographies (Middle East and South America) • Market-leading service offering with 5 & 9 year contracts, provides recurring revenue • 90 distributors and 9 OEMs reaching 152 market locations throughout the world Maturing Distribution Network Lays • Built from the ground up over the last 8 years and the equivalent of 740 Capstone dedicated employees Foundation for Long-Term Growth • As network continues to mature and grow, distributors become more productive and efficient • Company has significant industry experience at senior leadership and operational levels Experienced, Proven Management Team • Leadership team has combined 113 years of energy industry experience • Stronger, leaner, more flexible and better positioned for rapid growth than ever before Future Revenue Growth, Continued Margin • Projected revenue growth, steady margin improvements and positive operating leverage all support path Expansion and Operating Leverage Drive to profitability; balance sheet supports growth plans Path To Profitability • Developing Capstone financial solutions business to leverage top line growth • Two manufacturing plants operating on a single shift, 5 days a week, 35% capacity 4
Business Strategy Update INITIATIVE GOAL STATUS C30 & C65 currently meet goal. Flagship C200/C1000 Series MTBF improved from 6,500 hours to a projected 9,158 in Build the Highest Quality Product All Products 99% uptime – 14,000 hr. MTB F. July. This is from new improvements to the engine, filtration in the Distributed Energy Industry system, stator, electrical system and a new software release. Goal is to reach 14,000 hours by end of the fiscal year. Recently launched new Capstone website. The intuitive platform is easy-to-use and features a more modern look, intended to serve as a primary resource for market, product Increase Global Brand Equity and Drive global brand & product awareness and service information. The new design, content and Product Recognition features will help to facilitate a higher level of customer and distributor interaction with an increased use of marketing assets, project case studies and social media. Rolled out a new distributor key performance indicator (KPI) program to better measure and manage distributor Improve Efficiency and Effectiveness of Improve project close rate from 11% to 20% performance and help focus on improving lead generation, our Sales and Marketing Process of $1.5 billion in identified projects project development, customer relationships and drive up order close rates. Conducted third party sales training in four different geographic locations around the world. New leaner C200/C1000 Series manufacturing line with a new engine-building clean room, upgraded test cells, new emission testing equipment and improved manufacturing visual work instructions. These improvements have already Keep operational costs flat while continuing Leverage Lean Manufacturing and led to higher engine yields and lower overtime expenses. to leverage the business with top line Organizational Practices revenue growth Flattened our organizational structure to lower operating costs by eliminating three top-level executive positions that save the company an estimated $2 million dollars annually after severances and one-time termination expenses. 5
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