Management Presentation September 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, Nasdaq listing; implementation of a new Capstone finance business; collection of reserved accounts receivable; opportunities in New York; improved brand equity and product recognition; and a strengthened aftermarket. 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
Product Competitive Advantages 4
Macro Drivers and Headwinds CORPORATE FOCUS SUSTAINED LOW NEW NEW TIER 4 DECLINING ON REDUCING COST GAS GAS FLARING EMISSIONS GRID COSTS ENVIRONMENT REGULATIONS REQUIREMENTS RELIABILITY Megawatts Shipped FY15 91MW 16 MW 12 MW 7 MW 47 MW <1 MW 2 MW 2 MW 5 MW ONGOING DELAYED DOWNTURN CONTINUED RUSSIAN GEOPOLITICAL ORDERS AND IN THE OIL STRENGTH OF SANCTIONS TENSIONS SHIPMENTS MARKETS THE U.S. DOLLAR AND RUBLE 5 Note: The map above depicts megawatts of microturbines shipped for the fiscal year ended on March 31, 2015
Growing Channel to Market NORTH SOUTH EMEA ASIA TOTAL AMERICA AMERICA Distributors 31 19 30 95 15 Distributor 124 190 303 145 762 Employees Distribution 42 41 47 28 158 Locations 3 0 5 1 9 OEMs Note: The above employee and location figures are based on data provided by distributors and have not been independently verified . Goal is to add 100 new sales people into our existing global distribution channel 6
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. 7
Business Strategy Update INITIATIVE GOAL STATUS We recently finished the cut-in of several C200 and C1000 Continuously Develop New Products, Improve customer satisfaction and our Series product improvements, including C1000 package Product Improvements and Services competitiveness in the global energy market improvements, new C1000 marine grade paint, and improvements to our overall system flexibility and controls. Current network extends our present 225 employee workforce by adding another 762 distributor employees Grow sales force by 100 salespeople Build Strong and Loyal Worldwide across 158 locations around the world. At our recent Global across the global channel by the end of Distribution Channel Distributors conference, our distributors committed to grow calendar 2015 their sales force by 100 salespeople across the global channel by the end of calendar 2015. Launched new “TechShare” diagnostic software program that provides a continuously learning and improving failure Limit customer downtime, improve the end Offer Unprecedented Long-Term FPP analysis diagnostic tool that can be utilized real-time in the customer experience and provide a high Factory Backed Service Offering field to troubleshoot down units more accurately to reduce the margin long-term revenue stream mean-time-to-repair (MTTR) and the number of trips required to service or repair a unit. Q1FY16 continued the diversification of market verticals, Grow CHP market and expand our business including: a groundbreaking C600 order in a Midwest data Diversify our Vertical Markets and in South America, Asia, Africa and the center; CHP in a office facility and two orders for C1000 for Expand our Geographic Footprint Middle East CHP projects in New York City. New orders in Puerto Rico, Portugal, Lithuania and Finland. Embarking on developing a new Capstone Finance JV Drive top line revenue growth and improve Competitive and Creative Factory business to provide creative solutions to help grow the top overall profitability by financing or owning Backed Finance Program line revenue. We are continuing to make significant progress high internal rate of return (IRR) projects on this initiative. 8
Global Market Segments 9
Total Project Pipeline US and Canada $475,748,355 Latin America $557,949,940 Asia/Australia/ Russia $177,083,245 Total identified project pipeline $1.5 billion Africa/Middle East $85,236,054 Europe $218,324,540 Goal is to improve close rate from approximately 11% to 20% with tools and training Data obtained from the Capstone Turbine Corpora4on Distributor pipeline in Salesforce.com 10
Energy Efficiency – CHP/CCHP Absorption Chiller Capstone Steam C1000 (1MW) Generator Efficiency CHP/Type Notes Electric Total Hot water 33.0% 85.0% Heat exchanger Steam 33.0% 60.0–95.0% Steam generator Capstone chilled water 33.0% 85.0% Absorption chiller 11
Efficiency – CHP/CCHP CHP/CCHP Example: RSP Systems - New York City NYC is a great example or microcosm of our growing global CHP opportunity : • More than 14MW at 70 locations in the NYC metro area and counting. • CHP and CCHP can be used in all types of facilities. • Diversified clientele with systems installed at affordable housing projects, high-end residential buildings, retail buildings, office buildings, hotels, hospitals, universities, dormitories and manufacturing facilities. • Units covered under the Capstone Factory Protection Plan (FPP) are remotely monitored 24/7 by the local distributor RSP Systems. 12
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