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; benefits of the new Capstone finance business; collection of reserved accounts receivable; opportunities in New York; improved brand equity and product recognition; the implementation of our new strategic action plan; 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. 1
Who is Capstone Turbine? • Founded 1988 − Commercial launch in 1998 • Public Corporation 2000 (NASDAQ: CPST) • World leader in Microturbines • Headquarters and two manufacturing plants in California • Over 95 distribution partners and 787 dedicated distributor employees • More than 8,700 units shipped worldwide • Over 50,000,000 operating hours • Installations in 73 countries worldwide • Not heavily dependent on government subsidies • Tremendous business leverage 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. December 1998 September 2000 March 2006 December 2009 March 2011 March 2015 December 2015 January 2013 C200 achieves CARB First in market to offer a Shipped first 60kW New 65kW Hybrid electric CMT380 C250 concept FPP Backlog New C1000 emissions certification commercial microturbine microturbine microturbine performance car unveiled demonstrated to DOE reaches Signature Series for Digester Gas (C30) introduced at LA Auto Show $61.2M microturbine introduced Annual Revenue $84K $10.2M $31.0M $24.1M $21.0M $43.9M $81.9M $109.4M $127.6M $133.1M $115.5M December 2009 March 2012 March 2014 December 2015 October 2007 February 2002 June 2000 65kW model with World’s first hybrid Annual revenue Walmart concept New Capstone Energy Capstone microturbine Company IPO high efficiency heat UPS commissioned exceeds $100M truck unveiled using Finance entity first to achieve Calif. recovery achieves at Syracuse with positive Capstone announced “Rule 21” interconnect CARB emissions University gross margin microturbine range agreement extender 3
What is a Microturbine? Heat Power Out Out Air In Rotor Group Fuel In EFFICIENCY CHP/TYPE ELECTRIC TOTAL Hot Water 33.0% 85.0% Steam 33.0% 60.0-95.0% Chilled Water 33.0% 85.0% Air Foil 4
Product Competitive Advantages 5
Global Market Verticals 6
FY2016 Q3 Highlights • Q/Q Revenue increased 20% from $17.9M to $21.5M • Q/Q Gross Margin increased to 19% from 11% • Q/Q Total inventory dropped to $22.7M from $31.0M • Q/Q Substantial Finished Goods drop from $7.5M to $1.4M • $7.3M generated from positive working capital C65 CHP units on production floor preparing to ship • First positive working capital quarter in the last 4 quarters • $2.6M positive cash generated from operating activities • Q/Q Bookings improved to $12.3M compared with $8.4M in the second quarter • Q/Q Production, Labor & Overhead expenses dropped 28% • Q/Q total cash increased from $15.6M to $18.5M (including $5M restricted cash) • Wells Fargo $20M credit facility borrowings decreased $5.6M from $15.2M down to $9.6M 7
Recent Order Momentum January 27, 2016 “Capstone Turbine to Power Industrial CHP/CCHP Energy Efficiency Projects in Mexico” January 25, 2016 “Capstone to Upgrade U.S. Federal Government Headquarters in Washington, DC” January 21, 2016 “Capstone Receives Additional Follow-on Order for Australian Coal Seam Gas Company” January 13, 2016 “Capstone to Provide 2MW of Clean Power for Leading Chinese Offshore Oil Company” January 11, 2016 “Capstone Upgrades Colombian Hotel With C600 CHP Microturbine Package” January 6, 2016 “Capstone Secures Orders for 3.2MW of New Signature Series Microturbine Packages” January 4, 2016 “Capstone Receives 4.6MW Order from Horizon Power Systems for Flare Gas Project” 8
EBITDA Breakeven Action Plan Capstone Strategic Action Plan to Reach EBITDA Breakeven Executive Consolidation Add 100 New Distributor Sales Professionals Globally By consolidating roles and responsibilities and Cut Operating Costs and Re-Sizing to 20% Lower Breakeven eliminating three Committing to add 100 executive positions, the Enhancing Top Selling 1MW Product Line new distributor sales Company realized annual professionals globally To further reduce costs, savings of $2.2M. Improved Diversification increases the Company’s Capstone has eliminated Management forfeited reach, marketing The new C1000 Signature 29 positions, cut R&D unvested options and capabilities, and brings the Finance Product Series product will allow spend, converted Executive bonus plan. Capstone is increasing its total number of distribution the Company to be more commissions and focus on growing the CHP channel employees to competitive and cost- bonuses to stock, and . and Renewable markets Capstone owns 30% of a ~850. effective in capturing the suspended merit based new Capstone dedicated and adding resources to growing CHP and CCHP increases. JV entity that will enable increase its geographic energy efficiency space. it to provide a power diversification. In the next purchase option to U.S. 12 months, the Company will markedly grow its customers that do not have the capital budgets business in Latin America, to purchase the product. Africa, Middle East and Australia. Under the new Strategic Action Plan, EBITDA breakeven is expected to drop from approximately $40M per quarter at 25% gross margin to $30M per quarter at 25% gross margin with improved key CHP products, global diversification, new sales resources and financing solutions. 9
Cost Reduction – Revenue Growth Plan Current CEO Leadership $140.0 $133.1 $127.6 EBITDA Breakeven April 2016 $120.0 $115.5 $109.4 EBITDA Breakeven April 2017 $100.0 $81.9 $80.0 $61.6 $60.0 $43.9 $40.0 $31.6 $31.3 $28.3 $24.1 $21.0 $17.7 $17.0 $20.0 $12.6 $10.2 $- FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 (a) (a) (a) (a) (a) Adjusted to conform to current fiscal year periods. Organizational Cost Reduction and EBITDA Breakeven Plan: Renew growth from 100 new sales professionals, launch of the new C1000 Signature Series product, new finance entity, focus on the growth in CHP business and expansion in Latin America, Africa, Middle East and Australia. 10
Positive Market Segment Trend Product Revenue 9 months Product Revenue 9 months Other Other 6% 8% Energy Energy Oil and Oil and FY15 FY16 Efficiency Efficiency Gas 37% Gas 42% 55% 52% New focus on growing the energy efficiency market – Leverage new C1000S product 11
New C1000 Signature Series • 1.0MW Electrical Output • 1.5MW CHP Heat Recovery • Integrated Heat Recovery • Two Stage Air Filtration • Improved Enclosure Design • Lower System Noise Level • Relocated Engine Exhaust Stack • 12 Year Marine Grade Paint • Higher Inlet Fuel Temperature 82% Total System Efficiency in CHP 12
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