Capstone Turbine's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Capstone Turbine (CPST)

Q2 2012 Earnings Call

November 09, 2011 4:45 pm ET

Executives

Mark G. Gilbreth - Chief Technology officer and Executive Vice President of Operations

James D. Crouse - Executive Vice President of Sales & Marketing

Jayme L. Brooks - Chief Accounting Officer and Vice President of Finance

Darren R. Jamison - Chief Executive Officer, President and Director

Edward I. Reich - Chief Financial Officer, Executive Vice President and Secretary

Analysts

Eric Stine - Northland Securities Inc., Research Division

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Shawn M. Severson - JMP Securities LLC, Research Division

Sanjay Shrestha - Lazard Capital Markets LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Capstone Turbine Corporation Earnings Conference Call for Second Quarter Fiscal Year 2012 Financial Results ended September 30, 2011. During today's call, Capstone management will be referencing slides that can be located at www.capstoneturbine.com under the Investor Relations section. [Operator Instructions] I would now like to turn the conference over to your host for today, Miss Jayme Brooks, Vice President, Finance and Chief Accounting Officer. Please proceed, ma'am.

Jayme L. Brooks

Thank you. Good afternoon, and welcome to Capstone Turbine Corporation's Conference Call for the second quarter ended September 30, 2011. I am Jayme Brooks, your contact for today's conference call.

Capstone filed its quarterly report on Form 10-Q with the Securities and Exchange Commission today, November 9, 2011. If you do not have access to this document and would like one, please contact Investor Relations via telephone at (818) 407-3628 or e-mail ir@capstoneturbine.com, or you can view all public filings on the SEC website at www.sec.gov or on our website at www.capstoneturbine.com.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future financial performance in attaining profitability, the ability to continue to reduce cost and improve inventory turns and contribution margins, the ability to reduce cash usage, higher average selling prices, continued growth in current markets; the continued availability of a line of credit, our ability to raise funds through warrant exercises, the success of the C200 and C1000 products; new products and technologies; compliance with certain government regulations and increased government awareness and spending of our products; growing market share and market adoption of our products; new applications for our products; growth in the energy efficiency, renewable energy, oil and gas, critical power supply and mobile product markets, increased opportunities in Japan, revenue growth and increased sales volume, our success in key market segments, our ability to enter into new relationships with channel partners and distributors and other third-parties; the energy efficiency, reliability and low cost of ownership of our products; and the expansion of production capacity, manufacturing efficiency and improved relationships with suppliers.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties including the following: Our expectations about expansion into key markets may not be realized; certain strategic business initiatives and relationships may not be sustained and may not lead to increased sales; we may not be able to continue to reduce our manufacturing costs; the growth in our backlog has significantly exceeded our internal forecast; in order to meet this increased demand, we may need to raise additional funds to meet our anticipated cash needs for working capital and capital expenditures; the current economy can make it difficult or impossible for us to raise necessary funds and for a customer to buy our products; we may not be able to utilize our line of credit, for example, as the result of the failure to meet a financial covenant; we may not be able to expand production capacity to meet demand for our products; we may not be able to obtain sufficient materials at reasonable prices; if we fail to meet all applicable NASDAQ global market requirements and NASDAQ determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, impair the value of your investment and adversely affect our ability to raise needed funds; we have substantial accounts receivable, and increased bad debt expense or delays in collecting accounts receivable could have a material adverse effect on our cash flows and results of operations; our release of new products may be delayed or our new products may not perform as we expect; we may be unable to increase our sales and sustain or increase our profitability in the future; we may not be able to obtain or maintain customer, distributor and other relationships that are expected to result in an increase in volume in revenue; we may not be able to comply with all applicable government regulations; we may not be able to retain or develop distributors in our targeted markets, in which case our sales would not increase as expected; we may not be able to successfully integrate the acquired Calnetix assets and achieve productive relationships with distributors; and if we do not effectively implement our sales and marketing service and product enhancement plans, our sales will not grow and therefore we may not generate the net revenue we anticipate.

These are among many factors which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements. We refer you to the company's Form 10-K, Form 10-Q and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of these 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 obligations to release any revision to any forward-looking statements to reflect events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events.

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