Capstone Turbine Management Discusses Q4 2012 Results - Earnings Call Transcript

Capstone Turbine (CPST)

Q4 2012 Earnings Call

June 14, 2012 4:45 pm ET

Executives

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

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

Analysts

Shawn M. Severson - JMP Securities LLC, Research Division

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

Sanjay Shrestha - Lazard Capital Markets LLC, Research Division

Eric Stine - Northland Capital Markets, Research Division

Walter Nasdeo - Ardour Capital Investments, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Capstone Turbine Corp. Earnings Conference Call for Fourth Quarter and Fiscal Year 2012 Financial Results ending March 31, 2012. My name is Charis, and I will be your coordinator for today. [Operator Instructions] 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] At this time, I would now like to hand the call over to your host for today, Ms. Jayme Brooks, Vice President, Finance and Chief Accounting Officer. Please proceed.

Jayme L. Brooks

Thank you. Good afternoon, and welcome to Capstone Turbine Corp.'s conference call for the fourth quarter and fiscal year ended March 31, 2012. I am Jayme Brooks, your contact for today's conference call. Capstone filed its annual report on Form 10-K with the Securities and Exchange Commission today, June 14, 2012. If you do not have access to this document and would like one, please contact Investor Relations via telephone at (818) 407-3628 or email ir@capstoneturbine.com, or you can view all of our 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 provisions of the Private Securities Litigation Reform Act of 1995.

These statements relate to, among other things, market expansion, new product development, growth in revenue, gross margin and backlog, attaining profitability, improvement in certain key performance indicators and strategic initiatives, low cost of ownership and advantages over competing technologies. 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 conference call or to reflect the occurrence of unanticipated events.

I will now turn the call over to Darren Jamison, our President and Chief Executive Officer.

Darren R. Jamison

Thank you, Jayme. Good afternoon, and welcome, everyone, to Capstone's fourth quarter and fiscal year-end 2012 earnings call. With me today are Ed Reich, our Executive Vice President and Chief Financial Officer; and Mark Gilbreth, our Executive Vice President and Chief Technical Officer.

Today, I will again start the call with a general overview of our fourth quarter and full year achievements and then turn the call over to Ed, who will review the detailed financial results. Ed will then turn the call back over to me, and I will discuss what is happening in some of our key market verticals and update you on our growth strategies designed to improve gross margin, generate positive cash flow and achieve profitability.

During our remarks, we'll be referring to presentation slides that can be found on the Capstone website under Investor Relations. Fiscal 2012 was an outstanding year for Capstone. Despite a challenging economy, our business is thriving, and this is reflected in our exceptional growth rates and expansion in key markets.

I'd like to mention a few of the important metrics that we showcase our achievements beginning on Slide 2. First, we delivered record revenue of $109.4 million, up 34% year-over-year. We have now delivered consecutive quarterly revenue growth over the last 20 quarters when compared to the same period in the prior year and a compounded annual growth rate of 39% since fiscal 2007.

Second, we delivered positive gross margins of 5% for fiscal 2012, up 6 percentage points over fiscal 2011 and up 19 percentage points over fiscal 2010. Fiscal 2012 was the first year in the company's long history with positive gross margins in all 4 quarters. While our operating model targeted 35% gross margin over time, it's important to note that profitability can be achieved at lower gross margins based on continued strong revenue growth.

Third, accelerating order momentum drove record backlog of $139 million at March 31, 2012, up 31% year-over-year and reflecting a compounded annual growth rate of approximately 34% since 2009. In fiscal 2012, we received new orders of $123 million, up 42% year-over-year. Shipments totaled 96.1 megawatts, up from 69.7 megawatts in fiscal 2011.

Key performance indicators such as production rates and average selling prices are all trending in the right direction, and I'll discuss those in more detail later in the call.

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