After the Capstone Turbine Corp. (NASDAQ: CPST) earnings report, we listened to the conference call and the question and answer session from analysts to get a better handle on the quarter and what is out in front of it on the calendar. Below are some excerpts from the analysts and from the company (listed only as company to avoid which officer was saying what). As a reminder, these are comments and a synopsis or paraphrase rather than direct quotes on individual models and exact metrics. Also, keep in mind that comments on the conference call were sometimes interrupted or not entirely heard in entirety.
Before going to Q&A, the company noted that the company isexploring military orders but does not expect any meaningful revenuefrom that sector in fiscal 2009. It is seeking marine certificationand if that occurs it could see orders occur from that in fiscal 2009.They are also in discussions with a CLASS A truck manufacturer for thatmarket penetration.
There was a $1.9 million order that the company didn’t book from acustomer that didn’t line up the credit properly, but that has nowoccurred if you listened to the Q& A session. Here is backlog inunits:
- "238" C30’s
- "206" C60’s
- "67" C200’s
- "55" C1000’s.
The company said they believe they are past the "market adoption phase"and are now in the manufacturing phase with real orders. Withoutgiving formal guidance, the company said that Fiscal 2009 (now in Q2-2009) is expected to beits greatest year in operating history.
LAZARD CAPITALasked about backlog and revenue conversion to revenuesand commented on lumpiness of revenues…. Company responded that theyprefer to look at a combined revenue and backlog together. Again, thebacklog is actually understated as it does not include parts,maintenance, and services. They company wasn’t specific but did notethat revenue should go up even though they are susceptible to singlecustomer orders.
WACHOVIA asked about backlog, but then asked WORKING CAPITALREQUIREMENTS…. the company noted that future demands are capitalintensive and the company noted that it first would set up lines ofcredit or bank loans, but last choice would be to resort to a securities sale after that but did note that it is a possibility….
ARDOUR CAPITAL… Asked about shipment and manufacturing capabilities… can ship 2,000 units right now if they were at full capacity by adding shifts andcould do 4,000 annual units if they increased expenses (and if raised capital was what it sounded like). But constraintsrely on external suppliers rather than on internal configurations.
NORTHLAND SECURITIES: Asked if Capstone is on track to be cash flow positive byyear-end? They are based on orders today and backlog. Need plants upmore and need more consistency from suppliers. Using Just in time with materialsis the current environment. Still on track for UL and CEcertification, also Greenvironment(?).
BROADPOINT CAPITAL… On Launch of new products in September, what aremajor hurdles to achieve? Company is past design hurdles and they arelooking at maintainability and getting assembly line up and running…also getting inventories of parts and supplies in timely manner. DOESCOMPANY NEED FINANCING FOR NEW ORDERS (or on new product launches)? Capstone wants to make sure neworders are sustainable before making large capital commitments and they should knowthat in roughly 1 quarter. In R&D and SG&A, besides UTC fundingexpiring in 2010, but if they get other programs then that currentR&D and SG&A should remain mostly the same… Doesn’tanticipate adding major headcount but will increase small headcounthere and there. Noted adding one staff member in Houston because of demand from oil and gas sector and may add one in India it sounded like…..
As far as the stock reaction, shares are not down as much as they the3% after the actual news came out. Shares went up to +1% after LAZARDasked its questions as the first in line, and shares are downalmost 1% at $2.40 currently after the Q&A at 5:50 PM EST.
Jon C. Ogg
August 11, 2008
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