Second Quarter Revenues of $20.8M, up 21% from $17.2M in the Second Quarter Last Year and up 18% Year-over-Year for the First Half of Fiscal 2023
Second Quarter Adjusted EBITDA Improved 19% Year-over-Year and 66% Year-over-Year for the First Half of Fiscal 2023
Capstone Green Energy Corporation, announced its financial results for the second quarter ended September 30, 2022, as the Company continues to execute on its Energy-as-a-Service (EaaS) business plan.
Second Quarter and First Half Fiscal 2023 Highlights:
? Revenues for the second quarter ending September 30, 2022, were $20.8 million, up 11% from $18.7 million in revenue during the first quarter ended June 30, 2022, and up 21% from $17.2 million in the year-ago September quarter.
? Revenues for the first half of fiscal 2023 totaled $39.4 million, up 18% from $33.3 million from the first half of fiscal 2022, as the Company executes its EaaS growth strategy.
? Gross margins for the second quarter ending September 30, 2022, were 11% compared to 25% in the first quarter, which ended June 30, 2022. Gross margins decreased primarily due to increased costs in the company's supply chain, specifically related to C1000 enclosures and the need to source alternative recuperator materials at a higher relative cost to meet customer delivery requirements.
? Net loss of $4.9 million for the second quarter ending September 30, 2022, improved 18% from a net loss of $6.0 million in the year-ago September quarter. Net loss increased from $2.1 million from the first quarter 2023, in large part due to approximately $1.6 million of additional supply chain expenses, freight and expediting charges.
? Adjusted EBITDA improved 19% to negative $2.2 million from negative $2.7 million in the second quarter year-over-year but decreased from a positive $0.4 million for the first quarter ending June 30, 2022, in part as a result of the approximately $1.6 million of additional supply chain expenses, freight and expediting charges.
? Adjusted EBITDA improved 66% to negative $1.7 million for the first half of fiscal 2023 compared to negative $5.0 million in the first half of fiscal 2022 as a result of the continued growth of the high-margin EaaS business and reduced operating expenses offset by the additional supply chain expenses, freight and expediting charges.
? EaaS long-term rental units and re-rental units under contract on September 30, 2022, totaled approximately 34 MW versus 12.7 MW on September 30, 2021, representing 168% growth year-over-year. Today, the EaaS long-term rental units under contract are approximately 39 MW, representing significant progress toward the company's goal of 50 MW under contract by March 31, 2023.
? Total revenue from EaaS rentals was $1.8 million for the second quarter, up $1.2 million or 200% from $0.6 million year-over-year. The gross margin for the EaaS rental business continued to be strong at 72% for the second quarter.
? Gross product bookings for the second quarter ending September 30, 2022, were robust at $15.4 million, up from $12.4 million in the previous quarter ended June 30, 2022, demonstrating the ongoing success of the company's current growth strategy.
? The product Book-to-Bill Ratio improved to 1.6:1 in the second quarter ending September 30, 2022. The ending product backlog on September 30, 2022, was $28.9 million, up $4.1 million or 16.5% from $24.8 million on June 30, 2022.
? Total cash as of September 30, 2022, was $23.8 million, up from $16.9 million as of June 30, 2022. The increase of $6.9 million was primarily related to the net proceeds of the $7.3 million Lake Street public equity offering on August 23, 2022.
? Net cash provided by operating activities was $0.9 million, primarily as a result of $3.8 million in cash provided by working capital as the company’s Days Sales Outstanding, or DSO, dropped from 123 days in the quarter ending June 30, 2022, to 85 days in the most recent quarter.
? To mitigate global supply chain shortages, parts price increases, and higher freight costs, the Company plans to enact a new across-the-board product, spare parts, and FPP service contract price increase on January 30, 2023 in addition to remediating the recent higher costs associated with C1000 enclosures and recuperator materials.
"The top-line revenue growth in our second quarter is very encouraging and reinforces our belief in our strategic direction. However we faced a strong headwind in significantly higher C1000 enclosure costs and expensive alternative recuperator materials that we needed to procure in order to maintain our customers’ scheduled deliveries. We believe these cost increases are short-term and expect to work through both of these supply chain issues in the current quarter. We look forward to a return to more normal Adjusted EBITDA results in the fourth quarter and beyond as costs normalize,” said Darren Jamison, President and Chief Executive Officer of Capstone Green Energy.
“The most important take-away from our second quarter results is the continued growth of our EaaS rental business and the benefits it brings. Specifically, it drives higher margins, generates more constant and predictable revenue, and enables us to leverage a more streamlined staffing model relative to that of a traditional industrial manufacturing company. Furthermore, the solution is attractive to our customers across various industries as it helps them to manage capital costs and meet environmental impact targets directly, while generating an attractive return for Capstone and our stockholders," continued Jamison.
"Capstone’s key goals for the current fiscal year remain growing the top-line and achieving positive Adjusted EBITDA on a sustainable basis. We intend to accomplish this by accelerating the growth of our EaaS business and boosting balance sheet liquidity through a combination of revenue growth and leveraging the benefits from last year’s cost reduction efforts. We see several factors helping to drive the growth, including the efforts of our Capstone Direct Sales organization, expansion of our global Distribution network, and increased demand related to the US Inflation Reduction Act (IRA). Not only do we expect these factors to drive growth in the second half of this year, but we also expect to see continued tailwinds well into next year,” concluded Mr. Jamison.
The signing of the Inflation Reduction Act (IRA) in September was pivotal event for Capstone and its customers. For example, the tax credit available to microturbine combined heat and power (CHP) projects, which is a common customer solution for Capstone, will increase from 10% to 30% for projects that are placed in service or safe harbored by the end of 2024, and the IRA reinstates the tax credit for biogas energy projects. This is significant incentive for these projects and is expected to provide a robust backdrop for Capstone’s CHP technology platform.
Additionally, a bonus credit of 10% is available for projects that meet domestic content requirements or are in energy communities. Capstone expects its US based manufacturing facility to be eligible for the domestic production credit to further bolster the attractiveness and economics of our products. The legislation also adds new covered technologies, including energy storage, microgrid controllers, and hydrogen production facilities, several of which relate to Capstone’s core products.
