Capstone Turbine Corporation (NASDAQ:CPST) reported preliminary fiscal fourth-quarter results that achieved the company’s key goal of having strong cash flow and adequate liquidity to deal with the business challenges posed by the coronavirus (COVID-19) pandemic.
The maker of clean-energy microturbines has responded to the outbreak with a Business Continuity Plan focused on its “employees, customers, supply chain partners and shareholders.” In keeping with the blueprint, Capstone said it is supporting critical Aftermarket Factory Protection Plan (FPP) long-term service contracts and spare parts deliveries to “essential critical infrastructure customers,” such as energy, health care, wastewater treatment, and food manufacturing.
It is doing this while sustaining two key business goals — cash flow and liquidity. The company aims to be adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) positive in the upcoming June quarter.
Capstone’s goal for the quarter was to finish with a minimum of $14.5 million in cash. In addition, the company said it was critical that it dramatically “slow incoming raw materials” to position Capstone to potentially achieve positive working capital in the June quarter.
"I am pleased to report that our cash balance as of March 31, 2020, was $15.1 million and our inventory receipts during the quarter decreased by $4.6 million, or 36%, to $8.1 million compared to $12.7 million in the third quarter which should put us in position to potentially drive positive working capital next quarter," said Capstone Turbine CEO Darren Jamison, in a statement.
Capstone's second key goal is to remain committed to its objective of being adjusted EBITDA positive in the upcoming June quarter. In support of that goal, Capstone executives volunteered salary cuts and developed "an aggressive furlough and cost-control program," which will reduce operating expenses by nearly 25% in the short-term to support an adjusted EBITDA positive quarter with “strengthening aftermarket margins" and the assumption of "rebounding product shipments in June.”
"We have staged over 5.8 megawatt in finished goods and shipped as many FPP spare parts as possible during the end of this quarter to afford customer continuity of both parts supplies and unit shipments and also to lower the potential risks of not reaching our June Adjusted EBITDA positive goal," added Jamison.
Highlights from fiscal 4Q
Capstone clocked up preliminary revenue of $11.3 million for the fourth-quarter of fiscal 2020, compared to $22.0 million in the same period a year earlier. The decline was down to product shipments and project constructions slowing as a result of the coronavirus pandemic, as well as weakness in the oil and gas market.
This is expected to negatively impact the net loss and adjusted EBITDA results for the fourth-quarter of fiscal 2020.
Total cash and equivalents as of March 31, 2020, totaled $15.1 million, down only $1.6 million from to $16.7 million in December 31, 2019, despite lower revenue, pointed out the company.
Capstone received $2.6 million from financing activities during the quarter as it focused on liquidity as part of its business continuity plan.
Inventory receipts decreased by $4.6 million, or 36%, to $8.1 million in the fourth-quarter compared to $12.7 million in the third-quarter.
Factory Protection Plan (FPP) long-term service contract revenue continued to expand despite impacts from the pandemic and was up 16% year-over-year.
The company allocated 0.6 megawatt of new production to grow its long-term microturbine rental fleet, which now stands at 7.6 megawatt, approaching its 10 MW goal.
New gross product orders were approximately $9.1 million during the fourth quarter compared to $9.3 million in the third quarter. Book-to-bill ratio was 2.4:1 for the fourth-quarter of fiscal 2020 on lower shipments compared to 1.2:1 in the third quarter of fiscal 2020.
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