Management Presentation Reliable power when and where you need it. - PowerPoint PPT Presentation

Management Presentation Reliable power when and where you need it. Clean and simple.

Safe Harbor Statement This presentation contains “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, benefits from our cost reduction initiatives, improved operating leverage and organizational efficiency, strengthened distribution channels, new product development and the success of our Signature Series product, benefits and competitive advantage associated with our product, compliance with government regulations, increased sales in Russia, implementation of the Capstone Energy Finance business, growth of our aftermarket service business, growth and diversification of our end markets, increase in revenue and performance in light of macroeconomic headwinds, and attaining profitability. Forward- looking statements may be identified by words such as “believe,” “expect," "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. 2

Who is Capstone Turbine? • Founded 1988 − Commercial launch in 1998 • Public Corporation 2000 (NASDAQ: CPST) • World leader in Microturbines • Headquartered in Chatsworth, California with two manufacturing plants • Over 86 distribution partners and 759 dedicated distributor employees • Approximately 9,000 units shipped worldwide • Over 50,000,000 operating hours • Installations in 73 countries worldwide • Not heavily dependent on government subsidies • Expense reductions enhance operating leverage Darren Jamison, President and CEO of Capstone Turbine Corp., standing alongside C65 CHP units that are preparing for shipment 3

What is a Microturbine? Heat Power Out Out Rotor Group Air In Fuel In EFFICIENCY CHP/TYPE ELECTRIC TOTAL Hot Water 33.0% 85.0% Steam 33.0% 60.0-95.0% Air Foil Chilled Water 33.0% 85.0% 4

Competitive Advantages 5

Global Market Verticals 6

Examples of California Installations * PP – Prime Power * DM – Dual Mode System (Emergency backup power feature) 7

Capstone Strategic Plan Three-Pronged Capstone Business Profitability Plan Reduce Breakeven from Finance Solutions to Capture Develop New CHP Focused $160M at $25% GM to Orders that were Lost from Products & Accelerate $100M at 25% GM Lack of Capital Aftermarket Business Act ction: ion: Reduce business expenses Act ction: ion: Launch new product focused Act ction: ion: Develop a 30% JV with a high 35% from Q1 FY2016 levels. on CHP or Energy Efficiency Markets. net worth individual to provide PPAs Drive FPP and Extended Warranty to customers who have lack of capital. Res esult ult: : Achieved 38% reduction in revenue growth. Res esult ult: : Launched Capstone Energy operating expenses in Q3 from the Res esult ult: : Launched new Signature same period last year. Dropped from Finance JV in November 2015 and $9.9M to $6.1M - which is a 14 year Series product in December 2015 and developed $40M in highly qualified low. new FPP and Extended Warranty projects. products. Status us: : GO GOAL L ACHI HIEVED Status us: : IN N PROC OCESS Status us: : GO GOAL L ACHI HIEVED Comment omments: : Management plans to Comment omments: : Added Sky Solar for Comment omments: : New Signature Series is focus on continued cost reductions. additional capital beyond first $10M. performing well in the field. FPP Initial PPAs anticipated in the coming Backlog business has grown 19% over quarters. the last 12 months to $77.2M. 8

How Capstone is Close to EBITDA Breakeven 1 2 3 4 5 Quarterly operating Aftermarket service Product revenue is Recovering oil New Signature expenses are the recurring revenue rebounding with prices and Series exceeding lowest since March continues to improved rebounding Russia customer 2003 and down expand and margin geographical business driving expectations and 38% versus same is at 35% on the diversification and future revenue new Capstone period a year ago – way to a target of growth in the growth and Energy Finance 50%. energy efficiency recovery of bad business poised to and we continue to market, which are debt from BPC. spur additional do more! FPP Backlog key to achieving growth with repeat business up 19% in $1.5M recovered our diversification customers. last 12 months. and $6.5M goals. remaining as of December 31, 2016. Dramatically lower operating costs combined with an expanding service business, makes the company less reliant on unpredictable product shipments to generate positive EBITDA. 9

1. Previous, New and Future Quarterly Business Models Previous Business New Business Future Business (In thousands) Model Model Model Microturbine Product Revenue $35,000 $15,000 $25,000 Accessories, Parts & Service Revenue $5,000 $10,000 $15,000 Total Revenue $40,000 $25,000 $40,000 Cost of Good Sold $30,000 $19,200 $26,250 Gross Margin $10,000 $5,800 $13,750 Gross Margin (percent) 25% 23% 34% Research & Development Expense $2,900 $1,300 $1,500 Selling, General & AdministraRve Expense $7,100 $4,500 $5,200 Total OperaUng Expenses $10,000 $5,800 $6,700 EBITDA $0 $0 $7,050 EBITDA (margin) _ _ 18% Growing High Margin Service Business Drives Profitability 10

2. Aftermarket Service Growth Service Revenue (Amounts in thousands) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 2013 2014 2015 2016 New Signature Series Product Lineup FPP Service Backlog ($M) Service Gross Margin 40% $90 $80 35% $70 30% $60 25% $50 20% $40 15% $30 10% $20 5% $10 0% $0 FY2013 FY2014 FY2015 FY2016 Q1 Q2 Q3 $35.0 $47.2 $61.2 $66.5 $71.4 $72.7 $77.2 FY2017 FY2017 FY2017 FY2013 FY2014 FY2015 FY2016 Q1FY17 Q2FY17 Q3FY17 50% Service Gross Margins Initially Impacted by Early Stage Product Reliability 11

3A. Sales Pipeline by Region Asia & Australia $138.2 U.S. & Canada Europe & Russia $439.0 $158.2 Latin America $247.7 MEA $112.1 Source: Capstone distributors via Salesforce Amounts in millions 12 Month Diversified Project Pipeline of $1.1 Billion 12

3B. Product Shipments by Vertical Market Q3 FY16 Q3 FY17 Critical Power Renewable Energy Renewable Efficiency 1% 8% 7% Oil, Gas & Other Natural Resources Oil, Gas & Other Energy Efficiency Energy Efficiency 22% 53% Natural Resources 71% 38% Record Energy Efficiency as a Percentage of Sales Goal is 40%-40%-20% 13

4. BPC Sales Recovery $1.5M Bad Debt Recovered $7.0 $6.5M Bad Debt Balance $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 BPC Business Analysis Revenue Bad debt recovery Amounts in millions Rebounding Russian Business - $1.5M in Bad Debt Recovery to Date 14

5. New C1000 Signature Series • 1.0MW Electrical Output • 1.5MW CHP Heat Recovery • Integrated Heat Recovery • Two Stage Air Filtration • Improved Enclosure Design Cervinia, Italy, Commissioned November 2016 Produces power and superheated water at over 80% efficiency for a local district heaRng facility in Northwest Italy. The 1MW unit works in dual mode, which allows customers to operate independently of, or with, the grid in a load sharing capacity. • Lower System Noise Level • Relocated Engine Exhaust Stack • 12 Year Marine Grade Paint • Higher Inlet Fuel Temperature California Oil Producer, Commissioned December 2016 • New System Control Platform The associated gas-fueled unit operates using the onsite associated gas to relieve the flaring requirement for the offshore plaXorm. New Product Focus on Energy Efficiency/CHP Market 15

Appendix Additional Information Reliable power when and where you need it. Clean and simple.

Examples of New York Metro Area Installations * Case Study – can be located on www.capstoneturbine.com/case-studies * GC – Grid Connect System * DM – Dual Mode System (Emergency backup power feature) 17

Research & Development Cost $ C1000S HRM Signature Series Signature Series 1.5MW CHP Performance Cost ReducRon Accessory CHP Program Rev New Controller Fuels New Features Butane, Ethane, Customer Syngas Friendly H2S C200S Benefits of Signature Series Upgrade C600S AFA C250 Universal Kits Boards Smaller Lower Cost Beder Cost Footprint Material & Performance New Service Obsolescence Lighter Revenue 18