Management Presentation May 2016 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: the competitive advantages of Capstone products over competitors; the size of market verticals and potential market capture amounts; potential applications in industries within market verticals; the plan for EBITDA breakeven; the growth of distributor sales personnel; increased accessory sales; the competitiveness, advantages, and cost-effectiveness of the C1000 Signature Series; the growth of the CHP, energy- efficiency, and renewables markets; market segment growth trends; projected FY2017 sales pipelines; worldwide business expansion, including in Latin America, Africa, Australia, and the Middle East, and rebuilding sales in Russia; growth in the number of projects financed by the Capstone Energy Finance JV and expected project closings; FPP contract sales, and extended warranty sales; C1000 performance improvement; the growth of aftermarket service and the effects of aftermarket sales on gross margins; and benefits from Capstone’s cost reduction initiatives. 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 presentation 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 95 distribution partners and 787 dedicated distributor employees • More than 8,800 units shipped worldwide • Over 50,000,000 operating hours • Installations in 73 countries worldwide • Not heavily dependent on government subsidies • Tremendous business leverage 3
Why Capstone? Capstone Turbine is the world’s leading developer and manufacturer of clean-and-green microturbine power generation systems. With over 100 patents and years of advanced engineering, Capstone offers a comprehensive product line, providing scalable solutions from 30kW Inducer Diffuser to 30MW. Capstone serves six major market verticals, including Oil & Gas, Energy Efficiency, Renewable Energy, Critical Power Supply, Combustion Liner Transportation and Marine. These award-winning, low-emission energy systems operate on a variety of fuels and are compliant with all current emissions regulations without after-treatment. Capstone microturbines provide reliable power when and where you need it. C200 Combustion Process Clean and Simple. C200 Engine December 1998 September 2000 March 2006 December 2009 March 2011 January 2013 March 2015 December 2015 First in market to offer Shipped first 60kW New 65kW Hybrid electric CMT380 C200 achieves CARB C250 concept FPP Backlog reaches New C1000 a commercial microturbine microturbine performance car unveiled emissions certification demonstrated to DOE $61.2M Signature Series microturbine (C30) introduced at LA Auto Show for Digester Gas microturbine introduced Annual Revenue $84K $10.2M $31.0M $24.1M $21.0M $43.9M $81.9M $109.4M $127.6M $133.1M $115.5M June 2000 December 2009 February 2002 October 2007 March 2012 March 2014 December 2015 Company IPO World’s first hybrid Capstone microturbine 65kW model with Annual revenue Walmart concept New Capstone Energy UPS commissioned at first to achieve Calif. high efficiency heat exceeds $100M truck unveiled using Finance entity announced Syracuse University “Rule 21” interconnect recovery achieves with positive Capstone microturbine agreement CARB emissions gross margin range extender 4
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% 5
Competitive Advantages 6
Remote Access & Control Confiden-al. Do Not Distribute. 7
Global Market Verticals 8
Positive Vertical Market Shift Product Revenue 9 Months Product Revenue 9 Months ended December 31, 2015 ended December 31, 2014 Oil and Energy Energy Oil and FY15 FY16 Gas Efficiency Efficiency Gas 42% 52% 55% 37% New focus on growing the energy efficiency market – Leverage new C1000S product 9
Capstone Strategic Plan Three-Pronged Capstone Business Profitability Plan 1) Reduce EBITDA Breakeven from $160M annually at a 25% GM to $100M annually at a 25% GM by reducing operating expenses by 35% 2) Develop New Product & Service Revenue Growth 3) New Capstone Finance Business to capture lost orders 10
1) Reduce Breakeven Level Reduce EBITDA Breakeven from $160M annually at a 25% GM to $100M annually at a 25% GM by reducing operating expenses by 35%. • Consolidation of Executive Team saves $2.2M annually – flattens organization • Voluntary forfeiture of Executive unvested stock options saves approximately $0.7M over a weighted average period of approximately 2.3 years • Voluntary suspension of Executive Bonus Program saves up to $1.0M annually • Suspension of annual merit increase saves approximately $0.6M annually • R&D expense cuts after delay of C250/C370 program and successful Signature Series launch saves approximately $5.5M annually • Sales & Marketing spending reduction and expense shift to distribution partners saves approximately $4.5M annually • Customer and field service department reductions save approximately $3.3M annually • New LEAN manufacturing, key component outsourcing and shop floor consolidation to reduce manufacturing expenses saves approximately $3.4M annually • Linearity of product build plan lowers overtime expense and increases inventory turns 11
Cost Reduction – Revenue Growth Plan Current CEO Leadership EBITDA Breakeven April 2015 $160.0 $140.0 $133.1 $127.6 EBITDA Breakeven April 2016 $120.0 $115.5 $109.4 EBITDA Breakeven April 2017 $100.0 $81.9 $80.0 $61.6 $60.0 $43.9 $40.0 $31.6 $31.3 $28.3 $24.1 $21.0 $17.7 $20.0 $17.0 $12.6 $10.2 $- FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 (a) (a) (a) (a) (a) Adjusted to conform to current fiscal year periods . Organizational Cost Reduction and EBITDA Breakeven Plan: Renew growth from 100 new sales professionals, launch of the new C1000 Signature Series product, new finance entity, focus on the growth in energy efficiency business and expansion in Latin America, Africa, Middle East and Australia. 12
2) New Sources of Revenue Develop New Product & Service Revenue Growth • Enhance top selling C1000 product line with better performance, integrated ICHP for CHP market • Increased accessory sales with new heat recovery module (HRM) for C1000S series • Improved market vertical diversification with more focus on CHP and Renewables • Improved geographic diversification with a heavier focus on growing the business in Mexico, South America, Africa, Eastern Europe, Middle East and Australia • Rebuild Russian business by continuing to support BPC and adding additional distributors in Russia and Commonwealth of Independent States (CIS) • Work with global distribution channel to add 100 new sales professionals and improve our key performance indicators (KPIs) • Continued growth from Service Business with improved Factory Protection Plan (FPP) program and new extended Warranty product • Sell new Signature Series upgrade kits for non Signature Series products 13
New C1000 Signature Series • 1.0MW Electrical Output • 1.5MW CHP Heat Recovery • Integrated Heat Recovery • Two Stage Air Filtration • Improved Enclosure Design • Lower System Noise Level • Relocated Engine Exhaust Stack • 12 Year Marine Grade Paint • Higher Inlet Fuel Temperature • New System Control Platform 14
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