Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Capstone Turbine Corporation (NASDAQ:CPST)

F4Q10 (Qtr End 03/31/10) Earnings Call

June 14, 2010 4:45 pm ET

Executives

Jayme Brooks – VP, Finance & Chief Accounting Officer

Darren Jamison – President & CEO

Ed Reich – EVP & CFO

Jim Crouse – EVP, Sales

Mark Gilbreth – EVP, Operations and Chief Technology Officer

Analysts

Sanjay Shrestha – Lazard Capital Markets

Eric Stine – Northland Capital Markets

Shawn Lockman – Ardour Capital

Shawn Severson – ThinkEquity

Operator

Good day, ladies and gentlemen and welcome to Capstone Turbine Corporation earnings conference call for fourth quarter and fiscal year 2010 financial results ending March 31, 2010. My name is Stacey and I'll be your conference moderator for today. (Operator instructions) As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Ms. Jayme Brooks, Vice President, Finance and Chief Accounting Officer. Please proceed.

Jayme Brooks

Thank you. Good afternoon and welcome to Capstone Turbine Corporation’s conference call for the fourth quarter and year ended March 31st, 2009. I am Jayme Brooks, your contact for today's conference call.

Capstone filed its annual report on Form 10-K with the Securities and Exchange Commission today, June 14, 2010. If you do not have access to this document and would like one, please contact Investor Relations via telephone at 818-407-3628 or email ir@capstoneturbine.com or you can view all of our public filings on the SEC website at www.sec.gov or on our website at www.capstoneturbine.com.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future financial performance in attaining profitability, the ability to reduce costs and improve inventory turns and contribution margins, higher average selling prices, continued growth in current market conditions, the availability of a line of credit, the success of the C200 and C1000 products, new products and technologies, compliance with certain government regulations and increased government awareness and funding of our products, growing market share and market adoption of our products, new applications for our products, growth in the oil and gas, office building, biogas, UPS and hybrid electric vehicle markets, the successful integration of the Calnetix Power Solutions Microturbine Business, revenue growth and increased sales volume, our success in key markets, our ability to enter into new relationships with channel partners and distributors and other third parties, the energy-efficiency, reliability, and low cost of ownership of our products, and the expansion of production capacity and manufacturing efficiency.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties, included the following. Our expectations about expansion into key markets may not be realized. Certain strategic business initiatives and relationships may not be sustained and may not lead to increased sales. We may not be able to reduce our manufacturing costs.

The growth in our backlog has significantly exceeded our internal forecast. In order to meet this increased demand, we may need to raise additional funds to meet our anticipated cash needs for working capital and capital expenditures. The current recession can make it difficult or impossible for us to raise necessary funds and for our customers to buy our products. We may not be able to utilize our line of credit, for example as a result of a failure to meet a financial covenant. We may not be able our expand production capacity to meet demand for our products. We may not be able to obtain sufficient materials at reasonable prices. Our release of new products maybe delayed or new products may not perform as we expect.

We may be unable to increase our sales and sustain or increase our profitability in the future. We may not be able to obtain or maintain customer distributor and other relations that are expected to result in an increase in volume and revenue. We may not be able to comply with all applicable government regulations. We may not be able to retain or develop distributors in our targeted markets in which case our sales will not increase as expected.

We may not be able to successfully integrate the acquired Calnetix asset and achieve productive relationships with the distributors. And if we do not effectively implement our sales, marketing service and product enhancement plans, our sales will not grow and therefore, we may not generate the net revenue we anticipate.

These are among many factors, which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements. We refer you to the company’s Form 10-K, Form 10-Q and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of these 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.

I will now turn over the call to Darren Jamison, our President and Chief Executive Officer.

Darren Jamison

Thanks, Jamie. Good afternoon and welcome everyone to Capstone’s fourth quarter and fiscal year ended March 31st, 2010 earnings call. With me today is Ed Reich, our Executive Vice President and Chief Financial Officer; Mark Gilbreth, our Executive Vice President, Operations and Chief Technology Officer; and Jim Crouse, our executive vice president of sales and marketing.

Today I will start the call with a general overview of the fourth quarter and fiscal 2010 annual results, and then turn over the call to Ed who will review the financial results. Ed will then turn the call back over to me and I will discuss what is happening in some of our key markets and update you on our progress toward our strategic objectives of positive gross margin and positive cash flow. As the operator mentioned, we will be using slides today in our presentation that can be found on the Capstone website under Investor Relations presentation section.

We’ve had an extremely busy quarter as the company continues to build positive momentum. Slides 2 and slide 3 of our presentation summarize some of the recent events. As we signed up new distributors in Japan, Nigeria, Pakistan and in the US. Specifically in the US, I am very pleased with our new distributor Western Energy Systems and that will be covering most of California, Oregon, Alaska and Hawaii. Western Energy is a very experienced company with a proven track record for selling and servicing GE Jenbacher natural gas internal combustion engines, and the combined heat and power and biogas projects.

The market adoption of our new C1000 products continues to accelerate. During the quarter, C1000 [ph] being sold into Italy, Korea, Mexico and most recently Venezuela. Capstone has now sold C1000 to all over the world including Russia, France, Germany, Poland, Spain, Australia, Mexico, Brazil, Colombia, Venezuela, Canada, and of course the United States.

Capstone recently announced the UL listing of the C1000 products that allow us to not only deliver the C1000 for the US market that are already in backlog, but also allow Capstone to more aggressively market the C1000 products in the US.

As the electric vehicle market continues to expand, I'm positioning Capstone to be a key player in the Range Extender market by offering a complete line of hybrid electric drive solutions as announced minutes ago. We also recently announced the first hybrid electric boat demonstration project in the Netherlands, and our first Class 8 Tractor-Trailer Truck application with US 1 Industries here in California.

Capstone turbines are already operating as Range Extenders in electric buses in New York, Charlotte and Baltimore, and I would talk more about our electric vehicle strategy and product offering later in this call. Capstone must also had many product development firsts recently, as we sold and shipped our first C1D2 explosion proof C200 offshore oil and gas product, and our first liquid fuel C200 units to China in the last couple of weeks.

We also recently completed and released our California Air Resources Board or CARB C200 for digester applications, our C65 CARB product for wellhead gas applications and are awaiting our C30 CARB liquid fuel for transit bus applications. These three additional CARB certifications further prove that Capstone is a world leader in clean energy MicroTurbine technology as CARB is the world's most stringent environmental standard.

We also received noticeable award on another product development grant for the US Department of Energy to develop our next generation MicroTurbine, rated at a 370 kW with an incredible 42% efficiency. These were in addition to our two other DOE and BIRD Foundation grants for development of an agricultural biogas product and a sober concentrator product. These three new DOE grants and BIRD Foundation grants will help Capstone develop the next generation of products be an integral part of Capstone’s future product development path. So I'm very pleased with our team's ability to win government funding, to help ensure that Capstone continues to be the world leader in microturbine technologies for years to come.

Also during the quarter we successfully integrated the strategic acquisition of the Calnetix Power Systems TA100 microturbine product and 125 kW waste heat generator OEM product. I'm pleased to report that we shipped 11 TA100s during the quarter, and recently received orders for our first two 125 kW waste heat generator systems for installation on Capstone products in landfills in France. As I said earlier, it has been a very busy quarter signing of new distribution partners, releasing new microturbine products, certifying to different CARB standards, winning new DOE grants, listing the C 1000 to the UL listing, all while integrating our strategic acquisition of Calnetix Power Systems.

During the fourth quarter, we continued to experience the trend of orders shifting to the right and finished with approximately 3 million of finished goods on the loading dock here at Capstone. We experienced higher than usual charges to cost of sales as we made field upgrades to C1000s currently in the field to improve operations at extreme high and extreme low temperatures, and upgrade and undersize the brake resister and cable that are used to take when the turbine is running at no load or low load conditions.

Capstone is taking a very aggressive approach to any product issues with the C200 and C1000 family of products. As each unit in the field is highly visible and will set hundreds of production customers’ expectations on Capstone’s brand and performance. As much as I air freighting parts around the world and fixing units that have not yet failed, I cannot and will not sacrifice Capstone’s brand for the sake of saving money or improving quarterly performance.

Overall, I continue to be very pleased with our direction of the company and the results for fiscal 2010 as we set new company highs in both annual revenue and new orders. Our revenue for the year was an amazing 61.6 million, which easily beat last year's 43.9 million in total revenue. That is a 40% year-over-year revenue growth with 73.9 million in new product orders in the face of the worst economic condition in decades.

If you analyze the bookings, we added another 22 million in Q4 on top of the 31 million in Q3 to finish the year with 53 million in new orders in the last two quarters. That is truly remarkable and gives us great momentum going forward in fiscal year. Obviously it is very difficult to judge an early stage company like Capstone on a quarter by quarter basis, therefore if you look at slide 4, it shows you the progress of Capstone from fiscal 2005 through fiscal 2010 just completed.

As you can see from the chart, Capstone has grown from 17 million in revenue back in 2005 to the 61.6 million in revenue today. Gross margins came down from negative 51% to negative 14%, and if you look our analysts were anticipating 102 million in revenue in fiscal ’11 with 13% positive gross margins.

R&D expenses have dropped from 69% of sales to 11% of sales, while SG&A has come down from 122% of sales or 46% of sales. Even though we have a lot of work to achieve our profitability goals, you can see the operating losses dropped dramatically from negative 242% to negative 71%.

However, sometimes it helps to step back and look beyond the numbers. If you look at the next slide, slide five, you will see that Capstone of yesterday all I can say 2007 [ph]. The Capstone what I began to see [ph] had a very limited product family with only C 30 and a C65 product, and the company was actually in the process of phasing out the C 30 product.

Capstone only had 25 distribution partners, and more importantly only 8 had repeat orders the previous year. Back in 2007 we had tremendous confusion in the market channels with limited distributed specificity, one year distributor agreements, and the Capstone factory often selling direct to customers, obviously undermining the channels to market.

The company had poor product documentation and no CRM system. Even worse, Capstone had all but abandoned the dream of electric vehicles, and the company only offered the C 30 in the HEV marketplace. The previous management did do an excellent job in fixing the product’s reliability issues, but Capstone had a very weak service organization.

The company had dramatically improved the meantime between failures or MTBF, but it had a 38 meantime to repair, MTTR, therefore closing customer goodwill after the first product failure in the field. Also when I joined the company, we did not offer long-term service solution like today's very successful Factory Protection Plan of FPP.

Our primary focus back in 2007 was on the New York market, and we really had no green marketing or branding strategy. Capstone had very limited carbon UL certifications and only liquid fuel was available in the C 30 product. As I said that was in the process of being phased out. However, the most disturbing issue when I became CEO was 38% annual employee turnover rate, which essentially gave Capstone a new workforce every couple of years, and obviously was totally unacceptable.

If you go to slide 6, it highlights Capstone today, 2010. As Capstone now features a broad product family with the C30, the C65, the newly acquired TA100, the C200, C600, C800, and C1000 products. Today we have approximately 95 distribution partners worldwide, of which 60% had multiple orders in the last fiscal year. We are in the process of adding a handful of new distributors, but for the most part we are what I call and Jim call the weed-and-feed phase of channel development.

We are working diligently to upgrade, not phase out the C 30 product, with new hardware and new certifications. We have not only improved the MTBF, but also dramatically improved the MTTR for all of our products worldwide. We now offer an industry unmatched 5-year and 9-year comprehensive factory protection plan, and have over 648 units under long-term service agreements at the end of March.

Today, our distributors are business partners not our competitors, as we work shoulder to shoulder to build our businesses together. Distributors have exclusivity by territory or market vertical, so they can justify investing their capital in additional salespeople, engineers, factory trained technicians and facilities. We have greatly improved our distribution training programs and have a very robust green marketing and branding strategy.

Today Capstone is the leader in CARB, UL, and CE certifications and now has more fuel options available across the product range, including the C30, C65, C200, and C1000 series for diesel, bio diesel, kerosene and propane. We have innovative new products like the Hybrid vehicle drive systems announced today, the Hybrid UPS systems, the Hybrid Marine systems. In addition, we launched the factory rental program early last year.

However far and away, the most important improvement to Capstone is our employee turnover, which is now less than 6% as we are now holding on to the most critical asset any technology company can have and that is our valuable employees.

If you turn to slide 7, Capstone continues to demonstrate strong revenue growth year-over-year for the last 11 consecutive quarters. I would venture to say this is a result not matched by many companies in today's market. However, this is proof of our growing market share and market adoption of our new ultra clean and energy efficiency products, and slide 8 illustrates how Capstone's product backlog increased substantially as a result of the record 53 million in new orders over the last two quarters.

Total product backlog not including parts, service, accessories, FPP contracts at the end of fiscal 2010 was $86.3 million. Capstone’s incredible product backlog represents a full year’s worth of shipments at a healthy growth rate and sets up another tremendous year of projected double-digit revenue growth in fiscal 2011. Our growing revenue and backlog will drive our company for our near-term goal of positive gross margins and profitability as long as we continue to execute our cost reduction programs.

I will now turn the call over to Ed to review the specific financial results, but more importantly give you some additional transparency into Capstone’s progress on those critical cost reduction programs, growing product direct material costs, while simultaneously increasing product average selling prices.

At this point, turn the call over to Ed.

Ed Reich

Thanks, Darren. Good afternoon everyone. I would like to provide you with our financial results for the fourth quarter and full fiscal 2010, which ended on March 31, 2010. I will begin with a recap of the major items on our balance sheet. The significant sequential changes from the Q3 to Q4 2010 balance sheet were as follows.

Inventory decreased in Q4 to 23.2 million from 25 million in Q3 with inventory turns at about 2.7. I'm pleased to report that inventory decreased $7 million from the prior year on revenue growth of 40%. Accounts receivables increased in Q4 to 18.5 million from 13.9 million in the prior quarter as a result of heavy end of quarter shipments.

Accounts payable and accrued expenses also increased to 17.1 million in Q4 from 14.4 million in Q3, again mainly due to higher payables as a result of heavy end of quarter shipments. Cash increased to $47.3 million in Q4 from $15.7 million in the prior quarter. The increase was due to $42.5 million in net cash proceeds from our equity financing completed in February of 2010, and was offset by $10.5 million of cash used in operations during the quarter.

Sequential changes from the Q3 to Q4 income statement are as follows. Total revenues increased 2% sequentially to 16.3 million. Product revenue increased 9% to 13.5 million in Q4 versus 12.4 million [ph] recorded in Q3. Units shipped increased by 37 sequentially, although the average selling price per unit was down in Q4 as a result of both product revenue and pricing mix.

Accessories, parts and service revenue decreased approximately $800,000 to 2.8 million in Q4 from 3.6 million in Q3. The majority of the decrease was the result of increased seasonality in parts and lower FPP service revenue. We made significant progress over the last five quarters of reducing materials costs as seen on slide nine. Note that material margins have improved significantly as average selling price per unit increased along with a corresponding decrease in average material cost per unit.

As you can see on the slide, we saw over 25% improvement in average profit margin per unit from the end of last year and a 2% improvement between the third and fourth quarters of this fiscal 2010. As you can see further on slide 10, despite the 2% improvement in product material margins for the quarter, we reported a gross loss of $2.2 million greater than the Q3 loss on similar revenues. Q4 margins were affected by $300,000 in unfavorable revenue mix, from higher unit sales, and had a lower average selling price per unit, and decreased sales of higher margin accessories, parts and service.

Also related to revenue was the product mix effect on margin of $0.5 million or $500,000 related to the Q3 sales of nine C1D2 offshore units with no such sales – of such units in Q4. As mentioned earlier, we experienced heavy end of quarter shipments during the quarter. This caused us to incur overtime in the factory along with higher payroll related costs, as our fourth quarter begins on January 1 when payroll taxes are just resetting for the year.

The combined impact of this on margins was approximately $200,000, along with another $200,000 of lower overhead absorption to finished goods this quarter. We incurred $700,000 in incremental scrap inventory adjustments and material revaluations during the quarter that we expect to curtail as we move to tier 1 suppliers with regard to scrap and inventory adjustments, and have less impact from material revaluations as we reach our target materials costs.

Finally, margins were affected by incremental warranty costs, primarily related to field upgrades on the C200 and C1000 series of products in an effort to bring the fielded [ph] units up to current factory specs. We also expect these costs to decrease over the coming quarters. The total impact of these costs as you can see on the slide was $2.6 million, and after adding the back to GAAP margin, you can see approximately 2% margin improvement between the two quarters.

We spent $2 million in the fourth quarter on research and development, which is slightly less than $2.1 million we spent the same period last year. We spent less on salaries and other departmental costs, which was offset by the completion of the C200 development program, and that had benefits in the prior year comparable quarter.

SG&A costs were 7.9 million in the fourth quarter, which was up $1 million from the same quarter last year because of higher professional fees and increased insurance costs. Our net loss of 12.9 million for the fourth quarter was $0.05 per share, compared to 12 million or $0.06 per share loss for the same period last year.

Now I would like to review the year ended March 31, fiscal 2010. Total revenue grew 40% for the prior year to $61.6 million. Product revenue increased 50% from fiscal 2009 levels to $48.7 million. We had unit shipments this year of 499 which were almost flat when compared to 494 last fiscal year because of strong shipments of our C200 and C1000 series products and the started TA100 shipments. As a result, megawatts shipped increased by 55% to 52.8 mw.

Accessory, parts and service revenue grew 12% to $12.9 million from fiscal 2009. The gross loss was 8.4 million or 14% of revenue during fiscal 2010 compared to $5.3 million, or 12% of revenue during the last year. The increased gross loss was the result of higher warranty and inventory charges and a change in product mix by selling more of the new C200 and C1000 Series systems in fiscal 2010, which currently have a lower margin than our overall average margin mix that we experienced in fiscal 2009. This was offset by a decrease in our production and service overhead spend for the year of $1 million.

R&D expenses were down 14% to $7 million from $8.1 million during the same period last year. The net decrease in R&D expenses of $1.1 million was from lower salaries and department spending offset by reduced benefits as a result of us completing the UTC funding for the C200 development.

SG&A expenses were essentially flat decreasing $200,000 from the prior year. Capstone’s net loss was $57.2 million for the year or $0.34 per share, an increase of 25.5 million from the $41.7 million loss or $0.25 per share reported for fiscal 2009. The higher net loss was primarily attributable to the result of the adoption of accounting standards clarification 815, the standard for derivatives and hedging accounting and with our warrants. It has affected our accounting on our warrants with antidilution provisions.

We recorded non-cash charges of $22.9 million to warrant liability expense during the year. Capstone's net loss for fiscal 2010 before considering this non-cash warrant liability charges would have been $44.4 million compared to $41.7 million or $0.25 a share for fiscal ’09, which did not have any warrant liability expense. Please refer to slide 11 for reconciliation. Backlog at the end of the fourth quarter was $86.3 million, up 24.8 from the same period last year.

That concludes my comments on Q4 and fiscal year end 2010 results. Now back to Darren.

Darren Jamison

Thank you, Ed. As an encouraging sign of the economic recovery, we continue to see quotation order activity grow on all four of our vertical markets, which is reflected on slide 12. Most of our markets provide us a balanced and diversified portfolio as we look for opportunities in these markets and geographies worldwide. However, I am still most excited about the activity in oil and gas, office building, CCHP, biogas, the UPS product and the hybrid electric vehicle markets. Stepping back and looking at the size of the overall vertical markets, it is important that is impressive is our 86.3 million in backlog is, it is up from 1% from our total market opportunity across our addressable markets.

As you can see from slide 13, Capstone’s addressable markets are estimated to be in excess of $14 billion annually. We continue to plant seeds around the world with every new installation of our exciting new products, whether it is our C 200 or C 1000 series, our Hybrid vehicle market product or UPS products.

I'm amazed by the opportunities for our US transit bus customer design line, who has over 500 buses in backlog for New York, Baltimore, Charlotte, Denver and several California transit properties that are now able to take product with our CARB certification into C30 product. In addition, we are also working with bus OEMs in Italy, Russia, and most recently South America.

Capstone is developing a multi-pronged HEV strategy to capture market share in the fast growing electrical vehicle market. One of our strategies, as outlined on slide 14, is to target class 3 to class 8 new trucks and selected retrofit vehicles with the new Capstone branded complete system solution as shown on slide 15 and slide 16.

As the press release announced today mentions, Capstone is partnering with Cal Motors and Parker Hannifin Drive systems in North Carolina to develop this new solution. As part of this complete HEV drive solution, Capstone will drive the entire system except the batteries. Capstone and Cal Motors are developing an automotive grade water cooled inverter system that replaces the existing caps on engine control modules in battery control modules as shown in the next slide, slide 17. This new water cooled version of the inverter is 88% smaller and lighter, which obviously is extremely beneficial for over the road automotive applications.

Capstone is in talks with several companies to develop electric trucks with Capstone range extenders for delivery vehicles and trucks [ph]. The plug-in electric vehicle market continues to be a very small portion of Capstone's revenue in fiscal 2010, which should continue to grow as product demonstrations turn into product orders, and new OEM agreements are signed and come online.

For the passenger vehicle market, Capstone is targeting the automotive OEMs via strategic drive train partners. Capstone is currently collaborating with two Fortune 500 automotive drive train companies that manufacture and build high-volume low-cost 10,000 hour automotive version of the C30 and C65 product. Both firms have finalized their cost and design analysis of the new automotive product, and Capstone has executed a detailed MOU with one of the two potential partners.

The strategy is for one or both of these partners to manufacture lower cost microturbine parts of our current industrial product. We worked together simultaneously to engineer and develop a new lower cost, shorter life automotive product with a target selling price less than $5000.

The marine market will continue to utilize our standard industrial grade product with minor modifications for the marine environment. This product is being offered for sale to new boat OEMs and retrofit shipyards. The microturbine will be used as a marine auxiliary genset, prime power diesel electric, or a range extender for pure electric boats. Capstone will also offer this current industrial HEV solution in the construction and off-highway equipment and the military markets.

Earlier in this call, I talked about the Capstone of the past and the Capstone of today, but let me take a minute and talk about the Capstone of tomorrow. We have the products today to drive this company to several hundred million in revenues, and reach our operating target of 40% gross margins, 15% operating profit and north of 5 inventory turns. However, we cannot stand still and we must continue to develop new innovative energy products, and slide 18 illustrates the next generation of Capstone products of tomorrow. All of these products are in development and have various amounts of outside third-party funding.

First, we will increase the output and efficiency of our very successful C200 product to 250 kW and 35% electrical efficiency. So it could only take four C200s to make the popular C1000 product, thus lowering the size, weight and cost of the C1000 product. Next we will develop the new C370 product by combining the C250 and C65 as illustrated in slide 19. That will make Capstone more first cost competitive with the internal combustion engines of today, and provide Capstone with a first cost similar to that of the engine with lower CARB certified emissions, lower life cycle costs, higher overall system reliability and as good or better overall system efficiency at an outstanding 42%.

When I look to the future, I see a cutting-edge industrial clean tech company that continues to dramatically grow revenue and market share in all of our vertical markets worldwide as customers and governments look for more cost effective and energy-efficient clean tech solutions. I see company with support from the US Department of Energy continuing to be a leader in the new clean tech product development low emission solution and high efficiency energy systems. I see a company that is committed to broaden the range of microturbine applications, until Capstone is a household name and micro turbines are an integral part of everybody’s everyday business life and personal life.

I see a future where Capstone with strategic automotive partners becomes a major force in the new electric vehicle movement that will surely shape the next generation of car consumers. I see a new Agricultural SynGas product used on farms around the world, who take non-food crop waste and turn it into a much needed renewable green energy, to help countries meet their growing power demands and lower their carbon footprint.

I see a future where fuel combustion energy inside a microturbine can be replaced by external energy sources such as solar energy, like products like HelioFocus, as shown on slide 21 and slide 22, or energy from a fuel cell stack like Capstone did with fuel cell energy years ago, or maybe even energy from a biomass combustion system. I see these products principally use thermal energy, but they can switch to fossil fuel combustion systems at night during cloudy days or when thermal energy is not available for 100% reliable base loaded system.

I don't see these as dreams, but as the next generation of products that are now in product development by Capstone, with help from our strategic partners and with critical funding support from the DOE. These products can and will be successfully developed just like Capstone developed the C 200, developed the C1000, developed the Hybrid UPS, the liquid fuel HEV and marine products.

Slide 23 and 24 graphically show what I see as Capstone’s clear path to our short-term goal of positive gross margins, followed by a near-term goal of profitability. As important these goals are to Capstone, its stockholders and employees we cannot take our eye off the future. Every journey that is worth taking has its unexpected twist and turns, unforeseen bumps in the road, but good companies with good products, good management teams overcome those obstacles and find a way to deliver continued revenue growth, improved operational efficiencies, lower direct material costs, increasing average selling prices, and improved management of inventory.

Capstone is doing all of those things today and more to make sure that Capstone of today is sustainable, so that Capstone of tomorrow can provide the next generation of innovative, efficient and clean energy solutions that the world wants and needs right now. At this point, I would like to open the call to your questions from the analysts.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Sanjay Shrestha with Lazard Capital Markets. Please proceed.

Sanjay Shrestha – Lazard Capital Markets

Hello, thank you. Good afternoon guys, a couple of quick questions here, in terms of the backlog of $86 million somewhat, is that all 12 month backlog or how should we think about how much of that is 12-month, and what that number looks like when you put the service contract in the next?

Darren Jamison

Yes, I did. This is Darren. Most of the backlog is considered short-term or 12 months. There is a small portion of it that would be probably 5 quarters out – sorry, 4 quarters and 5 quarters, but all of that will most probably be in the next year. As you know part, service and accessories is about another 15 million to 20 million in revenue with long-term service agreements. So, overall if we delivered all that backlog with parts and service, you would be north of $100 million of fiscal 2011.

Sanjay Shrestha – Lazard Capital Markets

Okay. Perfect. And I know you went through a lot of short-term and long-term opportunity, sort of focused on profitability and near-term gross margin positive dynamics, I mean, when you guys are sort about thinking about as strategically right. I mean, help us understand from a priority standpoint what are the near-term markets you guys are going after and you know what is sort of the near-term top priority of the company while positioning it well for the maximum long-term opportunity?

Darren Jamison

Really, we're taking a diversified portfolio approach. Obviously, renewables has been a mainstay of the company. We continue to look at wastewater treatment plants, landfills, common [ph] agricultural waste, all that has been core to our product today. The oil and gas sector continues to be very strong. We are doing the Emal [ph] pipeline in Siberia. We're doing a lot of coal steam gas in Australia, plus some opportunities here in the US. So I would say oil and gas and renewables are the backbone of our backlog today, and our primary focus.

The HEV market that I mentioned is growing. It is a very small piece of our revenue, but I would say and Jim can jump in, but it is probably taking 20% of our focus today, because we had to figure out how to approach the market, select our partners and work with our strategic partners on a long-term automotive solution, but short-term definitely it is the heating ph power in the renewables.

Sanjay Shrestha – Lazard Capital Markets

Got it. One more follow up from you guys, then I will hop back into queue, so on the combined heat and power market, it seems like you guys have been sort of able to increase pricing and cost is going down. So that should translate into better margin profile, what does the current spot price in natural gas mean to you guys within that segment?

Darren Jamison

I will let Jim jump on that.

Jim Crouse

Hi, Sanjay.

Sanjay Shrestha – Lazard Capital Markets

Hi, Jim, how are you?

Jim Crouse

Good, good. The price of natural gas certainly drives interest in our product, and I think long-term stability is the most important factor. I think yes, between

$4 and $8 makes most US markets have a relatively attractive spark spread, and justifies the installation of our type of equipment.

Darren Jamison

Yes, I think as Jim said, the biggest issue is gas instability, because when folks are trying to analyze a project, and if gas is moving around a lot, they are not sure what numbers are put into their financial performance. So, as long as gas stays very stable and in the range Jim mentioned, the economics is very good. Our biggest challenge on the CHP side has really just been tight financing and peoples’ capital budgets being slashed. As the financing comes back and capital budgets come back, we got several projects out there that we think will move forward throughout the pipeline.

Sanjay Shrestha – Lazard Capital Markets

Okay, and then one last thing, then guys as we think about the profitability in your existing backlog versus the year that you just closed, what would be the order of improvement given the, you know, you guys have been able to do the right thing from a pricing, everything go in the right direction, and then from the working capital and the cash flow standpoint, how should we think about fiscal ‘011?

Darren Jamison

Let me take the pricing first, as you know our backlog, we have three price increases baked into that backlog. Total is 21% on the C1000 product. What is critical is we had a great Q3 which was new orders, which was right in front of our latest price increase of 6%.

Sanjay Shrestha – Lazard Capital Markets

Okay.

Darren Jamison

That makes the 22 million in Q4 that much more impressive that that was people that didn't pull orders up. They were actual orders that came in Q4 after the price increase. So we're seeing for the most part with the exceptions of oil and gas orders moving the numbers around. We are seeing ASPs go up every quarter, and as Mark and his team execute on the cost reduction strategy, we are seeing our material cost go down every quarter.

So we should see as the older product burns off, more and more of the 50 million booked in the last two quarters come through. We should continue to see our ASPs go up and our DMCs go down.

Sanjay Shrestha – Lazard Capital Markets

Okay, okay. And on the cash flow front?

Ed Reich

On the cash flow Sanjay, we expect – we need to keep focusing on the DMC reductions, right. It is critical to the company in this coming year.

Sanjay Shrestha – Lazard Capital Markets

Okay.

Ed Reich

In driving cash as well as leveling out shipments during the quarter, but we expect the burn to continue to decrease over fiscal ’11 giving us sufficient cash balances along with our line of credit from Wells Fargo to get us through the year.

Sanjay Shrestha – Lazard Capital Markets

Okay. That is great. Thanks a lot, guys.

Darren Jamison

Thanks, Sanjay.

Operator

Your next question comes from the line of Eric Stine with Northland Capital Markets. Please proceed.

Eric Stine – Northland Capital Markets

Hi, everyone. Thanks for taking the questions.

Darren Jamison

Hi, Eric.

Eric Stine – Northland Capital Markets

Did I hear correctly that you had $3 million in product sitting on the dock at the end of the quarter, and if that is the case could you just talk about the product specifics, what the application was for and whether that shipped in this quarter?

Darren Jamison

Yes, it was multiple customers, a little bit in Europe and a little bit in South America, a little bit in Russia. Our Russian distributor had been a contributor to product on the dock three quarters in a row. The good news is we are seeing that trend reverse itself, and he's getting – doing very well in this quarter. Our South American folks were still little bit slow in getting their payments in. We are hopeful that all that product that was on the dock last quarter will ship this quarter.

So, I think it is a trend. I don't want to say it is our standard course of business, but I think with the economy that is something we have seen as the financing has gotten tighter and product schedules that have moved to the right, I think as we deliver more of our backlog, and we get better production slots and the economy improves, I would like to think that over the next couple of quarters that will decrease and hopefully by the end of fiscal ’11 you won't see the situation, and we will have very much products on the back door at the end of the quarter.

But, I think during the recession or depression it has been a challenge to figure out which financing on which projects is going to come through. And frankly, we could have probably loosened our credit standards and shipped some of that product, but Ed and his team have been pretty good at keeping us on it and making sure that this stuff is truly rated at the ship, and that we are protected from a credit standpoint.

Eric Stine – Northland Capital Markets

Okay. It sounds like an ongoing problem, but a majority of that 3 million has shipped?

Darren Jamison

Yes.

Eric Stine – Northland Capital Markets

Okay. And then just on the subject of the shift to the right that you have talked about, based on that and the shipment schedules that you see with your customers, how should we think about the linearity of revenues in fiscal year ’11?

Ed Reich

I mean, we like to see each quarter build on the prior quarter. That doesn't always happen in our business, but I think it will look something like that. I think we will start with a solid Q1. I feel very good about the first quarter and continue to build through the fourth quarter of this year. I think if you look at what the folks on the street, I think are all around 100 million in revenue for the year. That is obviously a nice growth from even our 40% growth this year.

We look very good, the year looks very good, and we are very happy with the bookings especially in the last two quarters.

Eric Stine – Northland Capital Markets

In that $100 million kind of level it sounds like you are pretty comfortable with that?

Ed Reich

As comfortable as I can be in the first quarter of the year, yes.

Eric Stine – Northland Capital Markets

Okay.

Ed Reich

If you look at our backlog of 86 million, if you assume the majority of that backlog comes through, you assume 15%-ish parts and service. That seems like a very reasonable number. We are watching the euro very closely. A lot of the product in our backlog is for Europe. A lot of our distributors have hedged that – those orders, but we could see may be in Q3 or Q4 some softness out of them if the euro continues to lag. So it is probably – the biggest risk factor we are closely monitoring is the euro.

Eric Stine – Northland Capital Markets

Okay. Maybe turning to gross margin, and you did spell out; it was nice that you spelled out kind of the items that went into that. Can you just talk about how we should think about Q1, since we're almost all the way through the quarter?

Darren Jamison

Yes, I mean, let us say, I guess the first thing is hopefully some of the slides showed you where the ASP was going, where the DMCs were going, and how the product contribution margin, the product margin was improving, because I think sometimes with other things that hit in the margin part of the P&L it gets disguised. So I want to make sure that folks realize, we are continuing down our cost reduction plan. I would say we're in the fifth or sixth inning of that program and we still have two to three quarters to finalize it, and then win the game.

That is not counting anything we do from an automotive standpoint with a strategic partner. Obviously, the inventory or the warranty charges we took, we think with the C1000 and the C200 are both fairly mature in the marketplace. We have taken a portion of that reserve, which is forward-looking for products yet to be upgraded. We are very happy though today with the C200, C1000 product. After the modifications we have made, it is working around the world very well.

Some of the other issues are related to repricing of inventory, as lower-priced inventory gets purchased, there is some repricing that goes on of inventory that is on the books. Obviously that appears as a negative. That is a positive thing. We want to continue to do that. Some of the other things were related to scrap. We're moving to more tier 1 suppliers every day. We are going to have less scrap, the more tier 1 suppliers we have.

So if you look at Q3, big difference in Q3 and Q4, we would like Q1 to look more like Q3. It will probably be somewhere between the two, and Q2 should be pretty clean as we get most of these issues behind us. Ed, I don't know if you want to add any more to that.

Ed Reich

No, Darren. I think that was an accurate statement. Obviously, you know, the revenue mix, the revenue product mix had a good effect. We mention that we had nine offshore units that were sold in Q3. So, can't talk about where we might be in Q1, but those were important to the margins.

Darren Jamison

So, part service and accessories were down in Q4 from Q3. We think that will bounce back in Q1 as well. So, seasonality in some of the part shipments from one of our customers that we expect to fully pick backup in Q1, then we had a decrease in FPPs. We had some older short-term FPPs expiring this quarter, but we resigned some and have added new [ph]. So we expect that to come back as well.

Eric Stine – Northland Capital Markets

Okay. So, it sounds like kind of a break even, it is what we should think about in Q1 and then Q2 is where we see a pretty healthy jump?

Darren Jamison

Yes, I think – I don't want to answer that specifically in the middle of the quarter, but I would say it is something similar to Q3 more than Q4 absolutely.

Eric Stine – Northland Capital Markets

Okay. Okay, fair enough, it was worth a shot.

Darren Jamison

Our shareholders were applauding you I am sure.

Eric Stine – Northland Capital Markets

Just turning to the C1000, can you just talk about, you know, certainly that has been a limiting factor. You have some in backlog, but limiting as far as addressing the market opportunity. Can you talk about what the pipeline looks like?

Darren Jamison

As far as in the backlog or…

Eric Stine – Northland Capital Markets

No, just you know – we know you have got a handful in backlog, but what is out there that you really have not been able to go after because you didn't have you well, or people who have told you they would order it, but they are waiting on it.

Darren Jamison

Okay. So, I misunderstood. You are talking the difference with the UL [ph] before and after?

Eric Stine – Northland Capital Markets

Yes.

Darren Jamison

Definitely the UL was holding back at least four units in New York, (inaudible), the MetLife Building, the Daily News Building. We had some units sold in Philadelphia, Chicago. So there is definitely some pent-up demand for the C1000 that we now can deliver. But I think more importantly not having UL certification in the US market is a real challenge. Trying to convince the building department or the customer to buy a non-UL listed electric product is very difficult to do. So Jim and his team have actually got the Americas distributor conference here this week.

They really can now take the gloves off and get after the US market, and so as I mentioned in the call, I'm very excited about some of our new distributors, and we think that California and the East Coast are going to be great markets, of course, for the C1000.

Eric Stine – Northland Capital Markets

Okay. And just one last one bookkeeping question, then I will jump off the line here, the TA100, can you just give a dollar amount of what that, dollar amount in backlog, just trying to get an idea of what your organic backlog growth was?

Ed Reich

About $4 million in the backlog now for the TA100, and we sold a little over 1 million of it in Q4, yes 11 units. So, to tell you the current number is about 4.

Eric Stine – Northland Capital Markets

Okay. Thanks a lot. I appreciate it.

Darren Jamison

Thanks, Eric.

Operator

Your next question comes from the line of Walter Nasdeo with Ardour Capital. Please proceed.

Shawn Lockman – Ardour Capital

Hi, good evening gentlemen. This is Shawn Lockman for Walter. I was just wondering if you could take just a second to walk us through a little bit geographically how your markets are playing out at the moment.

Darren Jamison

Yes, geographically for the year the biggest markets were Russia and Australia. Russia has been our biggest market for the last couple of years. Australia actually beat them out this year, which is a good event for us. Both were strong though. Europe continues to be very strong, but I would say and I will let Jim jump in here, the Americas is seeing a lot of growth recently. We are seeing orders out of Brazil, Venezuela, Argentina, Mexico proper. So I think North America and South America are going to see some nice growth this year and compete with Europe and Asia.

Jim Crouse

Yes, this is Jim. You know, one of the things we have seen in the last few quarters is our pipeline continued to grow in the Americas, and so we expect that to eventually translate into shipments and orders for the Americas. So, it is becoming more balanced. We like to see the Americas be a bigger portion of our business, and it looks like we're headed down that path.

Shawn Lockman – Ardour Capital

Also, Asia, why don’t you talk a little bit about some of the growth we are seeing in Asia?

Jim Crouse

Sure, you know, as Darren mentioned previously, we shipped our first C1000 to Korea. It will be installed and started up over the next few months. That should give us a good foothold for larger projects in Korea. China, we have shipped C200s to China this last year. Those projects have been started up, and with Shanghai Expo 2010 kicking off a few weeks ago, we have had quite a few visitors both Chinese visitors and international visitors go by the installation that was done with China [ph].

We continue to see strong growth in the Asian market oil and gas, Vietnam, Thailand, Malaysia and Indonesia, even the west coast of Australia we’ve got recent orders for oil and gas projects that we hadn’t seen before in the last 12 months.

Shawn Lockman – Ardour Capital

Great, and you talked a little bit about the efforts that the company is putting into products for HEV development, can you give us a little more specifics about how you see the timeline for that playing out in terms of significant order flow from that or should we start thinking about that in ’11, or ’12, ’13, what is the good way, or at least how you guys are looking at it at this point?

Darren Jamison

Yes, this is Darren. I will take the first swing at that and then I will let Ed or let Jim clean up for me. I think what you are going to see, design line continuing to grow there, shipments, they are building more buses for Baltimore. There are more buses going to New York. They have got some product going out to Denver and then out there to California. They have several other bids that are very close to ordering for another 200 to 300 buses on top of the 500 they already have. As we mentioned recently, we’ve got several demonstration projects going on with Class 8 trucks, Class 3 and 4 trucks. We have some small OEMs, who we are in negotiations with. So I think you’re going to see nice growth in 2011, and maybe even 2012. The big explosion though obviously will be getting a lower price automotive version of the product and really get into either automotive OEMs or truck OEMs and I’ll turn it over to Jim to give may be a little more color.

Jim Crouse

Yes, I think that’s pretty consistent. You know, the seeds we’re planting today will, you know, take a couple of years to grow. I think this was all kicked off by the CMT 380 that we had at the LA Auto Show last year. And since then we’ve had a lot of interest and inquiries from across the spectrum from automotive to Class 3, 4, 5, 6, as well as Class 8 trucks. A lot of Marine inquiries, Marine is an area we’ve been working on for the last 18 months or so and we are certain to see some of those opportunities come to realization. So it’s really a much bigger cross-section that just one OEM or one particular market vertical like buses. The European bus manufacturers continue to trickle orders in. South America, we’ve got a bus OEM just looking to build buses in Argentina. So, all of these become very additive and will eventually make a significant difference.

Shawn Lockman – Ardour Capital

Great and one final one. You talked a little bit about, you know, constraints that you have seen in recent quarters in financing. Can you talk a little bit about the progress that you might be seeing there or things are still a little tight in your end markets and or things are loosening up a bit?

Jim Crouse

Thanks. This is Jim. Things still seem to be pretty tight, Darren mentioned currency. You know, the exchange rate and the strengthening of the dollar makes our business in Europe and some parts of Asia more changing, but from a financing standpoint we thought we were kind of through the woods and with the problems in Greece financing in Europe is still challenging.

National oil companies are still taking profits from oil operations and using it to try and lessen the recession on their own economies. So we were still seeing things be quite challenging from a project finance standpoint.

Darren Jamison

Yes, I think – this is Darren. The real excitement I have is to have the bookings we’ve had the last two quarters, and frankly keep the revenue growth going despite the tightness and everything Jim is talking about. Really get too excited about when the market does come back with all the seeds we planted and all the hard work our distribution channel has done, we can see some real exciting explosive growth once financing is more readily available.

Shawn Lockman – Ardour Capital

Okay, that’s it from me. Thank you, gentlemen.

Darren Jamison

Thanks, Shawn.

Operator

And your final question comes from the line of Shawn Severson with ThinkEquity. Please proceed.

Shawn Severson – ThinkEquity

Thank you. Good afternoon, gentlemen.

Darren Jamison

Hi, Shawn.

Shawn Severson – ThinkEquity

Hi. I just wanted to dig in a little bit on your product development roadmap. Should we expect any incremental costs that are from you in terms of R&D or on the manufacturing side as we go forward or do you think that these are, they are kind of minor tweaks in the greater scheme of things and they won’t require a lot of cash?

Darren Jamison

No, this is Darren. I will make a quick statement, then hand it over to Mark. I think one thing that important to note is that we’ve developed a lot of products in the last three years. In fact, I would venture to say more products in the last three years then Capstone did in the first 17 years. We have about 175 to 180 employees today.

That’s almost 100 less employees than when I got here. Our sales per employee has gone from you know, roughly $30,000 a head to almost $400,000 a head and beyond. So I think, Mark and his team have done a tremendous job at developing products with strategic partners, subcontractors, and then key personnel at Capstone and his charter is to continue to do that in the most cost-effective way possible. So, not to influence his answer, but I’ll turn it up to him and let him answer from there.

Mark Gilbreth

Yes, I think one of the things that we are really happy with is that we have a product roadmap that we’ve had in place for some time that took us through some of the products that Darren mentioned in his message there, as well as taking us out into the future, into the 250 and the 370, and I think that we’re just very delighted that in all of these products that we have been able to combine where we were going with some of the Department of Energy programs that were out there. So my expectation on our spending with the assistance of the DOE should be relatively the same or down as we go forward.

Shawn Severson – ThinkEquity

Okay, in terms of manufacturing strategy do you think that kind of status quo as it is now is going to be sufficient for your development roadmap or do you foresee a need to make some adjustments maybe where you manufacture or who does the manufacturing outside the potential for the automotive OEM products?

Darren Jamison

Yes, I think as we look at larger markets and as we grow, we’ll always continue to look at our supply base or our manufacturing. I think as far as facilities we have more than enough facilities to take us forward. As far as suppliers, a lot of our suppliers are converting to tier 1. They’re taking more on themselves. As we move into the realm of the automotive market space, we will, there will be some suppliers, new suppliers that we will need to identify as we move into that type of volume.

Shawn Severson – ThinkEquity

Okay, and is there any kind of margin targets for these products as well or is that a little too early to think that far ahead. I am trying to understand as the mix mainly moves towards that, what happens to the margin profile and especially in the HEV market?

Darren Jamison

Yes, no, I think all of our products we’re targeting a direct material cost that yields us 40% gross margin. So, obviously a DMC perspective would have to be a little more than 50% to yield 40% gross margin. If you look at the C250, not only does that help us you know, manufactured price in kilowatts not in pounds or actual cost. So the 250 will help us from a margin perspective and efficiency perspective, and really the C1000, which is one of our biggest drivers and we think it’s going to be our biggest driver for several years, the megawatt class, be able to go from 5 units to 4 units and really cut 20% of our cost instantly, and often the customer higher system efficiency is great, and if you look at the C370 we are leveraging what will be the C250 and the C65, may Mark can walk through that that architecture and little bit that you saw on the presentation, but again that’s also lower cost higher efficiency. So that the target for all of our products, improve margins and then better product project economics for the customer. Mark, why don’t you walk through the 370 architecture, just real quick for us?

Mark Gilbreth

Yes, we – the next step for the C200 is go to a C250 where we’ll both see a 25% improvement in power and a couple of efficiency points improvement as well. Really that’s just from up flowing the compressor wheel, but the majority of the parts on that system stayed the same. So 25% power increase with maybe just one or two percentage points of direct material cost increase, that’s very similar to where the lot of the larger turbine manufacturers do as well with their product line over time.

I think then we get into the next step of our product roadmap, which is the 370 and that is a 370 kW 42% efficient product. That’s a really exciting product in the marketplace when you look at, combustion technologies be it reciprocating [ph] engines or gas turbines, but by combining a C250 in a low pressure spool you don’t need the recuperator. So we’re able to lose about half of the direct material cost of that component, and then we would use for the high pressures spool something very similar to the C65, and now that it has three times the pressure that it normally sees coming into it, it will also see roughly about three times the power output for the same cost. So we’re really leveraging the components that we already have and combining them in a unique way to not only increase efficiency, but also to reduce our costs by getting more power out of those same components.

Shawn Severson – ThinkEquity

Okay, thank you, and just one last question. As the US market and you expand your US distributor opportunities in the US, where do you think some of the best short-term and then intermediate term market opportunities are going to be, I mean are we talking about you know, hotels and those types of applications (inaudible) just give us some color on where that growth will come from maybe in the kind of 3 to 6 month basis and then maybe more like a 12 to 18 months basis?

Jim Crouse

This is Jim. I think as opposed to market verticals I’ll take it regionally. I think we’ll see some new growth California with new distribution. Our distributor in Southern California is delivering more orders in his tenure than his predecessor did. The new distributor in Northern California, we’ve been working with them and they’ve got a good pipeline started. I think we’ll continue to see growth in the Northeast, New York, Mid-Atlantic area, and I think it’s across the different market segments, digester gas applications continue to be strong. We see good deal flow in the RFP space there and the spark spread continues to be good and customers are interested in improving efficiency and reducing their energy costs.

Darren Jamison

I think you’ve got a combination of customers looking for better economics increased efficiencies. You see a lot of people that are realizing the natural gas prices have been low for a long time and appear to be low for the foreseeable future. But then you have the Obama buck, and some of the other stuff trickling through a lot of municipality city governments that are doing infrastructure projects in a lot of ways for our treatment plants.

Jim Crouse

We’re starting to see some orders around the corner from some of the Marcellus Shale activity that is going on, and I think that’ll grow into a good business in the next couple of quarters.

Shawn Severson – ThinkEquity

Okay, and is there anything on the legislative front or pretty much the same as it was a couple of months ago?

Jim Crouse

It’s similar. We continue to push and are making good progress with the increase in the 30% or 10% or 30% ITC for CHP, and we continue to work the California Energy Commission to reinstate us into the SGIP program. Unfortunately in California with workforce reduction and furlough days, the process has taken considerably longer than it should, and we’ve been told directly that we should feel lucky they are even working on it. So I don’t have a lot of optimism for anything around the corner. The good news is we’re selling projects independent of the incentives and rebate, which is really the business model we’re trying to drive to.

Shawn Severson – ThinkEquity

Great, thank you.

Darren Jamison

Thanks, Shawn.

Jim Crouse

Welcome.

Operator

And at this time I like to turn the presentation back over to Darren for closing remarks.

Darren Jamison

Great. I know we’ve had a long call today. We’ve covered a lot. I think the exciting thing for us as we look at the last year continued revenue growth, continued cost containment. We’ve done a lot of product development, launched a lot of new exciting products, and I think the new slides that Ed had put together for showing the average selling prices are increasing, average direct material cost or product cost are decreasing.

The service out of the business continues to grow revenue. So I am very excited with the progress the company has made, the strategic partners we have are getting better. As I mentioned we are kind of in weed and feed. Jim mentioned we’ve replaced a distributor in California. We’re doing that in some other areas of the country in the world. But we’re really moving to the point of filling in the very small holes we have in the map and then managing the current distribution base.

If you look at it today we have the same number of sales people we have when I joined the company, yet, revenues, you know, five times what it was in the past, and the product pipeline continues to grow. So despite the economic conditions, despite the tight financing, we’re very happy with the deal flow and the revenue targets that we have for the next year, and all that will only get better as we get better adoption of the product and financing becomes more available. So very good fiscal 2010, in our opinion, we look forward to an even better year in fiscal 2011. So with that operator, we’ll end the call. Thank you.

Operator

We thank you for your participation in today’s conference. This does conclude your presentation. You may now disconnect and have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Capstone Turbine Corporation F4Q10 (Qtr End 03/31/10) Earnings Call Transcript
This Transcript
All Transcripts