Capstone Turbine Corporation (NASDAQ:CPST) Q1 2017 Earnings Conference Call August 4, 2016 4:45 PM ET
Christopher Keele - Staff Counsel
Darren Jamison - President & CEO
Jayme Brooks - CFO & CAO
Colin Rusch - Oppenheimer
Eric Stine - Craig-Hallum
Amit Dayal - Rodman and Renshaw
Good day, ladies and gentlemen, and welcome to the Capstone Turbine Corporation Earnings Call for First Quarter Fiscal Year 2017 Financial Results ended on June 30, 2016. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to Christopher Keele, Staff Counsel. You may begin.
Thank you. Good afternoon and welcome to Capstone Turbine Corporation's conference call for the first quarter of fiscal year 2017 ended June 30, 2016. Capstone filed its quarterly report on form 10-Q with the Securities and Exchange Commission today, August 04, 2016. If you do not have access to this document and would like one, please contact us by email at firstname.lastname@example.org. Or you can view all of our public filings on the SEC Web site at www.sec.gov or on our Web site 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 provisions of the Private Securities and Litigation Reform Act of 1995. These statements relate to, among other things, collection of reserved accounts receivable, shipment of finished goods, benefits from our cost reduction initiatives, improved operating leverage and organizational efficiency, strengthen in distribution channels, new product development, and the success of signature series product, increased sales in Russia, implementation of the Capstone Energy Finance business, product reliability, growth and diversification of our end-markets, performance in light of macroeconomic headwinds, and attaining profitability.
Forward-looking statements may be identified by words such as believe, expects, objective, intends, targeted, planned 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.
I will now turn the call over to Capstone’s President & Chief Executive Officer, Darren Jamison.
Thank you, Chris. Good afternoon and welcome, everyone, to Capstone's first quarter earnings call. Also joining me today besides Chris is Jayme Brooks, our Chief Financial Officer and Chief Accounting Officer.
Pleased to start the call by saying overall I am very happy with Q1 results, as they were both in line with internal and external expectations. The business appears to have stabilized and I am very comfortable with our near-term performance. However, what is most important is we are making significant progress towards meeting our longer term goals we set forth several quarters ago to pivot and reposition our Company for renewed revenue growth and to achieve profitability in the near-term.
Just as a reminder, in response to multiple macroeconomic headwinds, we developed a plan to reduce our targeted breakeven revenue to approximately 100 million annually, or 25 million quarterly. This is a similar reduction from the previous 160 million annually or 40 million per quarter and then set a goal of attaining breakeven from a cost standpoint had a 25% gross margin. This is a significant structural shift in our business, and we are well down the path of making this a reality.
If you turn to Slide 3, Slide 3 illustrates our new strategic profitability goal compared to Q1 last year and Q1 this year. The key to achieving our goal is a three pronged strategic profitability plan, which is highlighted in Slide 4. As a direct result of this plan, we have substantially lowered our net loss year-over-year despite a 29% reduction in revenue. This was achieved primarily by lowering our operating expenses 30% below last year's first quarter actuals. This new lower cost structure is critical as we look to achieve profitability at much lower and much more attainable revenue levels than we have ever had historically.
If you turn to Slide 5. Slide 5 outlines some of the more significant cost reductions we have already implemented, these cost reductions represent significant annual savings and were in no way easy to achieve in such a short period of time. I have been very proud of our employees who have met this challenge, of improving our business despite the increased work load coming from significantly lower staffing levels. Capstone is extremely fortunate to have such a remarkably dedicated and talented group of individuals that love both our products and the Company.
Cutting cost and leading out the business is critical, but they are only part of our three part strategy. No business can thrive without solid revenue growth, and we are working hard to develop new sources of revenue despite the current macroeconomic challenges. The status of these new revenue initiatives are listed and updated on Slide 6.
As you can see on Slide 6 we have already completed many of these items. We have completed the launch of our new C1000 signature series product and I am proud to say we have fully cut the signature series into production during the first quarter. This was no minor effort with over 70 components system and design improvements and upgrades. As well we continue to grow our aftermarket service business and it rolled out an improved factory protection program and a new long-term extended warranty program to help maximize our future service revenue and service business potential.
We are well on the way of increasing our accessories revenue with the release of our new C1000 signature series integrated heat recovery module or HRM similar to our C65 product. We have stabilized our business in Russia, with BPC Engineering paying for over 4 megawatts of product in a very short 90 day period. This comes on the heels of newly a year of no significant product payments or product shipments. However, bringing BPC back online was only one part of our strategy to revitalize the area of Russia and the Russian region. In addition, we are also in process of signing several new distributors in Russia and the CIS states that should both diversify our risk, as well as add additional revenue streams.
Lastly and most importantly, we have made solid strides in diversifying our business into the energy efficiency space, and into targeted growth geographies. Revenues in Asia, Australia, Europe, Russia, the Middle East and Africa increased over last year's first quarter dramatically. Collectively these markets accounted for almost 54% of our product shipments this quarter compared to only 29% in the year ago first quarter. Make no mistake this is a significant development and a critical step to diversify our business in a very current, slow growth global economy.
Energy efficiency applications increased to 48% of revenue, compared with 35% in last year’s first quarter. Global shipments to customer sites that included hotels, office buildings, increase of hospitals, retail and industrial applications. Our recently launched Signature Series C1000 is targeted directly at these markets, and I’m proud to say we shipped our first Signature Series unit to Europe during the quarter.
Oil, gas and natural resources applications declined to 46% of revenue compared with 55% during last year’s first quarter, and renewable energy applications were 6% of sales compared to 10% last year. Our recent order momentum which is highlighted on Slide 7. Slide 7 has the new orders coming from the likes of Pakistan, Slovenia, Belarus, Italy, China, the Caribbean all of this demonstrates real-time our new and more diverse portfolio of geographies.
If you turn to Slide 8, Slide 8 illustrates the improving balance of our geographic diversification within approximately 850 million of identified project opportunities for the remainder of the fiscal 2017, weighted more evenly than never before. This future pipeline provides a view into Capstone’s potential revenue mix by region as we move forward with the business.
As the pipeline continues to diversify, it lowers the risk of macroeconomic downturns by avoiding heavy customer concentration in a single geographic region. I think this compares extremely favorably to other clean tech companies in our space, but significant portions of the revenue coming from one or two markets and are heavily dependent on government subsidies in those markets.
The last part of our three-pronged strategic profitability plan is the new Capstone Energy Finance joint venture which is discussed on Slide 9. This new entity launched last December after the Power Purchase Agreements exclusively for projects that utilize Capstone’s products and is designed to capture projects that were potentially lost because of the lack of financing. We have a $25 million pipeline of well qualified opportunities and hope to announce our first contract execution yet this quarter.
Now I will turn the call back over to Jayme Brooks, our CFO to go over the specific financial results from the quarter. Jayme?
Thanks, Darren. Good afternoon, everyone. I will now review in more detail our financial results for the first quarter of fiscal 2017. The highlights can be found on Slide 10 and 11. Net loss for the first quarter of fiscal 2017 improved to 4.5 million compared with a net loss of 6 million for last year's first quarter despite a 29% decrease in revenue to 19.1 million for the first quarter of fiscal 2017 from 27 million for the first quarter of 2016.
Net loss per share taking into account the 1 for 20 reverse stock split, that was affected in November 2015 was a $0.17 per share for Q1 of fiscal 2017 compared to with a net loss of 36% share in Q1 of fiscal 2016. The decrease in the net loss during the first quarter of 2017 was primarily because of the reduction of operating expenses of approximately 30% from the same period last year. This decrease was primarily the result of the cost reduction initiatives discussed earlier to lower operating expenses throughout the organization and to align with our goal of reaching profitability as quickly as possible.
Product revenue for the first quarter of fiscal 2017 was 12.1 million compared to 20.2 million in the first quarter of fiscal 2017, a decrease of 8.1 million or 40%. We shipped 11.6 megawatts during the first quarter of fiscal 2017 compared with 20.8 megawatts in last year’s first quarter, a decrease of 9.2 megawatts or 44%. The decrease in product revenue and megawatts shipped in the first quarter of fiscal 2017 over the prior year fiscal first quarter was the result of the continued softness in the global oil and gas markets, delayed customer shipments and project timelines and the continued strength of the U.S. dollar, which makes our product more expensive overseas.
Revenue from accessories and parts decreased 0.2 million or 5% to 3.7 million for the first quarter of fiscal 2017 compared to 3.9 million for last year’s first quarter. This decrease is primarily the result of lower accessories revenue due to the volume reduction in microturbine shipments. However, service revenue increased 0.4 million or 14% for the first quarter of fiscal 2017 to 3.3 million compared to 2.9 million in the first quarter of fiscal 2016, this revenue increased primarily because of our growing install base and continued market acceptance of our FPP offering.
As a percentage of revenue, service revenue was 17% in the first quarter of fiscal 2017 compared with 11% in the first quarter of fiscal 2016. Gross margins for the first quarter of fiscal 2017 was 3 million or 16% of revenue compared to gross margin of 4.7 million or 17% of revenue for last year’s first quarter, the slight decline in gross margin was primarily the result of a lower volume of product shipments and a shift in product mix.
We continue to implement initiatives to improve gross margins by further reducing manufacturing overhead and fix the direct material cost as we continue to strive to achieve profitability. R&D expenses for the first quarter of fiscal 2017 decreased 0.8 million or 33% to 1.6 million from 2.4 million in the year ago first quarter. The reduction in R&D expense was the result of decreases in salaries, supplies and consulting expenses, and was offset by a decrease in cost sharing benefit.
As part of our initiatives to reduce operating expenses and achieve profitability, during the first quarter of fiscal 2017, we reduced the number of active research projects, which included the development of the C250 microturbine. Management expense, R&D expenses in fiscal 2017 to be lower than in fiscal 2016 as a result of these cost reduction initiatives.
SG&A expense in the first quarter of fiscal 2017 decreased 2.4 million or 30% to 5.7 million from 8.1 million in the year ago first quarter. The SG&A decrease consisted of decreases in salaries, business travel and marketing expenses and bad debt recovery. These reductions in expenses were primarily the result of our cost reduction initiatives to lower our operating cost throughout the organization. Excluding the bad debt recovery we expect SG&A expenses for the year to be lower than in fiscal 2016, because of the strategic initiatives to reduce operating expenses and achieve profitability. The loss from operations for the first quarter of fiscal 2017 improved to 4.4 million from 5.8 million in the year ago first quarter.
Now I will provide some comments on our cash flow, balance sheet and backlog. Cash used in operating activities for the first quarter of fiscal 2017 was 2.2 million as compared to cash used of 6.9 million in the first quarter of fiscal 2017. At June 30, 2016, we had cash and cash equivalents of 24 million, including 13.1 million in net proceeds from our public offering in April and 5 million of restricted cash related to our Wells Fargo credit facility, this compared to cash and cash equivalents of 16.7 million including restricted cash of 5 million from the credit facility as of March 31, 2016. Our accounts receivable balance as of June 30, 2016 net of allowances was 15.7 million compared to 13.6 million at March 31, 2016.
During the first quarter of fiscal 2017, we recorded approximately 0.9 million in bad debt recovery primarily from EMI. We previously recorded an accounts receivable allowance of approximately 2.6 million during the second quarter of fiscal 2015 for EMI. As of June 30, 2016 the accounts receivable allowance for EMI was cleared. There was no bad debt expense or recovery recorded during the first quarter of fiscal 2016.
During the fourth quarter of fiscal 2015, we shipped approximately 0.7 million of product to BPC and given the uncertainty as for the collectability of the sale, revenue recognition on this shipment will deferred at that time. During the first quarter of fiscal 2017, the remaining 0.5 million of deferred revenue for this shipment was fully recognized when payment was received from BPC. As you may recall BPC’s payment terms are tax before shipment but a 15% premium to pay down their past due balance.
Our days sales outstanding or DSO was 75 days compared with 54 days as of June 30, 2015. The change in DSO was largely the result of lower revenue and slower collection of accounts receivable for the first quarter of fiscal 2017 compared to the first quarter of fiscal 2016. Inventories decreased to 16.1 million, or 12%, from 18.3 million as of March 31, 2016, and were significantly down from 26.4 million as of June 30, 2015. Inventories decreased as a result of the shipment of finished goods and the reduction raw materials.
Our accounts payable and accrued expenses were 13.2 million as of March 30, 2016 which was flat with March 31, 2016, and down significantly compared to 23.4 million as of June 30, 2015. I am very pleased with these significant year-over-year improvements in our balance sheet which should now explain the overall improving health of our Company. A healthy balance sheet is critical to our business and vendors, customers, lenders and employees are all monitoring the strength of our balance sheet.
Our total backlog as of June 30, 2016 was 108.4 million compared with 109.6 million as of March 31, 2016 and 165.5 million as of June 30, 2015. The year-over-year decrease was 52.1 million or 33%, the decrease in backlog includes our decision in fiscal 2016 to remove 51.6 million or 186 units totaling 53.8 megawatts in backlog from one of our Russian distributors BPC, which aligned our backlog with management's expectations because of the macroeconomic climate in Russia and the softness in oil and gas market.
Our book to bill ratio for the quarter improved 2.9 compared to 0.7 in the year ago first quarter. Our FPP service contract backlog at June 30, 2015 was 71.4 million compared to 66.5 million at March 31, 2016 and 63.2 million at June 30, 2015. These increases reflects our growing install base in microturbines as well as the ongoing efforts of our distributors to sell our FPP service contract, which enables the end users to achieve a lower total cost of ownership.
At this point, I will turn the call back to the operator for questions from our analysts, operator?
[Operator Instructions] And our first question comes from the line of Colin Rusch of Oppenheimer. Your line is now open.
Can you talk a little bit about the impact of Capstone Finance on moving some of the backlog forward it seems to me that you've got a nice solution there that could be helping some of this business?
Yes, I think most of the backlog we have doesn't require financing by Capstone Finance, I think a lot of the pending pipeline projects we have definitely could utilize Capstone Finance. So as I mentioned in the prepared remarks here about 25 million of identified projects that seemed to be a good fits primarily in the U.S. so we're looking at some international opportunities. That program was launched in December. We're making good progress so we've got a couple power purchase agreements that are in negotiation. I think the first couple of these will take a little longer just because of the learning curve we go up and how to structure these deals appropriately and deal with state and federal regulations. But after we get a couple of these done, I think the Capstone Finance JV will accelerate and we will quickly be talking about adding more capital to that business.
And then can we just get a little bit of an update on what's going in Latin America and certainly there was a meaningful opportunity there for you and you've done some reorganization of the distribution channel, but what are you seeing there over the last 10 months in terms pipeline?
Yes, definitely the pipeline is very strong Mexico has been a very good business for us in the last about 18 months, most of that is with our partner BPC and that's CHP in industrial applications. There we've got a very nice pipeline of projects continue to add sales people and execute. We've also put product in most of the Central and Latin America a lot of small projects probably our next biggest market is Colombia. We've got several nice projects going to Colombia we'll probably ship 2 megawatts this quarter, another 2 megawatts next quarter and again a pretty good pipeline. Ecuador is probably the big elephant in the room that's a 30 megawatt project that we have joked, we won and lost it three times, we still make progress with that in fact the team is in meetings today we have been to Ecuador several times this quarter, so I guess the bad news is we haven't got to cross the goal line, the good news is we still have the ball and there is still time on the clock. So I would say I am still cautiously optimistic that we'll get that order done. It only makes sense it is a associated gas to energy project flurrying gas in the Amazon above running diesel generators next to the flare is absolute ludicrous so I think environmentally, it's great financially and we're just trying to get around the challenges of financing projects in Ecuador. So I think in general Latin America we feel very good about, we are also put product into Qatar this quarter. We got product going into several places in the Middle East. We have product going into Africa. Australia continues to be a very nice market. And as I mentioned BPC coming back online and giving some more distributors in Russia and the CIS states is also very positive for us.
And just one follow-up from me just on the combining power opportunities for you in the U.S., are you seeing any progress on the CHP opportunities in the material way, have you seen an acceleration anything to share what is going on there?
It's obviously regional New York has got a lot that is going to happen in the back half this year. We’ve got several projects for related properties that are coming out of the ground and those buildings are ready to microturbines to ship. I think RSP our distributor in New York has got a nice backlog. And I think Q3 at the end of the calendar year in Q4 for us our fiscal Q4 would be very good quarters for them. We did ship them product this current quarter, last quarter Q1 or probably Q2. But I think Q3 and Q4 would be very quarters from, Infinity as always they are one of our best distributors and they’re doing very well in their territory. We’ve got Virgin too the newer distributor but they’re starting to do a lot of CHP projects, especially up in Quebec. And in Canada there is some nice opportunity there. Hawaii is coming on actually very nicely and we’ve got four C1000s now operating in Hawaii. Propane at hotels and large resorts I think that those prove the local marketplace Hawaii is not a big market, so news travels fast I think that’s a good opportunity for us. California is still a good market and to say probably the only thing negative is just the pace of business. There is really I would say the overall global business environment is one of caution. I think because of what’s got on with Brexit and terrorism and ISIS and all these different things, everybody is moving slowly and very methodically. So I’d say the opportunities are there. The pace at which business is happening though is still a bit of a challenge.
And our next question comes from the line of Eric Stine of Craig-Hallum Capital Group. Your line is now open.
So really good progress on OpEx but clearly gross margins a big part of the plan and I am just curious are you able to quantify the impact of the signature series limiting gross margins here near-term? And then just maybe more color on and Jayme touched on it a little bit. But some of the specific things you’re doing to get to that 25% level. And then maybe thoughts on roughly the timing or what you’re targeting internally?
No. It's a great question, and one I wanted to probably roll around it a little bit anyway. I think if you look at our three pronged strategy of 25 million in revenue, 25% gross margin and operating model of about 6.3 million operating expenses. You have seen the dramatic improvements we made to operating expenses, we still have some work to do but I think we’ve got most of that work lined out and it's just a matter of timing. Not to minimize that it was very challenging and a lot of difficult decisions and a lot of efficiencies we’ve had to achieve to do that. But that being said, controlling our operating expenses is the easiest thing for us to do because you have the most control over.
Revenue, I feel very good that we’re going to continue to see revenue growth albeit slower than we’d like, but we’re going to see growth hopefully each quarter. If you look at the 25 million we’ve achieved that 14 and of about 21 quarters, so it's not a herculean effort to get back to those kind of revenue levels and ones we can easily achieve when the market comes our way a little bit. So definitely the biggest challenge for us is to get a 25% gross margin. The signature series is higher cost than the old model, some of that is because of improved components, some of it is because of lower revenue, lower volumes, we’re building about one a week right now in the heyday we’re building 1.5 to 2 a week, so obviously lower volumes it's harder to drive your supply chain.
So I think margins will be challenging here on Q2 probably challenging into Q3. I would expect by Q4 and Q1 though that we can do some supply chain improvements and as revenue comes back and we spin up the manufacturing line faster on the signature series, we’ll see some margin improvement. So, as I said long story short I think we’ll get to our revenue target and our revenue target and our operating cost target before we get to our gross margin target, but all of that we are getting to as fast we can.
Okay. May be just on the pipeline you finally put up that slider recorder and I have noticed the last few quarters that that pipeline number while still extremely large has been coming down I mean just any color there is that you being more conservative is that a different focus on the end-markets that you are going after just any detail would be helpful?
Yes, no this is what we expect to close in fiscal '17, so this is only three quarters, this isn’t our total pipeline. So we if we pull up our pipeline and opportunities that are outside of the fiscal year that would be over a billion dollars so that number is coming down because Q1 pulled that out of that obviously. And so we have shown in both ways with total pipeline, we have shown 12 month rolling and this is just the snapshot of the next three quarter what we expect, so I wouldn’t read too much into that the reason we pulled up is to show, that this now looks like you hope your 401(k) looks very diversified. And I think in Latin America we pulled out Ecuador that looks even better so I think the diversification of our global business I think is improving quite a bit and I think that really set us apart from a lot of the people in our space or even companies our size to be a global $100 million company and publically traded is pretty amazing. So I think as we can grow this business and as the economy comes back globally we are going to benefit from that diversification.
Last one for me just you put out 2 days ago that you have the certification in terms of EU medium voltage interconnect standards I am just curious how do you think that opens up the market and any commentary have you lost orders because you did not have that certification any details would be great?
Well as I always say you can probably have this modeled better than anybody and I am sure you have noticed our C65 sales are down dramatically year-over-year. So some of that is oil and gas related but a lot of that is also Europe so not having that certification in Europe and Italy or in Germany and Italy specifically has impacted our business. Obviously we started with the 200 and 1000 series just because that’s the biggest bank to the buck but no that should help drive more revenue out of Europe. And Europe in general if you look at the numbers over the last couple of years, it’s actually held in there fairly well if you take out Russia. And so I think with our German distributors still doing a good job, our Australian distributor, our Spanish distributor all kind of coming back online. We are cautiously optimistic about the UK market though we did get hit with some additional discounting because of Brexit when the currency fell 18% in one day that was a bit challenging for our partners in that region. I'd say overall though we feel pretty good about Europe and having this certification is only going to make our product that much more competitive and easier to sell.
[Operator Instructions] And our next question comes from the line of Amit Dayal of Rodman and Renshaw. Your line is now open.
Good to see the turnaround materializing and most of my questions actually have been asked, I was trying to look into on the margin improvement side of the story and was wondering whether, and it’s going to be driven by volumes obviously in one -- as one driver but how much of it is going to be driven by say the product mix?
Really I think the biggest issue is just getting the vendors to manufacture more of the new parts, we've got one component and not to get into too much great detail, but the old component and the old configuration was $300,000 part. The vendor came out at $13,000 for that part and we are down to 10,000, but we needed to drive that part down to close to what the price was before. The new enclosure is significantly more expensive than the old enclosure but I think again with volumes and some value stream mapping with that vendor we will get the cost down. So obviously when vendors start building a new part for you they tend not be as aggressive on the pricing until they get more comfortable in building it. So we have got a team we have put together an integrated team of folks that are focusing on all those parts and of course we're taking the highest dollar one first and we'll work down and improve those margins. That being said with having volumes on specially the 65s and 200s down some volume improvement would definitely help those conversations with our vendors. So I think it will be two-pronged, it will be working with vendors them getting more comfortable building the new part that they are required to build and then some volume improvements will definitely help.
And just may be another question around cash dollars you are financing, this $25 million pipeline, is this for fiscal 2017 or is it for the calendar 2016?
Fiscal 2017 and the only thing we talk to and we talk to fiscal year.
I guess that's all I have. I'll follow-up with you on our later.
No I think the other thing Amit to talk about when it comes to margin again people don't give us a lot credit for our service business but our service business continues to grow even on down product revenue. We're seeing higher attachment rates on FFPs where we've launched a new extended warrantee program what is interesting when you look at attachment rates our CHP business the attachment rates are much higher than our oil and gas business, that's the reason we're coming out with an extended warrantee program because most of oil and gas users have indigenous technicians they are used to working on complicated machines and so they are reluctant to sign long-term service agreements where hospital or a hotel or industrial customers doesn't have that kind of experience and on-board resources. So I think have a extended warrantee though is something that we will sign a way for us to capture that we're kind of losing on the aftermarket side there, so I think as we can grow that factory protection plan as the signature series, the signature series is going to have a much lower warrantee rates and better performance rate as far cost of ownership which will make the margins on the FFPs even better. So I think our service business is going to be a growing key contributor and obviously that is a big margin contributor. So the more our service business can grow and improve in margin that's going to be a key lever to improving the overall gross margins.
And I am showing no further questions in the queue at this time. I would now like to turn the call back to Darren Jamison, President & CEO for any concluding remarks.
Thank you, guys. Great questions, I think the good news is that the quarter was very much in line with the analysts’ expectations and estimates and very much in line with our internal expectations and estimates. So, nobody likes surprises and to have a boring quarter that meets expectations is refreshing. So overall I will say that reiterate that I am very happy with the quarter, meeting both internal, external expectations is good and you could just stabilize and we're comfortable with our near-term performance whether that is balance sheet cash, gross margins. We're getting more comfortable with our long-term performance in that’s the -- as we kind of grow and pivot reposition the Company we need to see renewed revenue growth. I think in Q2 we’ll see revenue growth over Q1. Jayme will tell you low single-digits I’ll say high single-digits so we’ll probably compromise somewhere in the middle. We really need to get back to double-digit though and I think that will be the back half of the year before we see double-digit revenue growth again. But hopefully exiting this year double-digit revenue growth will become a normalized experience to that a couple of years ago.
Obviously, I am not happy with where the business is today, specifically the share price. I think we’re all extremely disappointed with what’s happened to our share price I think how the market is perceiving our Company. But with that I think all we can do is execute our strategic profitability plan, focused on all three of our strategic initiatives and we’re really happy with the balance sheet. I think if you look at the balance sheet year-over-year and I know everyone who look at the P&L that’s more exciting. But our payables are down dramatically. Our receivables are in good shape, they’re not great, but they’re definitely good. Our inventory is down dramatically, our inventory turns are up. So overall our cash position is much better than it's been in the long time. So I think cash is good.
Our bank line is probably the lowest it's been since I’ve been here. So we’re really in a good shape from a balance sheet perspective and that’s critical, because I think as we struggled over the last 18 months, we’ve been losing orders because of customers being concerned about reliability. So the more we can strengthen our balance sheet and the more we execute our plans, the healthy our business is going to become and more orders we’re going to get.
And that being said I just want to thank everybody for their continued interest in the Company and I look forward to achieving our new goal of the $25 million in quarterly revenue, or $100 million annual revenue. Look forward to delivering the cost structure that we’re very close to putting in front of everybody. And then really focusing on margins, I think that’ll be our long cold intent so I think we have the right team in place and the right levers to go forward and work with our vendors who truly have been very supportive through this process. So we’re going to focus on our three pronged strategic profitability plan. We’re going to execute to the right track and really just drive for profitability and improving shareholder value.
And frankly I think the share price will recover when people realize that we’re reliable we are not going away and see that revenue growth on top of our very low cost structure that we now have. So thanks for your continued support. I look forward to seeing everybody and talking to you in the upcoming Annual Shareholder Meeting. Thank you.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.
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