Capstone Green Energy Corp (CGRN) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Capstone Turbine Corporation earnings conference 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 a question and answer session and instructions will follow at that time. (Operator instructions) As a reminder, this conference call 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 4, 2016. If you do not have access to this document and would like one, please contact us by email at 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, a collection of reserved accounts receivable, shipment of finished goods, benefits from our cost reduction initiatives, improved operating leverage and organizational efficiency, strengthened distribution channels, new product development, and the success of our signature series product, increased sales in Russia, implementation of the Capstone Energy Finance business, product or liability, 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, expect, objective, intend, 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 and chief executive officer, Darren Jamison.

Thank you, Chris, 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.

Let me start the call by saying, overall, I'm very happy with the 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're making significant progress toward 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 significant reduction from the previous $160 million annually, or $40 million per quarter. Then set a goal of obtaining breakeven from a cost standpoint the 25% gross margin. This is a significant structural shift in our business and were well down the path of making this a reality.

If you turn to slide three, slide three illustrates our new strategic profitability goal compared to Q1 last year and Q1 this year. The key to achieving our goal is a three-prong strategic profitability plan, which is highlighted in slide four.

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.

Turn to slide five. Slide five 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 to say I'm very proud of our employees who have met this challenge of improving our business despite the increased workload 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 product and the Company.

Cutting costs and leaning out the business is critical, but they're only one 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 six.

As you can see from slide six, we've already completed many of these items. We have completed the launch of our new C1000 signature series product, and I am proud to say that we have fully cut the signature series into production during the first quarter. This was no minor effort with over 70 component system and design improvements and upgrades.

As well, we continue to grow our aftermarket service business and have 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 MW of product in a very short 90-day period. This comes on the heel of nearly a year of no significant product payments or product shipments. However, to bring 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've 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 the 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 customers' sites that included hotels, office buildings, increase in hospitals, retail and industrial applications. Our recently launched signature series C1000 is targeted directly at these markets, and I am proud to say we shipped the first signature series unit to Europe during the quarter.

Oil, gas, natural resource applications declined to 46% of revenue, compared to 35% during last year's first-quarter. Renewal energy applications were 6% of sales compared to 10% last year. Our recent order (inaudible) which is highlighted on slide seven. Slide seven has the new orders coming from the likes of Uzbekistan, 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 eight, slide eight illustrates the improving balance of our geographic diversification within approximately $850 million of identified project opportunities for the remainder of fiscal 2017, weighted more evenly than ever 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 with significant provisions 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-prong strategic profitability plan is the new Capstone Energy Finance joint venture, which is discussed in slide nine. This new entity launched last December, offers power purchase agreements exclusively for projects that utilize Capstone's products and is designed to capture products that were potentially lost because of 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 2017. The highlights can be found on slides 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 revenues to $19.1 million for the first quarter of 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 at $0.17 per share for Q1 of fiscal 2017, compared with the net loss of 36% share in Q1 of fiscal 2016.

The decrease in the net loss during the first quarter of fiscal 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 our 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 $21.2 million in the first quarter of 2016, a decrease of $8.1 million or 40%. We shipped 11.6 MW during the first quarter of fiscal 2017, compared with 20.8 MW in last year's first-quarter, a decrease of 9.2 MW 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 market, delayed customer shipments and project timelines, and continued strength of the US dollar which makes our product more expensive overseas.

Revenue from accessories and parts decreased $.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 micro turbine 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 installed base and continued market acceptance of our FPP offering.

As a percentage of revenue, service revenue 70% in the first quarter of fiscal 2017 compared to 11% in the first quarter of fiscal 2016. Gross margin 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. This 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 margin by reducing manufacturing overhead and fixed and direct material costs 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 benefits. 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 products projects which included the development of the CHP 50 micro turbine. Management expects 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 decrease 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 costs 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 at $6.9 million in the first quarter of fiscal 2016.

As of 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 $60.7 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 listed $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 balance for EMI was cleared. There was no bad debt expense or recovery during the first quarter of 2016.

During the fourth quarter of fiscal 2015, we shipped approximately $0.7 million of product to BPC, and given the uncertainty as to the collectability of the sale, revenue recognition on this shipment was deferred at the time. During the first quarter of fiscal 2017, the remaining $0.5 million of deferred revenue for this shipment was fully recognized and payment was received from BPC. As you may recall, BPC's payment terms are cash before shipment plus a 15% premium to pay down their past due balance.

Our day 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 of raw materials. Our accounts payable and accrued expenses were $13.2 million as of June 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 is now displaying 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 to $109.6 million as of March 30, 2016, and $160.5 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 MW in backlog from one of our Russian distributors, BPC, which aligned our backlog with management's expectations because of the macro economic climate in Russia, and the softness in the oil and gas market.

Our book-to-bill ratio for the quarter improved to 0.9 compared to 0.7 in the year ago first quarter. Our FPP service contract backlog as of June 30, 2016 was $71.4 million compared to $66.5 million at March 31, 2016, and $62.2 million at June 30, 2015. These increases reflect a growing installed base of micro turbines as well as the ongoing efforts of our distributors to sell our FPP service contracts, which enables the end user 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?

Colin Rusch; Oppenheimer & Co.

Congratulations on the progress. 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, but I think a lot of the pending pipeline projects we have definitely could utilize Capstone Finance. As I mentioned in the prepared remarks, we have about $25 million of identified projects that seem to be a good fit, primarily in the US, but we're looking at some international opportunities.

That program was launched in December. We're making good progress and have a couple power purchase agreements that are in negotiation. I think that the first couple of these will take a little longer just because of the learning curve we go up on 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 the business.

Okay, perfect. Can we just get a little bit of an update on what is going on in Latin America? Certainly, there's a meaningful opportunity there for you. You have done some reorganization of the distribution channel, but what are you seeing there over the last three months in terms of pipeline?

Yes, definitely, the pipeline is very strong. Mexico has been a very good business for us in the last probably 18 months. Most of that is with our partner [DTC] and that is CHP and industrial applications. They have a very nice pipeline of projects. They continue to add salespeople and continue to execute. We have also put product in most of Central and Latin America, a lot of small projects. Probably our next biggest market is Columbia, we've got several nice projects going into Columbia. We will probably ship 2 MW quarter and probably another 2 MW next quarter. Again, pretty good pipeline.

Ecuador is probably the big elephant in the room. That is a 30 MW project that we've joked we have won and lost three times. We still make progress, in fact, the team is in meetings today. We have been to Ecuador several times this quarter. The bad news is we haven't gotten across the goal line; the good news is we still have the ball and there is still time on the clock.

I would say I am still cautiously optimistic that we will get that order done. It only makes sense. It is an associated gas to energy project. Flaring gas in the Amazon while running diesel generators next to the flare is absolutely ludicrous. I think it's great environmentally, it's great financially, we're just trying to get around the challenges of financing projects in Ecuador.

I think in general, Latin America, I feel very good about. But we also put product into Qatar this quarter. We have product going into several places in the Middle East. We have product going into Africa. Australia continues to be a very nice market. As I mentioned, BPC coming back online and getting some more distributors in Russia and the CIS states is very positive for us.

Okay, great and just one final one for me. The [combining] power opportunity in the US, are you seeing progress on those CHP opportunities in a material way? Are you seeing acceleration? Anything material going on there?

It's obviously regional, New York has got a lot that's going to happen in the back half of this year. We've got several projects for related properties that are coming out of the ground, those buildings are ready, the micro turbines will ship. [RSPR], our distributor in New York, has got a nice back log. I think Q3, the end of the calendar year, and Q4 for us our fiscal Q4 will be very good quarters for them. We did ship them product this current quarter, last quarter, Q1. We will ship more product in Q2. But I think Q3 and Q4 will be very good quarters for them.

[EFND] has always been one of our best distributors and they are doing very well in their territory. We've got Virgin, who is a newer distributor, but they are starting to do a lot of CHP projects, especially up in Quebec in Canada, there's some nice opportunities there.

Hawaii is coming on actually very nicely. We've got I think four C1000s now operating in Hawaii. Propane at hotels at large resorts, so I think that those prove the local marketplace, Hawaii is not a big market, so news travels fast, I think it's a good opportunity for us. California is still a good market.

I would say the only thing negative is just the pace of business. There's really, I would say the overall global business environment is one of caution I think because of what is going on with Brexit and terrorism and ISIS, and all these different things. Everybody is moving slowly and very methodically. So I would say the opportunities are there. The pace at which business is happening, though, is still a little bit of a challenge.

Great, thanks so much, guys.

Eric Stine; Craig-Hallum Capital Group

Really good progress on OpEx, but clearly gross margin, a big part of the plan. I'm just curious, are you able to quantify the impact of the signature series limiting gross margins here near term? Then just maybe more color, and Jayme touched on it a little bit, but some of the specific things you are doing to get to the 25% level. Then maybe thoughts on roughly the timing or what you're targeting internally.

No, it is a great question and one I wanted to probably roll around a little bit anyway. If you look at the three-pronged strategy of $25 million revenue, 25% gross margin, an operating model of about $6.3 million operating expenses, you have seen the dramatic improvements we made in operating expenses.

We still have some work to do but I think we've got most of that work lined out and it is 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.

That being said, controlling your operating expenses is the easiest thing for us to do because we have the most control over it. Revenue, I feel very good that we're going to continue to see revenue growth, albeit, slower than we would like, but we're going to see growth hopefully every quarter. If you look at the $25 million, we've achieved that in 14 of the last 21 quarters, so it is not a Herculean effort to get back to those kind of revenue levels and one we can easily achieve when the market comes our way a little bit.

Definitely the biggest challenge for us is the 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 or lower volumes. We are building about one a week right now. In the heyday we were building about 1.5 to 2 a week, so obviously lower volumes, it is harder to drive your supply-chain.

I think margins will be challenging in Q2, probably challenging into Q3. I would expect by Q4 and Q1, though, that we could do some supply chain improvements. As revenue comes back and we spin up the manufacturing line faster on the new signature series, we will see some margin improvement. That said, long story short, I think we get to 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 as we can.

Okay. Maybe on the pipeline, you put up that slide every quarter. I have noticed the last few quarters that pipeline number while still extremely large, has been coming down. I mean, 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 2017. This is only three quarters, this is not our total pipeline. If we put up our complete pipeline and opportunities that are outside of fiscal year, that would be over $1 billion. That number is coming down because Q1 has pulled out of that, obviously. We have shown it both ways, with total pipeline, we have shown 12 month rolling. This is just a snapshot of the next three quarters what we expect.

I wouldn't read too much into that. The reason we put it up there is to show that this now looks like you hope your 401(k) looks, it looks very diversified, and I think Latin America, if you pull out Ecuador, that looks even better. I think of the diversification of our global business I think is improving quite a bit. I think it really sets us apart from a lot of the people in our space or even companies our size, to be a global $100 million company and publicly traded is pretty amazing. I think as we can grow this business and as the economy comes back globally, we're going to benefit from the diversification.

Got it. Okay. Last one for me. Just you put out two days ago the certification to the EU medium voltage interconnect standards. I'm just curious how you think that opens up the market, and any commentary if you lost orders because you did not have that certification? Any details would be great.

As I always say, you probably have this modelled better than anybody. I'm sure you have noticed our C65 sales are down dramatically year-over-year. Some of that is oil and gas related but a lot of that is also Europe. Not having a certification in in Germany and Italy specifically has impacted our business.

We obviously, we started with the 200 1000 series just because that is the biggest bang for the buck. But, no, that should help drive more revenue out of Europe. Europe in general, if you look at the numbers over the last couple of years, it is actually held in there fairly well if you take out Russia.

I think with the German distributor still doing a good job, our Austrian distributor, our Spanish distributor all 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 the region. I would say overall, though, we feel pretty good about Europe. Having certification is only going to make our product that much more competitive and easier to sell.

Okay. Thanks a lot.

Amit Dayal; Rodman and Renshaw

Good to see the turnaround materializing. Most of my questions actually have been asked. I was trying to look into the margin improvement side of the story and was wondering whether, and it is going to be driven by volumes, obviously, in one, as one driver, but how much of it is going to be driven by product mix?

I really think the biggest issue is just getting the vendors to manufacture more of the new parts. We've got one component, not to get into too much gory detail, but the old component and the old configuration was a $3000 part. The vendor came out at $13,000 for that part and we're down to $10,000 but we need 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 again I think with volumes and value stream mapping with that vendor we'll get the cost down.

Obviously, when vendors start building a new part they tend not to be as aggressive on the pricing until they get more comfortable with building it. We have a team we have put together, an integrated team of folks that are focusing on all of those parts. Of course, we are taking the highest dollar ones first and we will work down and improve those margins.

That being said, with having volumes on especially the 65 in the 200s down, some volume improvement would definitely help those conversations with our vendors. I think it will be two-pronged. It will be working with vendors, them getting more comfortable with building the new part they are required to build, and then some volume improvements will definitely help.

Thank you. That was helpful. Just maybe another question on Capstone Energy Financing. This $25 billion pipeline, is this for fiscal 2017 or is it for the calendar 2017?

Fiscal 2017. Yes, everything we talked, we talked the fiscal year.

Understood. I guess that is all I have. I will follow up with you on our call later.

Excellent. I think the other thing I meant to talk about when it comes to margin, again, people don't give us a lot of credit for our service business but our service business continues to grow even on down product revenue. We are seeing higher attachment rates on FPPs, we have launched a new extended warranty program, which interestingly, we look at attachment rates, our CHP business the attachment rates are much higher than our oil and gas business.

That is the reason we are coming out with an extended warranty program. Because most oil and gas users have indigenous technicians, they're used to working on complicated machines. So they are reluctant to sign long-term service agreements where a hospital or hotel or industrial customer doesn't have that kind of experience and onboard resources.

I think having an extended warranty, though, is something they will sign and it is a way for us to capture that aspect we are losing on the aftermarket side there. I think as we can grow that factory protection plan, as the signature series -- the signature series can have a much lower warranty rate and better performance rate as far as cost of ownership, which will make the margins on the FPPs even better. I think our service business is going to be a growing key contributor, and obviously that is a big margin contributor. The more our service business can grow and improve in margin, that is going to be a key lever to improving the overall gross margins.

Thank you. That is helpful. Thank you.

I'm showing no further questions in the queue at this time. I would now like to turn the call back to Darren Jamison, president and CEO, for any concluding remarks.

Thank you, guys, great questions. I think the good news is the quarter was very much in line with the analysts' expectations and estimates and very much aligned with our internal estimates and expectations. Nobody likes surprises, and to have a boring quarter that meets expectations is refreshing.

Overall, I would say, I would reiterate that I'm very happy with the quarter. Meeting both internal and external expectations is good. I think the business has stabilized and we're comfortable with our near-term performance, whether that is balance sheet, cash, gross margins, we are getting more comfortable with our long-term performance, and as we kind of grow and pivot, reposition the Company, we need to see renewed revenue growth.

I think in Q2 we will see revenue growth over Q1. Jayme will tell you low single digits, I will say high single digits, so we will probably compromise somewhere in the middle. We really need to get back to double-digit, though, and I think it will be the back half of the year before we get double-digit revenue growth again. Hopefully, exiting this year double-digit revenue growth will become the norm like we experienced back a couple of years ago.

Obviously, I'm not happy with where the business is today. Specifically, the share price. I think we were all extremely disappointed with what is happened to a share price and how the market is receiving our Company. But with that, I think I can do is execute our strategic profitability plan, focus on all three of our strategic initiatives.

I'm really happy with the balance sheet. I think if you look at the balance sheet year-over-year -- I know everybody wants to look at the P&L, that is 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. Overall, our cash business is much better than it has been in a long time. Our cash is good, our bank line is a probably lowest it has been since I've been here.

We are really in a good shape from a balance sheet perspective and that is critical because I think we have struggled over the last 18 months. We have been losing orders because customers being concerned about our viability. The more we can strengthen our balance sheet and the more we execute our plan, the healthier our business is going to become and the more orders we're going to get.

That being said, I just want to thank everybody for their continued interest in the Company. I look forward to achieving the new goal of the $25 million in quarterly revenue or $100 million in annual revenue, look forward to delivering the cost structure that we are very close to putting in front of everybody.

Then really focusing on margins. I think that will be the long pole in the tent. With the right team in place and the right levers to go pull, and work with our vendors, which actually have been very supportive through this process. We're going to focus on the three-pronged strategic profitability plan, we're going to execute like heck, and then really just drive toward profitability and improving shareholder value.

Frankly, I think the share price will recover when people realize we are viable, we are not going away and we see that revenue growth on top of our very low cost structure that we now have. Thanks for your continued support and I look forward to seeing everybody at -- or talking to them -- at the upcoming shareholder meeting.

Ladies and gentlemen, thank you for us in today's conference. That does conclude today's program. You may all disconnect. Everyone, have a great day.