Capstone Green Energy Corp (CGRN) 2021 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Capstone Turbine Corporation earnings conference call and webcast for the financial results for the first quarter fiscal year 2021 ending on June 31, 2020. (Operator Instructions) As a reminder, today's program will be recorded.

At this time, it is my pleasure to turn the floor over to your host, Mr. Colby Petersen, Corporate Counsel. Sir, the floor is yours.

Thank you very much. Good afternoon, and thank you for joining today's fiscal 2021 first quarter conference call. As a reminder, the company issued preliminary first quarter results on July 9, and hosted a call covering the fourth quarter and full year fiscal 2020 results as well as the preliminary fiscal 2021 first quarter results. On the call with me today is Darren Jamison, Capstone's President and Chief Executive Officer; and Eric Hencken, Capstone's Chief Financial Officer and Chief Accounting Officer. Today, Capstone issued its earnings release for the first quarter of fiscal 2021.

During the call today, we will be referring to slides that can be found on our website under the Investor Relations section. I would like to remind everyone that this conference call contains estimates and forward-looking statements that represent the company's views as of today, August 6, 2020.

Capstone disclaims any obligations to update or revise these statements to reflect future events or circumstances. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control.

Please refer to the safe harbor provisions set forth on Slide 2 and in Capstone's filings with the Securities and Exchange Commission for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. Please note that as Darren and Eric go through the discussion today, when they mention EBITDA, they are referring to adjusted EBITDA and the reconciliations that are in the appendix of our presentation.

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

Thank you, Colby. Good afternoon, everyone. Thank you for joining us today for a review of our first quarter fiscal 2021 results ending in June 30, 2020. Before getting into financial results, I'd like to run through our positive adjusted EBITDA initiatives on Slide 4 as a reminder of our strategic focus to achieve this important milestone and inflection point for our business.

The overriding focus for phase 1 is to lower operating expenses and bring the company to a positive adjusted EBITDA using a conservative baseline revenue model. Phase 2's focus is to grow revenue from the now adjusted EBITDA profitable baseline and do so in a way to maximize margins and maintain or improve further on those goals we set forth in phase 1.

The first point of attack was to reduce operating expenses in the first quarter of fiscal 2021 to under $4 million to $3.9 million, a decrease of $3.2 million or 45% from $7.1 million in the first quarter last year. Let me repeat that, $3.2 million or 45% reduction from $7.1 million in the first quarter last year.

Next was a focus on material costs, where we targeted $3 million reduction through our new IRF facility in the U.K. as well as sourcing more materials from lower-cost countries like Mexico and China. Energy as a Service is another key initiative and developing a rental fleet to our targeted 10 megawatts, which currently sits at about 8.6 megawatts, is a key for us.

We have also targeted an R&D reduction of 25%, and we have been able to march towards this goal without sacrificing our focus on next-generation technologies, which includes the development of our new hydrogen product. We've also effectively reduced our warranty expenses from 3% to under 1% as the "bad" vendor part issue has been substantially worked through the system, and we are back to more normal reliability levels and maintenance baseline levels.

As a result, Capstone's gross margin percentage expanded 24% -- or to 24%, an increase of 20 percentage points compared to prior quarter and 9 percentage points compared to the prior quarter year-over-year as the company successfully executed against its positive adjusted EBITDA plan. We've also intensely focused on improving our revenue mix in favor of higher-margin streams, and we will continue this effort aggressively in phase 2 of our plan.

The variables include: higher FPP service agreement attachment rates, growing from 38% to a goal of 45%; more aggressive management of our distributor network to drive near-term revenue and backlog; and the establishment and expansion of our new internal national account sales team. I expect this strategy to be even more relevant as we lower our cost of capital and expand the ROI on rental fleet in the future. All these factors I must -- just mentioned are working in harmony to get us to our goal. And I'm very encouraged by the progress we have made, and we'll push forward over the goal line and beyond.

Now let's turn to Slide 5. Slide 5 pretty much speaks for itself. This has been a long road, and I want to thank the Capstone team for all their hard work and long hours, and our investors for all their confidence in us as we strive to reach this key milestone despite the unprecedented and obviously unexpected headwind caused by the COVID-19 pandemic.

Let's turn to Slide 6. If you turn to Slide 6, it shows you the idea of just how much we've improved year-over-year in adjusted EBITDA, with a $3.5 million improvement. As I told you last call, it's difficult to give specific guidance, with COVID-19 continuing to impact the business. But Eric and I are very comfortable in saying we intend to improve the adjusted EBITDA performance of the company by $10 million year-over-year, and we are currently off to a good start as we are 35% of the way towards that goal and only 25% of the way through the new year.

I'll now turn the call over to Eric Hencken, our CFO and CAO, to provide more details on the first quarter financial results. Eric?

Thanks, Darren. I will now review in detail our financial highlights for the first quarter of fiscal 2021.

Turning to Slides 8 and 9. You can see the Q1 business highlights and financial results for the first quarter of fiscal 2021, which had revenue at $14.2 million, up 22% compared to $11.6 million in the fourth quarter of fiscal 2020. Product revenue was $6.1 million, up 61% from $3.8 million in the fourth quarter of fiscal 2020; while accessories, parts and service revenue, which includes our FPP long-term contracts, rentals and Distributor Support System, was $8.1 million, up 4% from $7.8 million in the fourth quarter of fiscal 2020.

Looking ahead, our new gross product orders were $5.5 million and the book-to-bill ratio was 0.9:1 for the first quarter of fiscal 2021 as we continue to see a slowdown in new projects and deliveries as a result of COVID-19. We also made improvements in our working capital and liquidity in the quarter as inventory receipts decreased by $2.9 million or 36% to $5.1 million in the first quarter of fiscal 2021 compared to $8 million in the fourth quarter of fiscal 2020 and decreased $9 million or 64% compared to $14.1 million in the year ago first quarter.

Our balance sheet on Slide 10 shows improvement, with total cash and cash equivalents as of June 30, 2020, at $16.2 million, an increase of $1.1 million compared to $15.1 million as of March 31, 2020. We also secured low-cost financing and used our ATM in the quarter, receiving $3.3 million in total between the SBA Paycheck Protection Program loan and our ATM as we focus on liquidity as part of our COVID-19 Business Continuity Plan.

Moving to Slide 11. You can better see the year-over-year comparison that drove our positive adjusted EBITDA of $0.1 million. A key item I'd like to highlight is that, despite the lower product sales related to the pandemic and lower oil prices, our accessories, parts and service revenue experienced a much smaller decline. That is a perfect demonstration of why that business is so important to Capstone's future as it provides resiliency and attractive margins.

This, along with the other initiatives Darren mentioned earlier, drove our gross margin higher to 24% and simultaneously lowered total operating expenses to $3.9 million in the first quarter of fiscal 2021 compared to $7.1 million in the first quarter of last year. At this point, I'll turn the call back to Darren to review our fiscal 2021 business goals and objectives. Darren?

Thank you, Eric. As I said earlier, reaching positive adjusted EBITDA in the June quarter has been a goal of ours for almost 2 years, and we reached that goal despite the pandemic and other external headwinds. That said, we still have a lot we can do to improve the business further and to reach our long-term profitability and business goals.

Let's go ahead and turn to Slide 13. Slide 13 lays out the top 4 critical short-term goals we have focused on, and I'm proud to say we've completed all 4. We were able to reach positive adjusted EBITDA while maintaining the highest level of customer service and continuity for our customers. We also managed to improve our liquidity and working capital metrics as we thought to conserve cash and keep our balance sheet healthy. Most importantly, we accomplished these while keeping our employees healthy and safe in these unprecedented times.

Go ahead and turn to Slide 14. As I noted in the prior earnings call, we are still facing a number of uncertainties, including the pace of the COVID-19 economic recovery. So although it is hard for us to gauge the specifics of each quarter, we can say we expect to see $10 million improvement to the full year -- year-over-year revenue and adjusted EBITDA. The key components in achieving that goal include 22% gross margin target in the full year, driving 15% of our revenue from direct sales channels, reaching at least 10 megawatts of rental equipment in our fleet and further improving our working capital to achieve upwards of 6 inventory turns.

Despite COVID-19, we have several positive tailwinds in the future. And if you look at Slide 15, I have highlighted some of the more salient drivers as well as a couple of the inputs that could create challenges. The biggest driver is the broader industry trend in favor of distributed power generation and microgrids. Many of the growth drivers we see fall under that umbrella, including: low natural gas; new emission requirements, either mandated and adopted separately by our customers; energy security and reliability; green building initiatives; and energy efficiency subsidies.

Also, we cannot forget the broader trend toward electrification, with the proliferation of EVs, which will put ever-increasing strain on the existing centralized power grids. We're remiss not to address some of the headwinds we are facing, with the most prominent being the low oil and gas prices that are impacting our oil and gas customers.

In regards to this, I would say that oil prices have stabilized around $40 a barrel and when things are starting to show signs of improvement. However, for this market to expand significantly, I feel oil prices need to reach $50 per barrel for a sustained period of time. As I said earlier in the call, layering on revenue growth is the next critical step or phase 2 of our profitability strategy plan going forward.

If you turn to Slide 16. Slide 16 sets out the top 6 drivers of our profitability and growth plan. First is new nondistributor business. As we have discussed previously back in January, we created an internal Capstone direct sales team focused solely on OEMs and national accounts. We are also actively pursuing strategic partnerships and our rental strategy, both of which we expect to fuel additional revenue growth. I would also note that the rental revenue stream creates high-value reoccurring revenue as all of our existing rentals are a minimum of 1 year and a maximum of 5 years.

Second is our new target pricing program. This is a focused program designed to get our current national accounts and OEMs to expand their current Capstone installed base at a faster pace. Said another way, quite simply, how do we get the Mohawk Carpets of the world, the Ambevs, DHL, Magna Internationals or even Marriotts to deploy microturbines at a faster pace across a broader base of the global installations.

Third is our focus on hydrogen fuels and renewable natural gas, or RNG. This is important as it enables our customers to achieve net zero-carbon objectives. And with renewable natural gas, it can actually take carbon out the atmosphere on a net basis. It is important that our technology can run on these new fuels as we believe both will be key sources in the future and make our products more attractive in the ever-developing energy market.

Fourth is improving customer satisfaction. As you would expect, one of the most important drivers of revenue is getting existing customers to buy more product. By improving the microturbine system reliability and lowering our warranty costs, we are making our customers happier while improving our margins and incentivizing them to expand and install their base with us faster.

Fifth is our new marketing strategy. We are implementing a new digital marketing strategy, including website update and strategic digital campaigns by market. In fact, just this week, currently, we launched our #ShiftToGreen initiative with the support of Andretti Autosport, George Steinbrenner IV and the youngest driver to ever win an INDYCAR race, Colton Herta. We all have or will be appearing on multiple shows like Big Biz as well as the new #ShiftToGreen marketing video has been widely distributed as part of our digital marketing campaigns on social media.

The digital marketing campaign we are currently running is a two-pronged approach, 2 different types of digital campaigns for the week across 4 social media platforms. The first is the Capstone brand awareness campaign, focused on green businesses or businesses with green certifications as well as sustainability officers and other energy efficiency-related job titles. In addition, we will run an expanded version of this audience using Facebook look-alike.

The second campaign is what we call a traffic campaign, which looks to increase click-throughs to the new Capstone INDYCAR landing page on our website. This campaign has 2 audiences as well, and we'll be using ads that are created based on our scheduled social media posts, including the new #ShiftToGreen video.

Under this campaign, we'll be targeting INDYCAR enthusiasts, ahead of the Indianapolis 500, and an expanded group, which will be similar to the folks we are targeting under the 2 brand awareness groups. This is somewhat new territory for Capstone, so we will gain the success of this initiative by the estimated recall lift of the Facebook-boosted post, total clicks and number of landing page views as well as the #ShiftToGreen video views and, last but not least, the number of Capstone racing giveaway entries.

The sixth part of our revenue growth strategy is distributor business growth. We are specifically interested in growing our distributor business in untapped markets such as Eastern Europe, Northern Africa, parts of Asia and the Middle East. These geographies represented tremendous upside for us and are currently underserved and need improved local presence.

In addition, we will ship our first C200 Series product to Japan this quarter, with the C800 being delivered next month. If you don't remember, Japan is one of the markets that Capstone dominated on early in its development, but lost because of an early-stage reliability issue almost 20 years ago. We are actively talking with several potential distributors in these areas and expect we can add new revenue streams to Capstone going forward.

Lastly, on Slide 17. Slide 17, I would like to give you some more color on how Capstone fits into the hydrogen economy and why this, too, could be a significant revenue driver for us. I'm sure most of you have noticed, there's a lot of activity going on in regard to the build-out of hydrogen capacity and hydrogen distribution.

Today, with our current legacy microturbine products, we can use up to 20% hydrogen in our fuel mix. But we recently developed and received the new patent for a multiple-fuel capable, pre-mixed, low-emission injector for high-flame and speed fuel combustion hydrogen and renewable natural gas. Plans are in place to release a commercial 100% hydrogen fuel-capable microturbine over the next couple of years.

Through the hydrogen and RNG, we can create a zero-carbon power source for our customers and provide a very competitive solution to fuel cells and stationary power applications. We are looking forward to providing you with more details on our hydrogen product and product strategy and our many similarities to fuel cells throughout fiscal 2021.

In conclusion, I will leave with you comments that the fiscal 2020 was a transformative year for Capstone at an inflection point. I'll say that Q1 of 2021 was the initial step in our extremely bright future.

We managed the fight through a global pandemic and an oil price war and still meet our positive adjusted EBITDA objectives. This is the beginning of a new chapter for Capstone, and we will continue to put together the right pieces to create a growing and profitable company.

The fact we have shipped approximately 10,000 systems around the globe, the fact that we have saved customers approximately $0.5 billion of energy costs and saved 718,000 tons of carbon for our planet in the last 2 years alone says that we are coming into our own. And with 30% to 40% of the world's population growing up with climate change, energy markets are going to continue to value our technology and move in our direction.

In summary, we have refined our business strategy to focus on reoccurring high-margin lines of business, dramatically lowered our cost structure, focused on cash flows and liquidity without huge dilutive toxic financings, developed a new direct sales organization to leverage our existing Fortune 1000 customers. However, most important is that these external market factors have never been more favorable for Capstone as carbon-reduction strategies continue to be compelled by ever-more responsible consumers, responsible corporations and responsible countries, and we are ready and able to meet the carbon and cost challenges.

With that, I'd like to open the call to questions from our analysts. Operator?

(Operator Instructions) And our first question comes from Rob Brown from Lake Street Capital.

Just wanted to touch on the rental market a little bit more. I think you talked about 10 megawatts of rentals is your initial goal, but is that market getting more active now in this environment or less? And ultimately, what could that kind of rental business be?

Yes, Robert. No. Great question, though. We're very high on the rental business. It's why we started the relationship with Goldman Sachs to help fund that rental business. We will be looking for additional capital amid lower cost to improve the ROI on that business. We're at $8.6 million when COVID hit. So we've taken a little bit of a pause to getting to that 8.6 megawatts, excuse me, a little bit of a pause to get to that 10 megawatts.

Oil and gas was kind of our first market. It will continue to be a strong market for us. We just got our first CHP rental out there a couple of weeks ago. We have a robust pipeline of potential rental opportunities. This is a market that's been dominated by the Aggrekos of the world and United Rentals.

It's a very mature market. It's not a market that has a lot of low-emission equipment. And so we enter the market with a low-emission, highly reliable microturbine. And so I think we're kind of uniquely placed in that market. So I think we can quickly get to the 10 megawatts after COVID settles down a little bit, and then we'll look for additional financing to take it to 20 megawatts.

Okay. Great. Great. And then I think you talked a little bit about the CHP market. But is that -- where is that at in the current environment? And do you see that sort of coming back and stabilizing? Or is that business a bit disrupted with COVID as well as the oil and gas?

I think all businesses have been disrupted by COVID one way or another. I think our CHP business has held in there better, and our renewable business has held in better than oil and gas. We are seeing an uptick in oil and gas business, which is good.

I think in general, our reoccurring revenue streams has really helped us through this crisis because our Factory Protection Plans are solid. Our margins are good. Our rentals have been -- have hung in pretty well. Also, our spare parts sales have done well. So the aftermarket reoccurring revenue streams have been solid and helped us through this -- still viewed it a positive through this crisis.

I would say projects are coming back online. Municipal projects are coming back online. It's really -- it depends on the geographies, but Mexico has been sluggish. It seems to be coming back online. The U.S. is, in most areas, doing better. Brazil, though, is really challenging. Latin America, in general, is challenging. Europe is coming back faster than the U.S. We've had some nice orders already this quarter from Austria and from Germany also as well as the U.K.

So it's really country-by-country, and the U.S. is state-by-state. I think in general, we're seeing an uptick in activity. But I think it's going to really be probably Q -- good for us would be fiscal Q4, the first quarter next year that we'll really keep things turning around or more back to normal.

(Operator Instructions) And our next question comes from Colin Rusch from Oppenheimer.

It's Joe on for Colin. Congrats on the strong quarter. Can you talk a little bit about what the sales cycle looks like, really, from first contact to the final sale?

Sure. No, sales cycle, it really depends a little bit on the market and the customer, the vertical. In general, we've got about at $1.2 billion to $1.4 billion in pending opportunities, and that's oil and gas, that's CHP, that's renewable energy projects. We see an average across the globe about 13 months from initial contact to closing. I'd say our distributors that are more mature, they can close quicker. The newer distributors tend to be on a slower pace. In general, I'd say, our distribution channel is maturing, though, fairly quickly.

We separated the sales organization in January. So Jen Derstine is running the distributor organization, doing a great job. And then Jim Crouse is leading our direct sales organization. I'll say Jim's group has already had some nice wins. They're going after existing customers that already have Capstone technology and trying to get follow-on business or a larger scale rollout. So those close rates can be faster if you have a customer who's already familiar with the technology.

Got it. And then can you give a sense on the trends for conversion rates for your pipeline into sales?

Yes. Again, it depends by a distributor. I would say we're high single-digit today, on average. Our better distributors are closer to 15% to 18% close rate. And again, so part of our strategy is that 83 countries and 73 distributors is working on that. The maturation of the distributor is to get those close rates up. And so as they get better, they mature. As they get more experienced, they have more reference installations. We see that close rate pick up as distributors mature.

And so if you look at Caterpillar, their distributor channels is well over 100 years old. Many of the other industrial customers are very similar. Our distributor channels, they're not even 15 years old yet. So I'd say considering we built a global channel with over 700 people in that channel, how to train those folks from a service, sales, application standpoint, I'm actually pretty proud of how mature our distribution channel is and how much have grown. But they are improving year-over-year, fairly substantially still at this point.

Got it. And then shifting gears a little bit more on the product side. Do you guys see any potential for design changes that could also help reduce manufacturing costs?

Yes. Our manufacturing costs are really driven by volume. So we can drive more through the plant, the lower manufacturing costs go. About 90-plus percent of our cost of goods in the product is materials. And so materials really depend on how much you buy at the time, and how big of manufacturing runs or casting runs you can put forth.

And so our costs will come down precipitously as the volumes go up. Our labor is really a fairly small component. So I get questioned a lot, saying, "Why don't you move out of California?" The reality is, on my $1 million sale ASP product, I've got less than $30,000 of labor. So even if I cut that in half, it's not going to move the needle.

And so we are looking at different suppliers, offshoring low-cost manufacturing. The good news is a lot of our vendors are aerospace vendors, and they're getting a lot more flexible. So Kirk has got his baseball bat out and is out hunting for cost reduction opportunities. And so the reality is, if our volumes are going up and the aerospace business is down, then that gives us a fertile ground to go negotiate some better LTAs.

And our next question comes from Eric Stine from Craig-Hallum.

I jumped on late, juggling calls, so I apologize if I ask some duplicates here. But -- so I noticed the OpEx in the quarter, $3.9 million, I mean, obviously, great to see and great to see the positive adjusted EBITDA there. But have you talked about or just discussed what you kind of see as a normal run rate? I mean that certainly was more of a COVID run rate. So just thoughts on that. And then just thoughts on the steps you're taking internally or what you need to see to have that be sustainable? I mean you've done a lot of things on the rentals side, the FPP, but what gets you to that level on a sustainable basis?

Sure. No, great questions. And Eric, I have answered all those already. No, just kidding. No, good questions. Glad you could make it to the call. No, we're very proud to be EBITDA positive for the quarter. Obviously, getting that OpEx down was a big piece as well as getting our margins up. $3.9 million is not the new run rate. I think we'll probably be closer to $5 million. And I think that there's opportunities to continue to streamline the business.

And I think the other issue for us is as product sales start coming back on, as rentals get more product out there, we've got a chance to stay around that EBITDA-positive level. If you look at our goal for the year, it's a $10 million improvement. Well, that's about a $13.5 million of EBITDA loss last year, down to about $3.5 million this year.

The last time we put together 2 positive EBITDA quarters, I think we got about $18 per share pre split. So we have a lot of incentives to try to get there again next quarter, and we'll do everything possible to string as many EBITDA-positive quarters together as possible or be as close as possible. I guess, Eric, do you want to add any more to that?

Well, yes, on the OpEx, we previously guided to a range of $5.2 million to $5.7 million. And I think now, with the cuts we made from the COVID plan, would be on the lower end of that range. And like Darren said, maybe as low as $5 million going forward.

Okay. No, that's great. And maybe just last for me. Just on the backlog, just to confirm, I mean, still a situation where you haven't seen any cancellations. And then, I know, prior to COVID, you were back to a point where the backlog was more of that 12-month backlog and that it had been extended previously. I mean is it fair to say that now, at least, for the foreseeable future, given the COVID and everything else, that it is more of an extended backlog again?

Yes. We've done a good job of cleaning up our backlog over the past year. So we think a 1-year turn on the backlog is pretty reasonable now.

(Operator Instructions) And our next question comes from Sameer Joshi from H.C. Wainwright.

Congratulations on the -- achieving your target. Good job. On the distributors front, is there any update as far as how they are faring during the COVID-19 headwinds? And are there smaller distributors who are going to be still around in the face of this crisis?

Yes. No, great question. I think the short answer is we have not seen any distributors face severe financial crisis to the point where they're no longer around. We did put some reserves in place in Q4, with some that we were worried about, the receivable collection or collectability. That being said, we didn't do anything new this quarter. So I think it's kind of stabilized.

A few of our bigger U.S. distributors applied for and received PPP loans, which is great. And I think, in general, most of the distributors make their day-to-day living off reoccurring revenue, much like Capstone's looking to do. So I think they are weathering the storm fairly well. But definitely, it's been challenging for some of our distributors. I'm not aware of any wholesale furloughs or layoffs, though. Most of the distributors managed their cash flows fairly well with their reoccurring revenue. So they've actually weathered the storm, I think, better than most.

And I think you may have answered this question earlier, but just a little bit clarification on the -- as against G&A, just S&M spend, given your activities. What is the budget for this year? Like how much or what run rate are you looking at for sales and marketing spend?

Yes. I mean our G&A, as a total, is added in there as well. So I think we really kind of moved into more digital marketing, so that's obviously a lot cheaper. If you look at our sales expense, we haven't been on an airplane since March. We're doing a lot of stuff through Zoom and through other techniques. And so I think our sales and marketing expense will be the lowest it's been probably in the last 13 years as well as our OpEx as well, as it's been since I've been CEO.

So I think we'll continue to manage that. I think we're seeing increased business activity, which is good. Maybe next year, when things are really back to the more -- the new normal, we'll look at increasing those levels. But our goal is really to stay around the EBITDA-positive level as much as possible.

And we also want to focus on product development. I mean getting that hydrogen product to market sooner rather than later is key. The hydrogen market is really starting to pick up in the U.S. as well as internationally. We're seeing opportunities in Australia, Japan, Europe, obviously, here at home. So getting that hydrogen product to market will be key. So I think you'll probably see more of an increase in our R&D line than you will in our OpEx line in the next, call it, 18 months.

So that's a good segue to my next question. On the hydrogen front, are you -- are there customers who are asking you for this, like seeking out your product for hydrogen? Or how is that business being driven?

Yes. No, we've already taken a couple of small orders for hydrogen fuel C65 in Australia. We're seeing opportunities in Japan. We've got a lot of folks looking for 20% to 30% hydrogen blend with natural gas or other fuels. We're also looking at some other off-spec fuels, mostly oil and gas-related or in refineries and other areas like that. And so there's definitely some markets that we can get near term if we can run on some more exotic fuels and mix hydrogen in with natural gas.

And then, I think, there's a lot of talk about just pure natural -- pure hydrogen as a play, with wind and solar, excess energy, creating hydrogen and then running that in a microturbine. And so I think that if you look at us from a competitive standpoint, we did very well against fuel cells and CHP using natural gas. We should be just as competitive against fuel cells in a CHP mode with hydrogen.

If you look at other traditional turbines and gas engines, they're talking about getting to 100% hydrogen in 2030. 2030 is a long ways away, and I think we can get to 100% hydrogen in the next, call it, 2 years.

Understood. Yes. No, we are seeing that as well as probably everyone else, but good to know that you are working on that. I will take my other questions off-line.

Thanks, Sameer.

And that appears to be the last question at this time. I would now like to turn it back to you for any closing comments.

Great. Well, thank you. No, very happy for the Capstone employees, team, Board of Directors that we could achieve this positive EBITDA goal. As I said, it's been 2 years since we've been positive EBITDA. And unfortunately, because of a bad vendor part, it's knocked us backwards.

But we're happy to be back here again. I think the journey has made us a better business. We've got higher reoccurring revenues, higher margins, lower cost structure, more focused business. And so I think that which doesn't kill you makes you stronger.

I think we exit this COVID issue a much better company than we were over the last couple of years. And I think the things we've done to strengthen the business are important. I think the new sales organization is going to lead to additional adoption rates for kind of Fortune 1000 customers, which are key. I think the overall energy market is moving as people come out of COVID. I think they're looking for more of a green recovery.

And so I think we're well positioned in the market and that we've got the right product and the right people and the right partners in place to have a very successful fiscal '21 and beyond. So look forward to talking to everybody about Q2 in a few short months. Thank you.

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.