Q1 2021 Capstone Turbine Corp Earnings Call
To remain on the line your conference will begin shortly thank you.
[music].
Good day, ladies and gentlemen, and welcome to your Capstone Turbine Corporation earnings Conference call and wet cats for the financial results for the fourth quarter fiscal year 220, 21, ending on June 31st [laughter] 2020, all lines have been placed under listen only mode and there will be a question answer session. Following the pre.
Temptation.
As a reminder, today's program will be recorded at this time, it's my pleasure to turn the floor over to your host Mr. Colby Peterson corporate counsel, Sir the floor is yours.
Thank you very much.
Good afternoon, and thank you for joining todays fiscal 2021 first quarter conference call.
Under the company issued preliminary first quarter results on July nine and hosting the call covering the fourth quarter and full year fiscal 2020 results as well as the preliminary fiscal 2021 first quarter results.
On the call me today, Darren Jamison, Kapstones, President and Chief Executive Officer, and Air Cancun, Kapstones, Chief Financial Officer, 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 slide that can be found on our website under the Investor Relations section.
To remind everyone that this conference call contains estimates and forward looking statements represent the company's views as of today August six 2020.
So disclaims any obligations to update or revise these statements to reflect for 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 at Fort on Slide two and then Kapstones 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 is there an error go through the discussion today, when they mentioned EBITDA, they're referring to adjusted EBITDA and the reconciliations that are in the appendix of our presentation.
Like to now I'll turn the call over to Darren Jamison, President and Chief Executive Officer.
Thank you go very good afternoon, everyone.
Thank you for joining us today for a review of our first quarter fiscal 2021 results ending in June Thirtyth 2020.
Before getting into the financial results I'd like to run through our positive adjusted EBITDA initiatives on slide four as a reminder of our strategic focus to achieve this important milestone an inflection point for our business.
The overriding focus for phase one is the lower operating expenses and bring the company to a positive adjusted EBITDA using a conservative baseline revenue model.
Phase twos focus is to grow revenue from the now adjusted EBITDA probable baseline and do so in a way to maximize margins and maintain or improve further on those goals, we set forth in phase one.
The first point of attack with reduce operating expenses in the first quarter fiscal 2021.
There are 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 we'll focus on material costs, where we targeted 3 million reduction through our new IRS facility in UK as well as sourcing more materials from lower cost countries like Mexico in China.
Energy as a service is another key initiative and developing a rental fleet to our targeted 10 megawatts, which currently sits about 8.6 megawatts is key for us.
We have also targeted R&D reduction of 25% and we've been able to March towards this goal without sacrificing our focus on next generation technologies, which include the development of our new hydrogen product.
We've also effectively reduce our warranty expenses from 3% under 1% as the quote bad vendor part issue has been substantially worked through the system and we're back to more normal reliability levels and maintenance baseline levels.
As a result, CASMED gross margin percentage expanded 24% or to 24% an increase of 20 percentage points compared to prior quarter and nine percentage points compared to prior quarter year over year as a company successfully executed against its positive adjusted EBITDA plan.
We've also intensely focused on improving their revenue mix in favour of higher margin streams, and we will continue this ever it aggressively in phase two of our plan.
The variables include higher SPP service agreement attachment rates growing from 38% to go a 45% more aggressive management of our distributor network to drive near term revenue in backlog and established an expansion of our new internal national account sales team.
I expect the strategy, even more relevant as we lower our cost of capital and expand the ROI on rental fleet in the future.
All the factors I must have 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.
Let's turn to slide five.
Slide five pretty much speaks for itself. This has been as long road and I want to thank the castle team for all of their hard work and long hours or investors for all their confidence in us as we strive to reach this key milestone despite the unprecedented and obviously unexpected headwinds caused by the Coburn 19 pandemic.
Let's turn to slide six.
If you turn to slide six it shows you the idea just how much we've improved year over year in adjusted EBITDA with a 3.5 million dollar improvement as it told you last call it's difficult to give specific guidance with cobot 19, continuing to impact business, but Eric and I are very comfortable im, saying, we intend to improve the adjusted.
EBITDA performance of the company.
By 10 million year over year, and we're currently out to 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 Hagen, our CFO and CIO to provide more details on the first quarter financial result, Eric.
Thanks, Darren I will now review in detail our financial highlights for the first quarter fiscal 2021.
Turning to slide eight nine you can see the Q1 business highlights.
And financial results for the first quarter fiscal 2021.
Which had revenue at 14.2 million up 22% compared to 11.6 million in the fourth quarter fiscal 2020.
Product revenue was 6.1 million up 61% from 3.8 million in the fourth quarter fiscal 2020.
While accessories parts and service revenue, which includes our FTP long term contracts rentals in distributor support system.
Was 8.1 million up 4% from 7.8 million in the fourth quarter fiscal 2020.
Looking ahead, our new gross product orders were 5.5 million in the book to Bill ratio was 0.9 to one for the first quarter fiscal 2021, as we continue to see a slowdown in new projects and deliveries as result of Coven 19.
We also made improvements in our working capital and liquidity in the quarter as inventory receipts decreased by 2.9 million or 36%.
The 5.1 million in the first quarter fiscal 2021.
Compared to $8 million in the fourth quarter 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 Thirtyth 2020.
16.2 million, an increase of 1.1 million compared to 15.1 million as of March 30, Onest 2020.
We also secured low cost financing and use our ATM in the quarter, receiving 3.3 million in total between the FDA Paycheck protection program loan and our ATM as we focus on liquidity as part of our Kogan 19 business continuity plan.
Moving to slide 11.
You can better see a year over year comparison that drove our positive adjusted EBITDA of point 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 the perfect demonstration of why that business is so important to capstone future as it provides resiliency and attractive margins.
This along with the other initiatives Jeremy mentioned earlier drove our gross margin higher to 24% and simultaneously lower total operating expenses to 3.9 million in the first quarter 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 two years.
Reach that goal despite the pandemic in 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 wouldn't turn to slide 13.
Slide 13 lays out the top four critical short term goals, we have focused on and I'm proud to say we've completed all four we were able to reach positive adjusted EBITDA, while retaining the highest level of customer service and continuity for our customers.
Also managed to improve our liquidity and working capital metrics as we thought to conserve cash and keep our balance sheet healthy. Most importantly, because I was just while keeping our employees healthy and safe in these unprecedented times.
Could turn to slide 14.
As I noted the trip prior earnings call, we are still facing a number of uncertainties, including the pace of the code 19 economic recovery. So although it is hard for us to gazes specifics of each quarter. We can say, we expect to see 10 million improvement in the full year year over year revenue and adjusted EBITDA.
The key components and 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 fleets and further improving our working capital to achieve upwards of six inventory turns.
The spike over 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 doesn't separately by our customers energy security reliability Green building initiatives and energy efficiency subsidies.
Also we cannot forget the broader trend toward electrification with the proliferation of east, which will put ever increasing strain of the existing centralized power grids.
We were emmis not to address some of the headwinds we are facing with rose prominent being the low oil and gas prices that are impacting our oil and gas customers.
In regards this I'd 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 fuel oil prices need to reach $50 per barrel for sustained period of time.
As I said earlier in the call airing on revenue growth is the next critical step or phase two of our profitability strategy for and going forward.
Turn to slide 16.
Slide 16 sets out the six top drivers of our profitability and growth plan.
First is new non distributor business as we have discussed previously back in January we created internal capstone direct sales team focused solely on Oems in National accounts. We are also actively pursuing strategic partnerships and our rental strategy both of which we expect a few additional revenue growth.
I would also note that the rental revenue stream creates high value recurring revenue as all of our existing rentals or a minimum of one year at a maximum five years.
Second is our new target pricing program.
This is a focus program designed to get our current national accounts and Oems to expand their current capstone install base at a faster pace.
Said another way quite simply how do we get the Mohawk carpets of the world the Ambevs DHL Magna International's or even marriott's.
Due to deploy microturbines at a faster pace across a broader base of the global installations.
Third as our focus on hydrogen fuels and renewable natural gas or RMG.
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 of 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 and the ever developing energy markets.
Fourth is improving customer satisfaction as you'd 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 were making our customers happier, while improving our margins and incentivizing them to expand and install their base with us faster.
Fifth as our new marketing strategy, we are implementing a new digital marketing strategy, including web site update and strategic digital campaigns by market.
In fact, just this week currently we launched our shift to Green initiative with as part of Andretti Autosport during side relative to fourth and the youngest driver to everyone Indycar race Colton Herta.
We all have or will be appearing on multiple shows like big biz as well as the new ship to Green marketing video has been widely distributed as part of our digital marketing campaigns on social media.
The digital marketing campaign. We're currently running is a two pronged approach to different types of digital campaigns for the weak across four social media platforms. The first is a capstone brand awareness campaign focused on green businesses or businesses with green certifications as well as sustainability officers and other energy.
The 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 campaigns, which looks to increase click throughs to the new Capstone Indycar landing page on our website. This campaign has to audiences as well and we'll be using ads that are created based on our scheduled social media posts, including the new ship degree video.
Under this campaign will be targeting indycar enthusiastic and at the in Napa 500, and an expanded group, which will be similar to the folks we are targeting under the too new to brand awareness groups.
This is someone new territory for capstone. So we will gazes success. This initiative by the estimated recall lift to the Facebook boosted posts total clicks and number of landing page views as well as the shift to green video views and last but not leaves the number of caps in racing giveaway entries.
The six part of our revenue growth strategies distributor business growth, we're 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 represent a tremendous upside for us and are currently underserved and need improved local presence.
In addition, we will ship our first see 200 series product to Japan this quarter with the seed hundred being delivered next month.
If you don't remember Japan is one of the market's a capsule dominated on early in its development, but lost because 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 caps on fits into the hydrogen economy and why it is too can be a significant revenue driver for us.
Sure. Most of you have noticed there's a lot of activity going on in regard to build out of hydrogen capacity and hydrogen distribution.
Today's our current legacy Microturbine products, we can use up to 20% hydrogen in our fuel mix, but we recently developed and received a new patented from multiple fuel capable pre mix lower mission injector for high flames speed fuel combustion hydrogen and renewable natural gas plans are in place release, a commercial hundred percent hydrogen fuel capable microchip.
Driven over the next couple of years.
To the hydrogen in R&D.
We can create a zero carbon power source for our customers and write a very competitive solution to fuel cells in stationary power applications.
We are looking forward, 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. It was the initial step and are extremely bright future.
We manage the five do 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 rate pieces to create a growing and profitable company.
The fact, we have shipped approximately 10000 systems around the globe. The fact, we have saved customers approximately half a billion dollars of energy costs, and say 718000 tons of carbon for our planet in the last two years alone says that we are coming into our own and with 30% to 40% of the world's population growth.
Going 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 recurring 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 this external market factors have never been more favorable for capstone as carbon reduction strategies continued 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 analysts operator.
Thank you the sort of open for questions. If you do have a question. Please press star one on your telephone keypad. At this time you question will be taken in the older that is its receives sure removed himself from the Q you May press, one again, ladies and gentlemen that star one please hold while we pull for questions.
And our first question comes from Rob Brown from Lake Street Capital Go ahead, Rob.
Good afternoon.
Rob.
Just wanted to touch on the rental market a little bit more you talked about 10 megawatts apprentices your initial goal, but but.
Is that market getting.
More and more.
More active now in this environment or less and ultimately what could that kind of rental business be.
Yeah, Rob No great question, we're very high on the rental business is why we started relationship with Goldman Sachs to help fund that rental business.
We will be looking for additional capital maybe lower cost improve the ROI on that business.
We're at $8.6 million when cobot hits on so we've taken a little bit of a pause to getting to that.
It was six megawatt excuse me a little bit deposit get to that 10 megawatts.
Oil and gas was kind of our first market of those continue the strong market for US we just got our for CHP rental out there a couple of weeks ago.
Have a robust pipeline of potential rental opportunities the market is in dominated by the Greco the world in the United rentals.
It's very mature market.
Not a market that has lot of low emission equipment and so we entered the market with a low emission highly reliable microturbine.
And so I think we're kind of uniquely placed in that market.
I think one quickly get to the 10 megawatts after cobot settled down a little bit and then we'll look for additional financing to take into 20 megawatts.
Okay.
Great and then.
I think you talked a little bit CHP, Mike, but is that where's that out and the current environment do you see that sort of coming back stabilizing or is that is that business.
A bit disrupted coded as well as the oil and gas.
I think all businesses have been disrupted by coven, one way or another I think our CHP businesses held in there better and our renewable business is held and better than that oil and gas.
We are seeing an uptick in oil and gas business, which is good.
I think in general our recurring revenue streams is really helped us through this crisis because.
Our factory protection plans are solid our margins are good our rentals have been hung in pretty well.
Spare parts sales have done well so the aftermarket recurring revenue streams have been solid and helped us through this you'll still you that positive through this crisis.
Okay projects are coming back online, Minnesota miscible projects are going back on line.
It's really depends on the geographies, but.
Mexico has been sluggish seem to be turned back on line the U.S. as in most areas doing better.
Zillow is really challenging Latin American generals challenging.
Europe is coming back faster than us and has a nice orders already this quarter from Austria, and Germany also as well as the UK necessarily country by country in the U.S. and state by State I think in general we're seeing a an uptick in activity.
I think it'd really be probably Q.
Good for us would be fiscal Q4, or the first quarter next year that receiving turning around or more back to normal.
Okay, great. Thank instead of you know turnover.
Thank you.
Okay, and ladies and gentlemen, this star wanted to ask a question and our next question comes from Collin Russo from Oppenheimer go ahead Sir.
Hey, guys, it's Joe on for college, congrats on the strong quarter.
Thank you.
Can you talk a little bit about what the sales cycle looks like really from first contact.
To Q2 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 a billion two to 1 billion for and pending opportunities that that's oil and gas that CHP, that's renewable energy projects.
We see an average across the globe about 13 months from initial contact at closing.
Their distributors that are more mature they can close quicker.
The newer distributors tended to be on a slower pace in general as their distribution channel is maturing, though fairly quickly we separated the sales organization in January so gender scene is running the distributor organization to integrate job and then Jim Grouses is leading our direct sales organization I'll say Jim's group has already had some some nice.
Wins.
They're going after existing customers that already have capstone technology and trying to get follow on business or larger scale rollout. So those close rates can be faster, if a customer who's already familiar with technology.
Got it.
And then can you give a sense on trains four and conversion rates for your pipeline sales.
Yes, again, it depends depends by distributor.
I would say were high single digit today on average are better distributors are closer to 15% to 18% close rate and against a part of our strategy is 83 countries and 73 distributors is working on that the maturation of the security those close rates up.
And so as they as they get better as they mature as they get more experience. They have more reference installations, we see that close rate pickup as distributors mature and so.
If you will get caterpillar.
Their distributor channels, well over 100 years old many other industrial customers are very similar to our distributor channels.
18 years old yet so I'd say, considering we built a global channel with over 700 people in that channel had to train those folks from a service sales application standpoint, I'm actually pretty proud at amateur our distribution channel is and how much have grown but they are improving year over year fairly substantially still this point.
Got it.
And then shifting gears a little bit more in the product side do you guys see any potential for design changes that could also help reduce manufacturing costs.
Our manufacturing costs are really driven by volume.
So as we can drive more through the plant the lower manufacturing Costco.
About 90 plus percent of our cost of goods in the product is materials and so materials I really depend on how much you by the time and how big of manufacturing runs or casting runs.
You can you can put forth and so our cost will come down precipitously as the volumes go up our labor is really a fairly small component. So I get questions a lot, saying why don't you move out of California.
The reality is on my million dollar sale ASP product I've got lesson $30000 labor, so even if I cut that in half its not going to move the needle and so we are looking it 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 as baseball bat out and as out hunting for cost reduction opportunities.
So the reality is if our volumes are going up and aerospace businesses down than that gives us.
Fertile ground as to go negotiate some better LTAC.
Very helpful. Thanks.
Thank you.
Next question comes from the Eric Stine from Craig Hallum Go ahead, Eric.
Hi, Rowan jumped on late bond calls so I apologize if I asked some duplicate is 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 or or just discuss what you kind of see is a normal run rate I mean that certainly was more about.
Colvin run rate.
So just thoughts on that and then just thoughts on.
On the steps, you're taking internally are or what you need to see that have then be sustainable I mean, you've done a lot of things on the rental side the SPP.
But but but one gets you to that level on a sustainable basis.
Sure great questions and Eric of ads and all those already know just kidding.
Yes. Good question I'm glad you could make all know very proud to be EBITDA positive for the quarter, obviously getting that's out there was a big piece as well as getting our margins up three nine is not the new run rate I think we'll probably closer to five.
And I think that there's there's opportunities to continue to streamline the business I.
I think the other issue for US is product sales start coming back on as rentals.
Get more more 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 will that's about.
13.5 million of EBITDA loss last year down about three now this year. The last time, we put together to positive EBITDA quarters, I think we got about $18 per share free split.
So we have a lot of incentives to try to get there again next quarter, we'll do everything possible to string as many EBITDA positive quarters, together as possible or be as close as possible as Eric you want to.
Had anymore to that play on the Opex, we previously guided to a range of 5.2 to 5.7.
And I think now with Axa.
Cuts we've made from the cobot plan would be on the lower end of that range guidance, maybe as low as five going forward.
Okay.
Great. Thanks for that and maybe just last for me.
Just on the backlog just to confirm I mean still a situation where you havent seen any cancellations and then.
You know I know prior to co than you were back to a point, where the backlog was was more of that 12 month backlog and it had been extended previously I mean is it fair to say that now at least for the foreseeable future given the cold and everything else that it is more of an extended back.
Well again.
Yes, we've done a good job cleaning up our backlog over the past year. So we think a one year turn on the backlog is.
Pretty reasonable now.
Okay.
All right that's great. Thanks, a lot.
Thanks, Eric.
Okay, and ladies and gentlemen that star one and our next question comes from Sameer Joshi from H.T.H.C. Wainwright.
I had some yeah.
Yes, thanks, Thanks for taking my questions.
Congratulations on the achieving your target.
Good job.
On the Distributers front.
Then or any update there as well as a whole definitely adding during the quarter.
In headwinds and then a smaller distributors, who I'm going to still around.
In the phase of this crisis.
No no great question I think I think the the short answer is we have not seen any.
Distributors face severe financial crisis, the point, where you no longer around we did put some reserves in place in Q4 with some that we were worried about the the receivable collection or collectability.
That being said, we didn't do anything new this quarter. So I think the kind of stabilize.
A few of our bigger U.S. distributors applied for receive PPP loans, which is great.
And I think in general most of distributors.
Make their day to day living off recurring revenue much like Kapstones.
Going to do so I think they are weathering the storm fairly well.
But but definitely it's been challenging for some of our distributors I'm not aware of any wholesale furloughs layoffs, though most of the distributors.
Manage their cash flows fairly well with their recurring revenue so that actually weather the storm I think better than most.
Okay. Okay.
And I think you may have answered this question, but just little bit verification on the as against the GE, Andy just as an end us spend.
Given your activities.
What is the budget for this year like what how much Oh look quite Tumbleweeds you.
Looking at close to it in marketing expense.
Yes, I mean are our DNA is it a total as as that in there as well. So I think we really kind of moving to more digital marketing.
So that's obviously a lot cheaper.
If you look at our.
Our sales expense, we have it on an airplane since since March we're doing a lot of stuff to resume and two other techniques and so I think our sales and marketing expense will be the lowest since been probably in the last 13 years.
Well as our Opex as low as it's been since I've been CEO. So I think we'll continue to manage that I.
I think we're seeing increased business activity, which is good.
Maybe next year when things are really back to more the new normal we'll look at the increase in those levels, but but our goal is really to stay around the EBITDA positive levels much as possible and we also want to focus on on product development, and then getting that hydrogen product and market sooner rather than later is key to 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.
So getting that that hydrogen products and Marco be keys, I think you pretty if obviously more of an increase in our R&D line than you will in our in our Opex line in the next 18 months.
So so that's a good segue to my next question on the hydrogen fund are you.
The other customers who are.
Asking you hold this like seeking out of your products.
What was that that business being driven yes, I know we've already taken a couple of small orders for hydrogen fuel 60 fives 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 aspect fuels, mostly oil and gas related.
Or in refineries in other areas like that and so there's definitely some some markets that we can get near term as we can runs more exotic fuels and mix hydrogen and with natural gas and then I think theres lot of talk about just peer natural pure hydrogen as a play.
With wind and solar excess energy, creating hydrogen and then running that in a micro turbine and so I think that if you look at us from a competitive standpoint.
We do very well against fuel cells and CHP using natural gas, we should be just as competitive against fuel cells in the CHP mode with hydrogen.
If you look at other traditional turbines in gas engines, they are talking about getting to hubs and hydrogen in 2030.
2030 is a long ways away and I think we can get to a honors and hydrogen the next call two years.
So yes, we are seeing that Venezuela, as the probably everyone else.
Good to know that you are looking on that.
I think my other questions offline. Thanks Amir.
And then appears to be to last question at this time I would now like to turn it back to you for any closing com comments.
Great. Thank you very happy for the Capstone employees team.
Board of directors that we could achieve this positive EBITDA goal.
As I said, it's been two years since we've been positive EBITDA.
Unfortunately, because of the fed vendor part is not as backwards, but we're happy to you back here again I think the journey is made as a better business. We've got higher recurring revenues higher margins lower cost structure more focused business and so I think that which doesn't kill you may see stronger I think we exit this cobot issue.
Much better company that we were over the last couple of years I think the things we've done to strengthen the business are important and into new sales organization is going to lead to.
Two additional adoption rates for kind of fortune 1000 customers, which are key I think the overall energy market is moving.
We will come out of co would 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 in the right partners in place of a very successful fiscal 21 and beyond so look forward to talking to everybody by Q2 in future 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.
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