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Capstone Turbine Corp. Message Board

  • ynella51 ynella51 Feb 13, 2013 1:10 AM Flag

    Margins

    The presentation slide “Path to Higher Margins” in the Appendix lays out the goals for: Cost Reduction (12%) (the 14 parts they are working through); Pricing (4%); Warranty (3%); and Royalty (2%). This is what needs to happen to get from the current 14% to the 35% margin target. Based on what was said in the cc, all of those improvements are ongoing, and seem reasonable and doable.

    However, none of that considers the substantial margin benefits of going from the C200 to the C250. DJ says the C250 is doing well in lab tests and they are pointing to “limited production” (without saying when). I am assuming they will initially offer both the C200 and C250, and eventually phase out the C200.

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    • UTC currently receives a 10% royalty on each c200 produced by Capstone Turbine that in Q1 of Capstone's FY 2014 reduces to 5%. At that point, Capstone's margins will generally go up by the same 5%. However, a UTC buyout of Capstone in their FY 2014 would provide them with a say near 25% to 30% margin at buyout time. Then UTC cuts the fat out the operations and gets to the 35+% margins.

      Sentiment: Strong Buy

    • The C200 will not be discontinued, however, it's contribution to continuing losses will be marginalized.

    • Cpst stockholders equity dropped from $58.617 million to $45.592 million between March 31 2012 and Dec 31 2012 ( 22% drop). Accumulated deficit up from $731.412 million to $749.845 during the same period. Page 3 pf cpst Q-10.

      Hardly something to brag about, being cpst stockholder.

      Sentiment: Strong Sell

    • I totally agree with that the profit margins the company laid ou,t and you listed above, are very reasonable goals and should be fully realized over the next couple of years, with some coming to fruition sooner. For example the UTX royalty conversion should occur this quarter, or the next at the latest. In addition, price increases and cost reductions will incrementally trickle in, increasing the margin rate. Hopefully the warranty issue dissipates soon as well, but this one seems to be a lingering issue, which has been unfortunate. I would not guess an end date for this, it has lingered longer than expected and I will assume that it will linger until the company proves otherwise.

      One thing I would disagree with you on is the idea eliminating the c200. They may end up doing it, it sure makes sense. But they may just keep it around and offer it as a single unit. For a c1000, it definitely should not be an option unless the consumer is willing to pay a premium for the added redundancy of 5 c200s vs 4 c250s. That will be a very interesting thing to watch. It just seems like a waste to have engineered it and developed the parts pipeline for it, only to discard it. They may just end up keeping it around because they will need the parts to service any in field units, so they might as well offer the product as well since they are already putting in the logistics to support the unit. Maybe they can bump the price up though in order to steer people into the c250.

      Best wishes and best of luck,
      Mal

      Sentiment: Strong Buy

    • 35% margins goal yes... but they stressed that they don't need to reach 35% for profitability. They said 20% is what is needed for that. So either the current quarter that we are almost half way through or more likely the next quarter. Your right that these figures do NOT included the additional positive margins from the C250 (which seems to be progressing nicely). Also, the the retirement of the UTC C200 royalties will add 5% by itself! Little facts that most that don't follow CPST closely even realize. All this means that CPST will become profitable this year easily.

      • 1 Reply to sgnow1
      • Two relevent quotes from the cc transcript:

        “But I think our goal, obviously, is still to be high teens by the end of the fourth quarter, and then, which would be driving very close to an EBITDA positive and then quickly get into profitability as fast as possible next fiscal year.”

        “So 35% is our terminal rate and that's obviously our goal, but we do not need to be at 35% gross margin to be profitable, which I think is an important point.”

        I could not find your 20% figure in the transcript. I wouldn't rely on it. I think that dates back to the previous era of overly optomistic statements by management. Thankfully, I think we are beyond that now.

        So, based on the above, it seems like very low 20s would be EBITDA positive and mid-20s would be profitable. The question is how much of a bump in volume are they assuming?

    • Well done, ynella.

      The presentation slide “Path to Higher Margins” in the Appendix lays out the goals for: Cost Reduction (12%) (the 14 parts they are working through); Pricing (4%); Warranty (3%); and Royalty (2%). This is what needs to happen to get from the current 14% to the 35% margin target. Based on what was said in the cc, all of those improvements are ongoing, and seem reasonable and doable.

      However, none of that considers the substantial margin benefits of going from the C200 to the C250. DJ says the C250 is doing well in lab tests and they are pointing to “limited production” (without saying when). I am assuming they will initially offer both the C200 and C250, and eventually phase out the C200.

      Sentiment: Strong Buy

    • You outline the importance of R&D . Used to be wall street was instrumental in the countries product developement. With all the companies listed with negitive cash flow, fly by night scams with a empty office and a answering machine that manage to get listed, the shorts pile on this one...............hard to figure. You forget their ever improving CCC.

      • 1 Reply to midav2752
      • What's really mind boggling is JCP looks like it has lost about 2 billion dollars in net asset value and share holder equity in less than two years. Net loss per shareholder is over 2 dollars per share and they gleefully pile on this one..............yeah,trying to catch these "investors" shorts on fire is just the right thing to do.

 
CPST
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