Capstone Energy+, Inc. (CGEH) Earnings Call Transcript & Summary

Good day, ladies and gentlemen and welcome to the Capstone Green Energy Earnings Conference Call and webcast for the financial results for the fourth quarter and full fiscal year 2025 ended on March 31, 2025. [Operator Instructions] As a reminder, today's program will be recorded. At this time, it is my pleasure to turn the floor over to Mrs. Janet Duderstadt, Capstone's General Counsel. Janet, the floor is yours.

Thank you very much. Good afternoon, and thank you for joining Capstone Green Energy Holdings, Inc.'s Fourth Quarter and Full Fiscal Year 2025 Conference Call. On the call with me today are Vince Canino, the company's President and Chief Executive Officer; and John Juric, the company's Chief Financial Officer. On June 27, Capstone Green Energy Holdings, Inc. issued its earnings release for its fourth quarter and full fiscal year 2025 financial results, which ended March 31, 2025. During today's call, we will be referring to slides that can be found on the company's website under the Investor Relations section. This conference call contains forward-looking statements representing the company's views as of today, July 2, 2025. Other than as required by federal securities laws, the company disclaims any obligation 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 of the slides accompanying this presentation in today's earnings release 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 Mr. Canino and Mr. Juric go through the discussion today, when they mention EBITDA, they are referring to adjusted EBITDA, which is a non-GAAP financial measure and the reconciliations in the earnings release and the appendix to the presentation slides. I would like to now turn the call over to Vince Canino, the company's President and Chief Executive Officer.

Thank you, Janet. Good afternoon, everyone. Thank you for joining today's earnings call, where in addition to covering our fourth quarter and full fiscal year '25 results, we will discuss some of the strategic initiatives we have in play for the fiscal year '26 and beyond. If you turn to Slide 3, I would like to run through today's agenda. Today's call will cover Capstone's business environment as well as our 3-year roadmap, including details around some of the initiatives we launched in early March of 2024. Then I will turn it over to John Juric for a detailed review of our Q4 and full fiscal year '25 financial results. We will then cover our perspective on what is turning out to be quite an exciting business climate. We will then conclude with questions from our investors and analysts. I do wish to remind you that today's presentation includes an appendix, which provides additional information for your purview. Let's now move on to Slide 5 to begin the discussion on Capstone's business environment. Turning to Slide 5. Let's get straight to the point. What we accomplished in fiscal year '25 was absolutely transformative for Capstone. Although our revenue was almost $5.7 million less than fiscal '24, we improved adjusted EBITDA by almost $8.5 million. In the fourth quarter, revenue increased by $2.7 million compared to the same period last year. However, full year revenue for fiscal '25 was softer than fiscal '24. As discussed in our Q3 earnings call, this decline was primarily driven by a combination of Chapter 11 restructuring and a slowdown in product orders following our emergence from Chapter 11, what we refer to as the Chapter 11 hangover. This effect, which lasted longer than anticipated by our distribution network, is not uncommon. Customers often delay major capital expenditures on products associated with companies that have undergone such a restructuring. The good news is that we're now seeing positive momentum. Customer confidence is returning, and we've observed a meaningful uptick in order activity. One encouraging sign is the growing demand for larger power blocks, particularly from our C1000 product line, an emerging trend we'll discuss further in this call. We've made a bit of history here at Capstone. For the first time in our 37-year existence, we've delivered a full fiscal year of positive adjusted EBITDA. Fiscal year '25 marks a significant milestone and one we believe is the first of many to come. In Q4 alone, we generated $2.8 million in adjusted EBITDA, bringing our full year total to $7.9 million. While we have had stand-alone quarters of positive adjusted EBITDA in the past, this year stands apart. Fiscal '25 is the first time we've delivered all 4 quarters of positive adjusted EBITDA, culminating in our first ever full year positive result. This reflects the strength of the foundation we've built, and we're not stopping here. We are confident that the financial discipline and operational focus we've instilled across the business will enable us to continue delivering strong results even in years with softer revenue. Turning to our technology. While wind, solar and battery storage remain critical components of the global energy mix, long interconnection queues and the challenge of providing 24/7 power, highlight the value of our solution. Our inverter-based generation technology is well positioned to meet the growing demand for energy systems that deliver resiliency, affordability and sustainability. When you consider the total cost of ownership, also known as TCO, our solution becomes even more compelling. We'll spend some time later in this call, walking through the key actions and decisions that helped us achieve this historic milestone year. Let's turn our attention to Slide 6. As we've seen in previous quarters, North America remains our strongest performing region, accounting for approximately 2/3 of total orders, both by megawatts and contract value for the year. Something very interesting happened this fiscal year compared to last. We saw strong growth driven by 2 key factors: improved price realization and a clear shift towards larger capacity units. This shift is evident in our product mix. In fiscal year 2024, our average bookings per unit was approximately $273,000. In fiscal year 2025, that number increased to $345,000 per unit, a significant uplift that reflects both market demand for higher capacity systems and the value customers see in our solutions. Another noteworthy trend in our bookings is the inclusion of several rental buyouts and build, own and transfer units. This is a strong indicator of customer confidence. As clients engage with our Energy as a Service program and experience the performance and value of our systems firsthand, many are choosing to transition from rental to ownership, clearly seeing the return on invested capital. We are also seeing a notable rise in larger power block orders, particularly in the 5- to 6-megawatt range. This trend suggests that customers with large critical loads are either facing grid resiliency challenges or are unable to secure utility power within the time frames their operations demand. We will dive deeper into this issue of load constraints and customer demand later in this call. Let's now turn to Slide 7. I'd like to highlight one of the standout strengths of our business model, our Energy as a Service, or EaaS offering. Under this umbrella, we've developed 4 scalable, repeatable business models that are designed to meet a broad range of customer needs, while generating recurring revenue. Build, own and transfer, lease to own, paired with an embedded service contract, power purchase agreements and our rental services model. As shown on this slide, we also delivered strong year-over-year revenue growth in this segment. A key driver of this success was the introduction of a rental OKR, which included several high-impact initiatives, a more proactive contract renewal process, improved price realization through enhanced market pricing strategies, increased fleet availability, a robust new pipeline tool that allows our team to align opportunities with available assets and forecast future availability. And lastly, reduced downtime between rentals, thanks to a better planning and faster maintenance turnarounds. These improvements have meaningfully increased our operational efficiency and positioned us to profitably scale this model going forward. Complementing the OKR is our new rental dashboard, a powerful tool that gives the rental team real-time visibility into fleet performance with insights extending 12 months and beyond. This dashboard allows us to proactively manage upcoming contract expirations, better coordinate equipment movement and respond more effectively to evolving customer demands. Let's now move to Slide 9. We've regrounded ourselves in our vision to become the premier clean energy provider in the distributed generation and microgrid space. At our core, Capstone exists to make the impossible possible. From our earliest days to today, we've achieved this by daring greatly to think beyond, boldly taking on challenges that others shy away from. We embrace failure as a necessary step in the innovation process, learning and iterating as we go. We know that achieving the extraordinary starts with doing ordinary things exceptionally well, which is why little things matter. This mindset has allowed us to build and refine a clean energy technology that many wrote off decades ago. Our 4 core technologies set us apart. Our proprietary recuperators, our oil-free bearings, our low emissions combustion systems and our advanced converter-based power electronics. Together, these innovations enable us to deliver highly efficient, reliable electricity and recoverable waste heat, all within a system that operates on a wide range of fuels, including those others consider waste. This positions us as a key player in the circular economy. Our microgrid systems capture waste gas from an industrial process and convert it into clean electricity, but we don't stop there. The waste heat from our systems has also recovered and transformed into usable thermal energy in the form of hot water, steam or chilled water. And we do all of this across an unmatched operating range, with flexibility and fuel tolerance that others simply cannot replicate. On to Slide 10. I'd like to take a moment to shift our focus to our three pillar strategy. The framework that underpins how we drive financial strength and long-term value across the business. This strategy is more than a guide for our operations. It shapes how we deliver value to all our stakeholders, our employees, distribution partners, vendors and most importantly, our shareholders. In fiscal year 2025, our primary focus was on the first pillar, financial health. It's the foundation for everything else. Without a strong financial base, we simply can't achieve the kind of sustainable excellence needed to reinvest in the business, whether that's in advancing our technology, streamlining operations or strengthening our company culture. Over the next 3 slides, I'll walk you through key accomplishments tied to this strategy as well as the initiatives already underway for fiscal '26. Now on to Slide 11, the financial health pillar. As a team grounded in accountability, we've taken a hard look at our performance and given ourselves a report card. It was, without a question, a challenging year, especially early on when liquidity was tight and order volume hit historic lows. But the team didn't fold, we didn't give in and we certainly didn't give up. We stepped up and leaned in every minute, every day, committed to restoring discipline across the business. The very nature of doing so delivered stronger gross margins through price realization, coupled with driving cost out measures to fight off supplier price increases. We maintained a sharp focus on ensuring every revenue stream contributed healthy margins. This was a key part of reinforcing our business discipline. As I mentioned earlier, we made meaningful progress in our commercial discipline especially with our Energy as a Service segment, driven by a rigorous OKR process. In our long-term service agreement business, we transitioned from reactive parts replacements without questioning why to a data-driven root cause analysis approach. This shift allowed us to mitigate margin erosion, optimize customer applications and strengthen collaboration. By identifying and correcting upstream and downstream behaviors contributing to preventative failures, we've implemented solutions that improve performance, reduce downtime and increase system availability. The result, a win-win. We protect our margins while delivering a better, more reliable experience for our customers, building trust and reinforcing our brand in the process. On the operating discipline front, we started the year slower than we would have liked. Progress in 5S, lean practices, DFMA cost-out efforts and production commitments fell short early on. I own that shortfall. That changed in Q3 with the arrival of John Toor, our new VP of Operations. Under his leadership, our manufacturing and supply chain teams are now aligned, focused and moving with urgency. John has instilled a culture of velocity, accountability and the notion that mediocrity is not acceptable. The impact is real. We are seeing meaningful progress across the board. One of the most impactful initiatives under this pillar over the past year was our design for manufacturing and assembly, or DFMA program. Led by our VP of Technology, Victor Kong, this initiative delivered outstanding results. While nearly 6% reduction in cost of goods sold in '25 is impressive on its own, what truly stood out was the depth of cross-functional collaboration. This wasn't just an engineering or manufacturing effort, sales, service, supply chain and even finance were actively involved. That kind of broad ownership is what made the difference and significantly amplified our impact. We'll be sharing an example of one of our most exciting DFMA projects in just a moment. We've also made notable progress in our financial discipline. While we're not yet where we want to be, our ambition is to become a top quartile finance organization, and we've come a long way. Over the past year, we've navigated some of the most complex challenges in our history. We completed the restatement of previously issued financial statements and became current with our SEC filings. We received a clean resolution from the SEC investigation, and we've successfully closed our Chapter 11 process. With those critical milestones behind us, our focus now turns to accelerating our journey toward top quartile performance. In parallel, we've improved coordination and communication with our suppliers, a key enabler of operational and finance efficiency. But as with everything at Capstone, we remain committed to continuous improvement because we know there's still more work to be done. If I had to sum up fiscal year 2025 in a phrase, I would call it our Valley Forge moment. It was a test of resilience, determination and grit. And across the organization, our people rose to meet it, leaning into the hard work of true transformation. Capstone is not the same company of the past. We've transformed how we think, how we act and most importantly, how we win. Let's turn to Slide 12, which highlights the second pillar of our strategy: Sustainable Excellence. We have been intentional about strengthening our go-to strategy for our repeatable business models, especially in services, which include service agreements and the business models under Energy as a Service. We have also made targeted investments in capital equipment to enhance efficiency and improve our bottom line. Each project was selected for its strong ROI profile. These efforts are delivering meaningful savings, 75% cost out in one case and enabling us to scale output with fewer bottlenecks. These projects will enhance operating income, strengthen business continuity and improve our resilience across the board. And lastly, we're planting seeds for future revenue growth through the development of new strategic partnerships linked to our transaction product portfolio. This strategy is centered on unlocking value from adjacent markets like battery storage, transformers and absorption chillers. These initiatives position us for long-term diversified growth and create new channels to monetize our core technologies. Slide 13 introduces the third pillar of our strategy, revitalizing our culture and talent. These aren't just words on a slide, they reflect a deep intentional shift in how we attract, develop and retain our people. From the first interaction in the recruiting process through onboarding and into career growth and leadership development, we are building a team that not only performs but truly embodies our vision and our values. Many of you may recognize the accountability model popularized in The Oz Principle by Roger Connors, Tom Smith and Craig Hickman. The core framework: see it, own it, solve it, do it, has served as a guide for countless high-performing organizations. At the heart of this transformation, we've taken that powerful premise and skillfully woven it into our own set of core values, which we call CLIMB. C, Courage to Dare Greatly; L, Little Things Matter; I, Iterate to Success; M, Mutual Trust Amongst All and B, Be Your Best. We call this our CLIMB to accountability because living these values is how we build a resilient high-performance culture. Let me be clear, we didn't invent these values this year. They've been part of Capstone's DNA for decades. Like unearthing a long-lost artifact, we simply brushed off the dust and rediscovered what has always been foundational to who we are. What's changed, what's different now is how we brought those values to life. We've embedded CLIMB into everything we do, from how we show up to how we think, lead and collaborate, from hiring and onboarding, how we evaluate both our successes and our failures. This isn't just a culture shift, it's a game changer. We've moved from a mindset of fear of failure to one where we dare greatly to think beyond. That change powered by people who are fully committed and engaged is what drives the financial results you're about to hear from John Juric in just a few moments. Allow me to share a quick example. As we wrapped up this past fiscal year, the senior leadership team took a hard look at both our achievements and our misses. At one point, someone suggested we soften the word misses and call them opportunities. We caught ourselves. That moment became a powerful reminder of the importance of staying above the accountability line of owning our setbacks, learning from them and committing to do better. It was a small moment but a big signal that this mindset is now deeply embedded in how we operate. That right there is an experience that created a new behavior and that's how culture change happens. That's how real sustainable results are achieved. I'd like to share a quick story that demonstrates how we iterate to success by atoning to the notion that little things matter. During a recent interview for a key finance leadership role, we walked a candidate through our core values. When we got to the last one, at the time, that last core value was phrased, be the best in all you do. She paused. She said, "That sounds a bit too task focused." What if it were be your best instead because being your best isn't just about the outcomes, it's about how you show up for your team, how you lead and how you behave. That insight landed, and we changed that core value now to be your best, not because it was dictated from the top, but because someone spoke up with a better way of framing it. That's how we evolve our culture here, not by mandates, but through collaborative, responsive and iterative process. And honestly, that's what makes it fun. We're building something real together. Turning to Slide 14. A key driver of our financial health this fiscal year was the successful launch of our DFMA initiative. DFMA unlocked our ability to drive meaningful cost reductions across our product lines without compromising quality or the strength of our supplier relationships. What began with just 5 pilot projects last May has now grown into a company-wide effort with over 20 active DFMA initiatives underway. This expansion was made possible by an engaged cross-functional team spanning engineering, operations, supply chain, finance and more. To ensure swift execution, we used our OKR tool to create transparency, accountability and open communication at every stage. That structure helped us move quickly and efficiently, delivering real savings that directly contributed to our bottom line performance. Now on to Slide 15. As we did in our last earnings call, I want to share a real-life example that illustrates the tangible value of our DFMA program. One of our early DFMA targets were key components on our engines. These components were flagged based on simple but telling assessment of what we were paying for a set of components. When we performed a should cost analysis, it became clear we had an opportunity to renegotiate pricing with the supplier. Unfortunately, the supplier chose not to engage in a meaningful way. So we took the next best path. We decided to in-source these components. As you can see in this slide, the impact was significant. We will achieve a 75% cost reduction per set. Based on fiscal '25 production volumes, this change translates to nearly $500,000 in annual savings and a direct $500,000 improvement in EBITDA. The best part, the investment in this tube bender will pay for itself in just 5 months based on current demand. Beyond the financial return, this initiative created engaging high-value work for our production team, proving that DFMA isn't just about saving money, it's about building capability, driving innovation and creating a more agile and empowered workforce. Now I'd like to turn the call over to John Juric. John?

Thank you, Vince, and good morning, everyone. Fiscal year '25 has proven to be challenging in many aspects, but as Vince has stated, the financial results in the fourth quarter and for the full year reflect positively on the underpinnings of the business. I will now review in more detail the company's financial results for the fourth quarter. Moving to Slide 17, you will see the summary financial results for the fourth quarter. Total revenue for the quarter was $27.1 million compared to $24.3 million for the fourth quarter of fiscal year '24. This represents a 12% increase to the top line. The revenue growth came from rental and service activities with rental increasing by $2.2 million and service increasing by $900,000. Product and accessories sales remained steady quarter-over-quarter with a moderate decline of $300,000. The top line improvement and shift in the sales mix delivered a gross profit of $7.5 million versus $2.6 million from the same quarter of the prior year. The current quarter's gross profit is 2.9x that of the prior year and with a delivered gross margin of 28%. The dollar and margin improvements reflect the effects of the sales mix, improved pricing, improved utilization rates and cost savings. Research and development expenses increased 33% to $800,000 for the quarter. The increase in R&D costs reflects the effort towards cost out initiatives and new technology development. SG&A expenses of $6.7 million in the fourth quarter increased $200,000 from the same quarter of the prior year and our 25% of revenues. Included in the fourth quarter of fiscal '25 is a $900,000 accrual for the AIP bonuses resulting from the significant improvement in financial performance. Net income for the period was a loss of $100,000, which is $5.2 million improvement from the fourth quarter of fiscal '24. The improved financial performance delivered adjusted EBITDA of $2.8 million for the current quarter. These numbers reflect the impact of the business improvements that have been driven across the organization throughout the year. Moving to Slide 18 for the full year results of fiscal year '25. Revenue for the year was $85.6 million compared to $91.2 million for fiscal year 2024. The sales of microturbine products and accessories declined by $8.9 million, as sales at the beginning of the year were impacted by customer concerns arising from the restructuring. As mentioned in the discussion earlier today, the customers' concerns have diminished and the business outlook for microturbine products is robust as we move forward. On the positive side, the top line performance for the parts, service and rentals increased by $3.3 million to $45.4 million for fiscal year '25 and is 53% of total revenue. The growth in this category resulted primarily from the increased utilization and pricing of the rental fleet assets. Gross profit for fiscal 2025 was $23.3 million versus $14.3 million in fiscal '24. The $9 million increase led to a 27% gross margin, which is an 11-point margin improvement from the prior year. The gross profit improvement is the result of higher pricing, improved utilization and direct material cost reductions resulting from the cost-out efforts. Expenses for research and development were $2.7 million and 3% of total revenue for fiscal year '25, this is an increase from $2.5 million in fiscal year '24. SG&A expenses decreased to $26.2 million for fiscal year '25 versus $32.2 million in fiscal year '24. The $6 million reduction results from decline of onetime charges related to restatement activities, debt restructuring and financing costs and stock-based compensation expenses caused by the restructuring. Fiscal year '25 reported a net loss of $7.2 million compared to net income of $7.4 million in fiscal year '24. Fiscal year '24, though, included a $32.5 million gain from reorganizational items. Excluding the reorganizational gain, the net loss improved by $17.9 million from fiscal year '24 due to improved gross profit and reduced onetime expenses. Adjusted EBITDA for fiscal year '25 was $7.9 million, an increase of $8.4 million from fiscal year '24. Fiscal year '25 is the company's first time reporting full year positive adjusted EBITDA. Looking forward, the gap between EBITDA and adjusted EBITDA will diminish as restatement, restructuring, SEC investigations and shareholder litigation expenses have concluded during the first quarter of fiscal '26. Additionally, the company is pleased that the SEC concluded their investigation with no action taken against the company. Now let's turn to Slide 19 for a review of select balance sheet items. Cash and cash equivalents at March 31, 2025, were $8.7 million, an increase of $6.6 million from March 31, 2024. The increase was supported by $7.7 million of positive cash generated from operating activities. Accounts receivable net of allowances was $7 million and increased slightly from March 31, 2024. Total inventories were $16.6 million and declined $4 million over the 12 months, as the company's operational discipline focused on supply chain efficiencies and improving inventory turns. Lastly, accounts payable and accrued expenses were $17.2 million at March 31, 2025, a $1 million reduction from the prior year as expenses for onetime items and professional fees decreased. Turning to Slide 21. I'd like to provide a quick update on our market and ticker symbol status, as we know this is an area of active interest to many of our shareholders. First, on the Form 211, this is the key filing required under the SEC Rule 15c2-11 to re-enable public trading of our stock. A sponsoring market maker has submitted the form on our behalf, and we are currently awaiting approval. Once approved, we expect to uplift to the OTCQX, which is the highest tier on the OTC markets platform and known for greater transparency and investor confidence. We proactively submitted our application to the OTCQX Market back in December of '24, and it remains under review, pending the completion of the Form 211 process. In parallel, we submitted our application for the newly defined OTCIQ (sic) [ OTCID ] Market, which officially replaced the Pink Market on July 1, 2025, under the updated SEC regulatory framework. We are in good standing there and expect to remain listed on the market, while we await OTCQX transition. Lastly, on the FINRA name correction, our company name is currently listed incorrectly as Capstone Green Energy Corporation due to an earlier CUSIP error. While the CUSIP itself was properly corrected, FINRA required additional documentation to accurately reflect the name of the new company, Capstone Green Energy Holdings, Inc. We've submitted all supporting materials and are now awaiting final approval. The correction is important as it affects how our company is displayed on widely used financial data platforms like Bloomberg, Google Finance, MarketWatch, Yahoo and MSN. We'll continue to keep shareholders informed, as these processes progress. Our goal is to restore full market visibility and transparency as quickly as possible. With that, I will turn the presentation back to Vince.

Thank you, John. Turning to Slide 23. I want to share our perspective on current market dynamics and how we plan to position Capstone to capitalize on these emerging opportunities. Goldman Sachs equity research report issued on April 28, 2024, highlights the accelerating energy demand being driven by AI and data center growth, particularly here in the U.S, the numbers are striking. According to the Goldman Sachs report, the CAGR for power demand related to data centers is projected to grow at double-digit rates through 2030. What's even more compelling is the projected incremental demand for gas-fired power generation. An estimated 28 gigawatts of additional capacity is needed in the U.S. alone over the next 5 years. This creates a major opportunity for reliable distributed power solutions, and that's exactly where Capstone plays. Our flexible, efficient, oil-free and clean microturbine systems are uniquely suited to meet the resiliency, scalability and sustainability needs of mission-critical applications like data centers. As this demand continues to scale, we are actively evaluating how to deepen our presence in this space, whether through new partnerships, product adaptations or expanded service models under our Energy as a Service umbrella. Turning to Slide 24. As exciting as the data center power market is, there's another opportunity emerging in parallel, and it's one we are uniquely positioned to address. As data centers consume more and more grid power, the commercial and industrial C&I sector will increasingly face load constraints and resiliency challenges. At the same time, the rising demand will put pressure on utilities to upgrade infrastructure, which inevitably leads to higher electricity prices. This creates a very real and growing need for distributed combined heat and power solutions, particularly in the sectors like manufacturing, health care and hospitality, where high resiliency and energy cost savings are nonnegotiable. With the favorable spark spread in much of the C&I market, distributed cogeneration becomes extremely attractive investment, delivering both energy savings and sustainability. The Electric Power Research Institute, also known as EPRI, released a study on May 29, 2024, reinforcing this trend. It projects that data centers could consume up to 9% of the U.S. utility electric load, a staggering number. That level of demand will create grid constraints across all market segments, including residential. With many renewable energy projects stuck in interconnection queues as well as lead times for large-scale gas turbines stretching into years, utilities will struggle to respond fast enough. That puts even more pressure and opportunity on distributed generation to step in and bridge the gap. This convergence of factors strengthens our conviction that Capstone's microturbine based CHP solutions are not only relevant but critical in the evolving energy landscape. As such, we are keenly focused on this evolving shift in the power industry and are realigning resources to take advantage of this opportunity. Turning to Slide 25. This is a great example of the value proposition Capstone brings to the table, and it clearly illustrates both the efficiency and environmental benefits of our CHP solutions. While this specific case study is based on a data center application, the model applies just as well to manufacturing facilities, hospitals, hotels, or any commercial operation with consistent energy and thermal loads. At 100 megawatts, the Capstone CHP system delivers some compelling outcomes. It reduces CO2 emissions by over 200 tons, showing a significant environmental benefit compared to traditional grid supply power. It also delivers a 30% energy surplus, equating to 30 megawatts in this case, of additional usable energy, a powerful advantage in any energy constrained environment. And perhaps most impressive, the entire system fits within just 2 acres of land. For context, many large gas turbine peaker power plants can only support about 18 megawatts per acre. That means we're delivering more than 5x the power density, thanks to our modular multi-bay architecture. That modularity also enables us to offer integrated and active redundancy, which significantly enhances resiliency and uptime for mission-critical operations. This slide isn't just a data point. It's a real-world representation of how Capstone's technology solves for cost, carbon, land use and reliability in a single scalable package. Slide 26 sets the stage for how we intend to play and win in the evolving energy landscape. We are leveraging a key strength, our existing global distributor network. These are trusted partners who are deeply skilled at shaping Capstone's product and services into tailored solutions for customers seeking resiliency, affordability and sustainability. What we've learned over the years is many of these customers become repeat buyers, and that's opened the door to national and global account opportunities. In response, we've built a governance and compensation model that incentivizes and supports our distributors to expand their role, as trusted advisers. This is a natural evolution of our distribution model and one that positions us well for scalable, relationship-driven growth. Another key area where we differentiate is our ability to run on alternative fuels, what we refer to as our Blue Ocean. Unlike many other distributed generation manufacturers, we've engineered our combustion systems to handle a wide variety of nontraditional fuels across a broad operating range. The latest fuel we have been working on is hydrogen. We've already demonstrated successful continuous operation from 35% up to 100% hydrogen. While we see hydrogen as a longer-term market play, we believe that with continued private and public investment, it will become a viable solution in multiple use cases, and we will be ready. The third space where we see exponential opportunity is what we call our Big Sky markets. Of course, data centers are at the top of that list, given their massive and growing power demands, but there's more. Ports and terminals are under increasing pressure to cut emissions and move towards net zero. These sites face space and grid limitations, which makes our mobile power on-the-go solutions especially valuable. We're developing clean, compact and mobile systems that can serve the dynamic energy needs of terminal operators. And finally, microgrids, not just for remote or renewable deployments, but also as a solution to grid constraints. Utilities are struggling to protect their overloaded distribution transformers, many of which serve C&I and residential neighborhoods. With millions of these small transformers at risk of failure, we see an exciting opportunity. Capstone's quiet, clean, plug-and-play microgrid solutions combined with battery energy storage can help protect utility infrastructure, extend equipment life and unlock new revenue opportunities, all while supporting the transition to a more reliable and distributed grid. We find these opportunities not just compelling but essential to the future of distributed energy and Capstone is poised to solve this trilemma known as resiliency, affordability and sustainability. And with that, we would like to turn the call over for questions.

[Operator Instructions]

Good afternoon. This is Kimberly Long. I'll be reading off the questions to both Vince and John. I'd like to take -- I'd like to call out the first question that we've received, which is when will CGEH meet the higher standards of the OTCQX or the OTCQB market? And since we've received several different questions that kind of pertain to the same topic, we're going to combine them. And with this particular question, I'm going to turn it over to John so he can answer it.

Thanks, Kim. So our progress towards uplifting our shares to a higher level market has been ongoing as we outlined in the material presented. We do not have a specific date that we would be able to be listed on the OTCQX market. Everything that the company has been requested to perform, to allow us to progress to that level has been completed, and we are just awaiting the completion of the review process by the market and by FINRA.

Excellent. Thank you, John. Next question, I'm going to direct to you as well. And what is management doing to increase more analyst following?

Yes. So where we are as far as more analyst followings? We've been having calls with several of the analysts. We've been engaging with prior analysts that had provided coverage for the company. And we are looking to facilitate that process even more so as we go into the second quarter of fiscal '26.

Next question. Is management trying to refinance both the short- and long-term debt loans? John, I'll turn this one to you.

Yes. So yes, our goal moving forward is to refinance the debt. We have 2 tranches of debt, one maturing in December of '25 and a larger tranche maturing in December of '26. Currently, we're focused on the refinancing of the initial tranche plus adding some additional liquidity through a line of credit structure and that initiative is on the way.

Okay. Excellent. The next question I'm going to direct towards Vince. Are our distributors still required to submit payment before turbines are shipped?

Thanks, Kim. Yes, they are. This is all part of our financial discipline. And so we've significantly changed terms with distributors. Some of them do have some payment terms. But all in all, almost every distributor must submit payments before units shipped.

Excellent. Next question. I'm going to also direct to you, Vince. Did the tariff increase inventory costs in Q4? Will they going forward?

So the tariff question is a very interesting one. We were affected by the tariffs. The good news is a high percentage of our product is made here in the USA. So our exposure to other low-cost countries and the tariffs outside of the U.S., they did, in fact, significantly increase, but we've been able to manage that so far. The other really good part about this and rather than run away from it, we leaned into it, it's forced us to rethink some of our supply chain strategies. And as such, we're finding and uncovering some really interesting cost savings measures that are bringing some of those components back here in the U.S. So all in all, we're going to come out of this in better shape, we think, especially in terms of business continuity. But yes, we did have an impact in some costs, but we've been able to manage that.

Excellent. Thank you. Next question, I'm going to also direct to you, Vince. The rental utilization rate was 98% for Q3. Was it similar in Q4?

Yes, it was. It was actually slightly above. But as we continue to go forward, as we mentioned earlier in the call, we've had a number of rental buyouts. And so as our fleet size starts to go down, which we are looking to rebuild again, we'll see that utilization rate fluctuate based on those things.

Excellent. Next question, I'm going to direct at John. Was the AR collection rate good in Q1 that just ended?

Thanks, Kim. Yes. As Vincent mentioned, we've changed some of the terms with distributors and we are seeing much better collectibility and collection rates from our customers at this time. It's been a very positive effect and very helpful for our liquidity, as we've made those changes.

Thank you, John. Okay. The next question, I'm going to direct at Vince. Will Trump's new budget eliminate the tax advantages that were expected before?

Well, I'm going to answer this in 2 parts. The first part is that we are going to be a company that is benign to any administration and policy. Our goal is to provide solutions to the market space when it comes to electricity and thermal energy and things like that. So what happens with policy, we want to be able to navigate our way through each of those. In terms of the tax advantages that did exist, the ITC, we found very little utilization of that. So in the end, this will go away. We don't think it's going to really affect our overall business because we didn't see a lot of leverage in that.

Excellent. Next question for you, Vince. Can we expect to see data center orders in the future?

I sure hope so. No, look, it's a great space. We believe we have something to offer. As we showed in the slide, we realized the hyperscale space. When they're looking for 300, 400, 500 megawatts, we're not going to be playing in that space, but we're a good answer for their day one problems in the hyperscale, where they can't get power for 2 or 3 years and we can come in and supply enough power and cooling for 2 or 3 data halls in a very short period of time. When you look at the colos and you look at the edge data centers, that's where we think we can certainly play. Another great place that we can play is an expansion. If a data center is running out of roof space but need more cooling, again, our CHP application makes a lot of sense in addition to providing the energy to that data center. So we expect to see some activity here. The data centers, we have to remember, are what I call late pragmatists. They don't just jump on board to any product. They do -- they have a very thorough vetting process, and we're going through those vetting processes, and we should be seeing some orders hopefully down the road.

Okay. The next question, I'm going to give to John Juric. John, how about some insider buys of stock along with employees to show confidence in our company?

Thanks, Kim. Insider buying of stock, it's an individual choice. I think it's definitely well warranted at this point in time. There's a lot of upside that we see with our business that we're planning for, as Vince has outlined previously today.

Excellent. Thank you. So then the next question I'm going to hand over to Vince. Is the C250 prototype still an option for future sales and deployment?

Absolutely, yes. That's actually in our plans this year. We are dusting it off, and we've got a team that we're putting together and we want to see the launch of that product by the end of this fiscal year.

Excellent. I'm going to also hand this next question to you as well, Vince. Can Capstone ramp up production, if sales pick up?

We're ready. This is what we talked about. We didn't get a great grade in the operational discipline. But now with the new leadership and the new team in place, we're working hard through 5S and lean manufacturing. We're actually doing a whole new floor layout as we speak so that we can actually increase our capacity. We've got a lot of potential in this facility, believe it or not. And once we get it leaned down properly, we should be able to -- we can go to 2 and 3 shifts. We can definitely handle a significant amount of capacity here.

Excellent. Next question. Is there any progress being made in Europe relative to new sales?

Yes. Europe has been a tough one. With the anti-gas movement, it really has put a damper and also the war in Ukraine, that's been a big challenge for Europe. I just came back from Europe. We met with one of our adaptive technology partners, and we are seeing something really exciting that could change the game and reinvent ourselves for the European market. There, we look at taking waste streams and turning them into some useful energy. And so there are some technologies out there that we're working together with that we think could really be exciting, especially for the European market.

Excellent. So we had several questions on this particular topic. I'm going to combine it into one. Vince, I'll hand it over to you. What is the outlook for sales with the new demand for electric shortage because of the demand for AI?

Well, I think all you have to do is go to the last few slides of this call. It's very real. We're seeing that obviously in the bigger power block orders, where the data centers -- and take Virginia, for example, where the data centers are consuming a large amount of that electricity and it's showing in the residential and the commercial space. And so we think that not only can we serve the data center space, but we can certainly serve the C&I space that's going to be also faced with these power constraints. So it's very real. AI is something that people are still trying to sort out, but it basically quadruples the amount of energy consumption that a normal data center would use. So as a result of that, something's got to give. So we see that as the time for us to step in and deliver.

Excellent. Well, we are at the top of the hour. We have several other questions, but we will need to turn it over to you, Vince, for closing remarks.

Sure. Thanks, Kim. Again, this -- coming into the beginning of fiscal '25 in a tight liquidity situation, I can't say enough about the team here. Not only just the senior leadership team, but every associate that has hung in with Capstone, the number of folks here that have been here for 20-plus years that didn't give up and didn't give in, and with a fresh look at things, we've delivered some pretty good results. Could we have done better? Sure, we can always do better. But that's the way we think is that we'll celebrate the wins but we will not give up and we can always figure out a way to get better and better each and every day. At the end of the day, this is about sustainability. It's not just a 1-year performance. We're not going to be a one-hit wonder. We need to be an organization that continually delivers not only on the financial performance but our presence in the marketplace and how do we reshape the energy landscape. So that's the way we're headed, and we're really excited for what we're about to do in fiscal '26. Thank you.

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