Q3 2026 Capstone Green Energy Holdings Inc Earnings Call
Results for the third quarter of fiscal year 2026 ended December 31st 2025.
All participants will be in a listen-only mode throughout today's call.
Following Management's prepared remarks, we will take questions from covering analysts and address any questions that have been submitted in advance and those submitted during the webcast.
If you are participating via webcast and would like to submit a question to management. Please click on the Q&A button, located on your screen and enter your question in the Q&A section.
Questions may be submitted at any time during the call.
As a reminder, today's conference call is being recorded.
At this time, I would like to turn the call over to Alfredo Gomez. Capstone, general counsel Alfredo, please go ahead.
Thank you very much, good afternoon, and thank you for joining Capstone. Green energy, holding inc's, third quarter, fiscal year, 2026 earnings conference call.
On the call with me today are Vince. Canino the company's president and chief executive officer and John Miller, the company is interim Chief Financial Officer.
on February 12th Capstone green energy Holdings, Inc issued its earnings release for its third quarter fiscal year 2026 Financial results which ended December 31st 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. February 12th, 2025.
Other than is 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 under Reliance on these forward-looking statements because they involve known and unknown risks on certainties 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 accompanying 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. Miller go through the discussion today, when they mentioned Evita, they're referring to adjust City Utah which is in on gaap financial measure and the reconciliation to net income can be found in the earnings release and the appendix to the presentation slides.
I would like to now turn the call over to Vince Keno the company's president and chief executive officer.
Thank you. Alfredo and good afternoon, everyone. I appreciate you joining us today.
Turning to slide 4. The third quarter was another strong period for Capstone green energy.
Our results reflect continued momentum across the business with Revenue growth margin expansion and improved profitability driven by disciplined execution of our 3 pillar strategy.
For the quarter Revenue was 26.8 Million up 33% from same period prior year.
Year-to-date Revenue reached 83,842 increase over the same period last year.
this growth was fueled by higher demand for our larger capacity, products, and strong performance, in our service, businesses,
Our strategy is working.
The operating leverage created by our straightforward and executable 3-pillow up in our results.
Our strong Revenue growth leveraged by the discipline from our Financial Health pillar and the systems tools and processes deployed under our sustainable. Excellence pillar continue to create strong delivery in adjusted ibida.
Q3 marks our 7th consecutive quarter of positive adjusted ibida as well as our best adjusted IBA for a quarter at 5.1 million contributing to a year-to-date adjusted IBA of over 12.3 million which outpaced all of fiscal year 2025 by over 4 million.
Let's move to slide 5.
Our trailing 12-month revenues are now running at 110 million.
Up 7 million from prior quarters trailing 12-month revenues of 103 million.
We continue to see a shift in product mix from our smaller, high volume c65 to larger, big box units and at powerblocks of multiple megawatts.
5 years.
according to a recent eia or Energy Information Administration report,
the frequency of power interruptions has been the highest than any year in the past. Decade with the average outage duration, being over 11 hours,
the eia data indicates that the major contributors to those outages are due to weather and grid disturbances.
Simply put.
Businesses are realizing that in order to maintain steady operations, power is becoming a problem and they are crossing the chasm to making either an Opex, spend through rentals or a capex. Spend for permanent installation of behind the meter combined heat and Power Solutions.
The department of energy released a report in July of 2025, warning, that blackouts could increase by 100 times in 2030. As a result of the retirement of existing generation and delays in adding new firm capacity, Beyond solar and wind.
The report goes on to state. That if the US continues to shutter, reliable power sources and fails to add firm capacity, this will become a major problem beyond the needs of AI driven data center growth,
Allowing 104 gigawatts of firm generation to retire by 2030 without timely replacement could lead to significant outages. Especially when weather conditions, limit the output of wind and solar.
Even though the 104, gigawatts of retired, generation is planned to be replaced by 209. Gigawatts of New Generation by 2030.
Only 22 gigawatts of that generation comes from firm base load generation resources.
This is where distributed Generation Now, enters Center Stage.
Moving on to slide 6 in this quarter's cost out corner highlight. We want to showcase an example that directly aligns with 1 of our core values. The little things matter
at first glance decals may seem insignificant in the grand scheme of bill of materials.
But our philosophy is simple. You can't do extraordinary things unless you get the little things, right.
And when you consistently execute small, low effort cost improvements those savings compound into something meaningful.
For many years, we Outsource the manufacturing of decals across our entire product line that Arrangement proved to be highly restrictive as our needs. Evolved more importantly if even a single decal was damaged we were forced to reorder an entire set driving unnecessary cost from what could have been a Sim
Simple isolated error.
When the supplier was unwilling to offer flexibility, the team ran the opportunity through our dfma program which produced a should cost that was significantly lower than what we were paying.
As the team evaluated alternative options it became clear. This process should be brought in house not only for cost reduction but also for greater flexibility and expanded capability.
The results speak for themselves. This project delivers a 71% cost savings while also giving us a multi-purpose tool that supports future needs.
It's another example of how focusing on the little things doesn't just reduce costs, it helps us future proof the business.
Now, I would like to turn the call over to John Miller, our interim, Chief Financial Officer.
Over to you, John.
Thank you, Vincent, good afternoon everyone turning to profitability. Let's move on to slide 7.
Where we delivered gross profit at 10.4 million more than double the prior year and Hispanic gross margin to 39% up 14 points. This Improvement was driven by favorable product mix direct material cost, reductions and the margin left associated with the Cal micro turbine distributor acquisition.
Our dfma cost out initiatives continue to deliver exceptional results and helped offset the impact of new import tariffs.
We also delivered our second consecutive quarter positive. Net income reporting 1.2 million for the quarter compared to a loss of 2.7, a year ago year to date. Net income stands at 1.3 million versus a loss of 7.1 million in the prior year.
And sustainable profitability.
We're also seeing the benefits of a smooth transition, following our Cal micro turbine acquisition, which is further, strengthened our bottom line, our workaround dfma. Even in spite of the effects of tariffs, continue to deliver margin expansion on our products and parts. Our root cause analysis processes are also helping us to mitigate failure modes due to application or site issues, which is not only improving margins in our service agreement base. But it's also helping to create
greater customer satisfaction by eliminating unnecessary failures.
Let's go to slide 8.
This quarter reflects continued momentum in strengthening capstone's financial position. Marked by 7 consecutive quarters of positive adjusted ebita, the resilience of our business model, favorable ships and power market dynamics, and the dedication of our employees. And Distributors have meaningfully improved capstone's trajectory together. We are, well, positioned to deliver Innovative Energy Solutions that meet growing Global power demands.
Now, let me discuss the company's Financial results for the third quarter of fiscal 26.
You'll see the summary Financial results for the third quarter. Total revenue is 26.8 million compared to 20.1 and 25.
Up 33% the Improvement in product and accessories Revenue at a 13.6 million. During this period, reflects the continuing increase in customer sentiment for Capstone products, following the restruction.
And the resilience and adaptability of the Capstone product to meet changing Market demands.
The decline in rental Revenue to 3.9 million is due mainly to a decrease in demand for a remote power in the oil and gas space, which is tracking with the decrease in the price of oil During the period.
We launched a December to remember Parts and Services Initiative for our Capstone. West territory, this initiative, contribute to a strong Revenue, delivery of 9.3 million for the quarter.
Topline growth delivered to gross profit at 10.4 million for the quarter versus 5 million in 2025. The current quarter's gross margin was 39% versus 25% in 2025 the gross profit dollars and continued study margin improvements. Reflect the increasing interest in our products and accessories impacts of strategically moving to direct sales in California.
And ongoing cost savings from our dfma initiatives and higher mix of high margin part sales.
R&D expenses were 4% of revenues for the current quarter reflecting our investments in our cost out initiatives and new technological development.
Sgna expenses of 7.4 million was up 1.1 million dollars from 2025 and stands at 28% of Revenue included in the third quarter was 6 million for incentive, compensation expense, and 0.2 million of customer related intangible amortization.
Non-recurring expenses for the quarter. Were 1.5 million versus 1.2 million in 2025 and increase of 0.2 million.
Net income for the period, was 1.2 million which is a 3.9 million dollar improvement from the loss and fiscal 2025 of 2.7. The improved financial performance delivered adjusted even uh to a record of 5.1 million in the quarter.
Let's look at slide 9 to review some selected balance sheet items.
Cash and equivalents were 15.2 million increases 6.5 million since the end of fiscal 25, the increase was primarily due to cash provided by the pipe, transaction of 3.9 million, out of the debt payment made in the quarter as well as cash generated by operating activities of 2.0 million.
Accounts, receivable were 11.4 million.
An increase of 4.4 million primarily due to the timing of large, distributor sales towards the end of the quarter total inventories at 21.2 million increased 1.1 million from year end.
last the accounts payable and recruit expenses were 21 million up 5.4 million from March, 31 reflecting the higher level of business activity
With that, I'll turn the presentation back to vets.
Thank you. John. Moving to slide 10.
Since our last earnings call. Where we introduced 4 key, technological developments we've been working on.
I thought it would be prudent to provide a follow-up on our progress.
For the 800 volt DC product which technically is complete. We have been working on developing 2. Key pieces of technology to provide a more comprehensive offering.
The first is our smart power switch or SPS, which provides the traffic flow of electrons between our micro turbine and the data centers 800 volt DC bus.
We expect to have our SPS prototype complete by the end of this month. And we'll move into a 5-month test cycle, with our 800 volt, DC micro turb.
Certification agencies on compliance requirements for safe and reliable data center deployment.
Combustion liner testing is 60% complete and we are in the tuning stages of the product development cycle. We expect we will be able to offer this product within the next 3 to 6 months
To give you an understanding of the value of being able to deliver 5 PPM of Knocks.
This will allow end users to install more megawatts of power, before triggering, the need to obtain a Title 5. Air permit,
4 perspective. The triggering of event of Title. 5 also known as a major source threshold is 100 tons per year of Knocks.
So a unit let's say that delivers 25 PPM of knocks without abatement will trigger Title 5 at 85 megawatts.
Our upcoming 5 PPM nox. Unit would trigger Title 5 at 380 megawatts.
Even more important.
Those non-attainment districts that require purchasing emissions reduction credits will see significantly lower costs using a 5 PPM nox unit.
This is why ultra low nox modular generation is so powerful. Commercially, they enable behind the meter growth without Title 5. Preserve, operational flexibility, and reduce permitting timelines. In community risk.
On our C250 engine, we continue to make good progress on run hours. And some exciting data where we are not only meeting our output and efficiency targets, but it does appear. Our emissions results are exceeding expectations.
We are planning to build our second test prototype to get more operating hours.
Even more exciting is how we are breaking the chains of legacy on how we will package this product. And we are hoping to see significant cost reduction on the product as well.
Needless to say, our goal for the C250 package is to create a new 1 megawatt and 1.5 megawatt unit, that will have a new and exciting, look and feel
Lastly, our heat recovery module or HRM.
The Prototype is built. And now on the test rating, early results are showing improved heat recovery over Legacy designs, and we are on track to deliver a product that is more efficient and effective in recovering, waste heat and turning it into useful, hot water.
this new HRM should push our total cycle efficiencies into the high 80s and low 90, percentiles,
Turning to slide 11.
On this slide, I want to highlight how we think about future proofing, growth through our Blue Sky use cases.
Areas where energy resilience emissions reduction and scalability are becoming Mission critical.
Starting with ports.
Ports are rapidly electrifying and that creates both opportunity and urgency.
Ship to shore, power, EV charging for Port operations, and resilient power for Logistics, and Cold Storage are no longer optional.
These sites need emissions. Compliance without relying on the grid and often require mobile or temporary Power Solutions that can scale as operations grow.
Moving to micro grid systems. Here we see strong demand for Integrated Systems that combine, Renewables storage and dispatchable Power.
These Solutions protect Transformers enable resilient community and campus, Energy Systems, and allow industrial electrification without costly grid upgrades.
Interconnect flexibility, programs are also opening the door to faster deployment, and better economics.
Next is station power, this includes power for plant auxiliary loads and gas turbine, Inlet cooling as well as Blackstar capability for heavy duty, gas turbine plants.
Customers are increasingly looking for modular low emissions alternatives, to diesel that improve reliability while meeting tight environmental standards.
And finally Data Centers, of course.
Data centers are expanding rapidly, often in Grid, constrained regions.
They need High availability power. That is scalable behind the meter and Deployable quickly.
Just as important, they are demanding cost predictable. Lower carbon base, load power to support, long-term growth and sustainability, commitments.
Taken together these Blue Sky, use cases, represent step, change, growth opportunities, where resilient clean and flexible. Energy Solutions aren't just beneficial. They are essential
on to slide 12.
Call for questions. I want to take a moment to speak about the broader future of distributed generation and why we believe Capstone is positioned at the center of 1 of the most important energy transitions in the next decade.
The future of distributed generation is being shaved by forces that are only accelerating.
And they all point to the same direction.
Customers want energy systems that are cleaner more resilient, more flexible more cost predictable than what the traditional grid can reliably deliver.
Distributed generation sits at the center of that shift.
Simply put distributed generation is moving from alternative to essential.
We are entering a period where energy demand is rising faster than new grid capacity can be built.
Electrification digitalization and the explosive growth of data centers, are putting unprecedented pressure on the infrastructure. That was never designed for this level of load.
At the same time, extreme weather events and aging transmission. Networks are driving more frequent outages and volatility.
Distributed generation solves, these challenges in a way that centralized systems simply can't.
It brings power closer to the point of use reduces dependence and energy losses that come from long-distance transmission and gives customers control over reliability and cost.
It also enables a smoother, more practical transition to a low-carbon future by integrating Renewables storage and ultra low emissions Technologies into a single flexible platform.
What's becoming clear is that distributed generation is no longer a niche solution. It's becoming a strategic necessity, whether it's industrial facilities, looking to protect operations. Commercial customers seeking predictable, energy costs or data centers, requiring High availability power with lower emissions. The demand drivers are durable and growing.
That's why we believe the future belongs to energy systems that are modular fuel flexible and capable of delivering high efficiency with ultra low emissions.
Distributed generation is not just filling gaps in the grid.
It's redefining how modern energy systems are built and companies that can deliver reliable scalable and behind-the-meter solutions will be at the Forefront of this transformation.
This shift plays directly into Capstone strengths.
Our fuel flexible wide operating windows, and ultra low. Emissions micro turbine technology is purpose-built for this new energy landscape.
As adoption continues to grow. We Believe distributed generation will play an even larger role in shaping how modern energy systems are designed built and operated, and we intend to be the leader in that transition.
Our results show. We are capturing the shift with this disciplined execution and processes that are building a backlog, which reflects long-term demand for resilient local power.
And with that we'd now like to move into the Q&A session.
Question and answer session.
We'll take questions from the.
Conference call First followed up by the webcast.
If you'd like to ask a question please press star. Then the number 1 on your telephone keypad, to raise your hand and enter the queue.
If you'd like to withdraw your question at any time, press star 1 again.
We'll pause just for a moment, to compile the roster.
Your first question comes from Eric Stein from Craig Halen, your line is open.
Hi Vince. I John
Hey Craig. Hey, hey Eric, how are you?
Doing fine doing fine on that. Hey that happens all the time. Um so curious maybe to start just um you mentioned that you know you're kind of Shifting or you're seeing a bit of a shift to larger units away from the c65. But I also look at the quarter and it looks to me like you had a a fair amount of
You know, I don't know if it's quick turn or or or things that might turn, uh, quicker than some of the larger units. So, you know, maybe talk about that mixed shift, how you see it, going forward, what it means for predictability but also, um, you know, this Dynamic that you do have some units, um, and demand that potentially is for more quicker term business.
The, uh, and as we do, see this shift to the bigger box. Uh, what this really means is, uh, the predictability of, of the pipeline or I, I should say the timing of the pipeline of when these deals get closed, because the larger the deal, uh, the more complex it gets and it ends up in, uh, you know, with a lot of other eyes, uh, in decision makers. So they, they tend to take a little bit longer and sometimes they get held up. Uh, even though everything has been approved, uh, you'd be surprised. So, uh, it is a little bit more of a challenge. Uh, when you go from the smaller units, which tend to be more transactional to the bigger units that are more Project based, uh, uh, it is a bit harder for us to predict when the timing is of these deals to to get closed. But that's also part of the reason why we're trying to create an agile Factory so that we can respond quickly to get units out especially for customers that are in dire need.
Got it and and I guess that's a good segue, you know, you I know, um, chasing some very large opportunities, whether its data center, or the other. Um, you know, the other end markets that you referred to earlier, uh, maybe just an update on the facility, your ability to produce where that stands now. I believe it would be on 1 shift and and, you know, potentially what that looks like and how fast you could you could ramp, if any
Necessary in some of these things are.
You know, are are out there and potentially could be, uh, in the somewhat near-term.
Yeah, that that's a it's a good question because uh and some of the things that we're doing, we are preparing is a data centers, uh could be a huge opportunity. Um, and some of these orders are some of the deals that are in the pipeline are, are very large megawatt type, uh projects. So, the team's been working on, uh, a new floor layout under lean manufacturing. We've talked about that and we're almost done. And when we get when we're done with that, we should be able to have 7 megawatts on the floor at any given time. And since it only takes us about a week to build a c1000, uh, if you've got 7 megawatts and 1 shift per week. You multiply, that by 50 weeks, you're at 350 megawatts. And then if you go to 2 shifts, you're at 7700 megawatts so you can do the math. But with that also comes uh, the logistics and the challenges in the supply chain. And actually uh we just recently had a dry run uh uh session with some of our key suppliers. Uh,
To basically say, okay, if we get this 100 megawatt order, what does this look like? And how fast can we ramped up? So now now the team is looking at at all of those, uh, choke points and we're working on solutions to those, so that we're ready. Uh when that day comes because uh, we're feeling pretty excited by it.
Got it. Um let's see. Maybe maybe last 1 for me just on the
the parts and services line. I mean that's that the revenues there and it sounds like some of it was related to a program that you ran end of the year. But I also know that you know that has been a focus of the company and this is the you know the highest it's been in looks like 8 or 9 quarters so you know, maybe maybe some of the things beyond the program. You ran in December but some of the things you're doing on the part side, uh, to grow that part of the business. Obviously, premium margin part of the business.
Yeah, I'm going to let John take that 1.
Yes, great question. Eric. I mean, I'd like to say uh, that that that kind of performance is going to repeat quarter over a quarter, but we had a couple couple different Dynamics there 1, as we said, our margins were 39%,
2 things going on there, we had fantastic. December to remember a quarter, um, with higher volumes. So the just the mix impact of that higher ratio of part sales had
Uh, substantial impact. The second piece is we had some really good news. Is we scrubbed our, uh, fpp liabilities and there was some liability sitting out there that weren't needed. So, we were able to release that liability and and drop right to the bottom line. So very good performance, very happy. Uh, it's a great performance but I can't say it's going to be that quarter over quarter.
For a lot of businesses, it's hard to forecast the parts business because on time and material, you really don't know how your customers are running their units. Um, but the most important thing you can do for parts, business is be ready. And I think that's 1 of the things that the team, the team's done a really good job on is when customers call in, and they need those critical parts right away. Uh, the team is able to, uh, respond very quickly and, and meet those orders and demands. And that certain helps our Revenue
All right. Thank you very much.
Thank you, Eric.
Your next question comes from Orin with egg Investment Partners, your line is open.
Hi, how are you? Hi good or how are you doing on a lot of progress. Good. Um can you just 1 followup can you quantify, you know, you know in terms of the gross margin again? Everybody's mystified in terms of the progress is just beyond, you know if you had to try and take a guess or if you do have a Quantified as to how much the effect was of those positives, those 2 positives within an extra few points of the 5 Points, maybe 5 to 10 points, 6 points, 3 points, that's question. 1 and question 2 is, can you just take us through in a qualitative level? I mean you've you've mentioned a few of them, just what the pipeline looks like. And if you're seeing a pipeline, get bigger, especially in the data center,
Hey, I don't want to specifically uh, quantify the margin impact of the quarter. What I will say is quarter over quarter versus last year and all segments. It's the margins are better, the gross margins so it's not just parts and service. It was it was a product, margins are better. The uh rental margins are solid as well. So
That's helpful.
And then there was a second part to your question Orin. Um,
Yeah, if you could talk to a little bit about the pipeline, if you see the pipeline, you need to expand. I know you. You mentioned some of the make a deals. The data center pipelines, is the real quickie
Sure, sure. And, and 1 of the things we're doing is, we're, we're keeping 2 separate pipelines, that what we call the cni pipeline, and that's your commercial and Industrial Pipeline, the traditional, uh, distributed generation business and, and we're watching that pipeline grow. Um, but as I mentioned earlier to Eric that, uh, you know, these deals as they get bigger, they take a little bit longer and especially when you're dealing with some government agencies, uh, in terms of, uh, the data center pipeline, uh, you know, it's magnitudes, magnitudes above what the cni pipeline is, um, and that's to be expected because these deals are so much bigger, um, and and we're just, you know, we're working through it. It it continues to grow, but the team is getting really good in qualifying and making sure uh they're not chasing everything. Uh so you know is the project funded does it have end user signed up.
They're asking all the right questions to make sure that we have a really solid and robust uh data center pipeline.
You think in the coming few quarters, we'll see our First Data Center orders.
Well, I sure hope so.
There's, there's some, yeah, there's some there's, there's some good, there's some good deals out there. Um, but uh, and and, and the crazy thing about the data center space, is that right, especially right now, where the currency for data centers is time to power, and so, we're getting phone calls all the time. Oh, we're short. Somebody wasn't able to deliver and, uh, and we want to be able to capitalize on those. Now, some of those might be, you know, 4 or 5 10 megawatts and we'll take them. Um, but uh, but there are certainly some other deals out there too.
Okay, great. Okay. Thanks so much since you're going well with that.
Thank you.
Thank you. I'll now turn the call over to Kimberly long to take questions from the webcast.
Kimberly.
Thank you.
So thank you everybody for submitting questions in our um chat box in the in the webcast. I'm going to go ahead and read them out and um, have John and Vince answer them for you. So the first 1, I'm going to, I'm going to ask John to answer, please.
Are there any plans to reinstate the ATM at the market stock purchase program?
Well, currently, you know, with our the momentum that we have financially and the, the, you know, 7 straight quarters of positive e. But, uh, you know, we're looking at at some different options and different possibilities in our capital structure. But at at the moment, we don't have any plans to reinstate a ATM Market stock purchase program.
Thank you.
so, the next 1 I'm going to ask Vince to
answer is kept some pursuing any data center, exclusive power provider contracts,
When I hear power provider contracts, I'm assuming power purchase agreements. And, um, we do have a few deals in our pipeline, where we're in discussions. Uh, with ppas with some of these data center providers,
Excellent, thank you.
So Vince will the C250 become the preferred unit for data centers.
Well it certainly it certainly can um 1 of the things that we think it matches up really well is with the data center uh electrical topology uh in terms of block power. So uh right now the c1000 can work and and we design it around a reference design of 3 to 4 megawatt blocks and so you take a C250, maybe you just need less engines. But uh we think that that's going to be a really strong fit.
Excellent. John. Can you give us any guidance on when Capstone could move to NASDAQ? Sure.
We we hear from shareholders all the time about uplifting to a National Exchange and and that's it's our Focus as well. Something we're thinking about all the time, as, as we're
Hopefully going to make our first profitable year and execute at this level, moving to a major exchange like NASDAQ or an icy American, is certainly a priority for us. We're not in a position to announce a timeline today, but I can tell you, we're actively evaluating the requirements of the various exchanges and I'm working towards putting ourselves in the best position.
To pursue that. As soon as we can,
excellent.
Vince can Capstone find its Niche and the small smaller sub, 10 megawatt Edge data center space. Oh, absolutely. Um, you know, and that that's the beauty of our product line, uh, the, our smaller units, whether it's a c65 c200 fit really well. In in those Edge data center plays and as a matter of fact, 1 of our Distributors is working with some folks on uh a very interesting reference design for Edge data centers. But um, but we also see some good ones in in in that 10 megawatt range as well in 5 megawatts. So uh, we believe we can play very nicely
Thank you.
Vince, what is your current potential annual capacity in megawatts considering supply chain, limitations skilled, labor. Availability, maximum output of your existing manufacturing lines and any other relevant constraints. Additionally, how do you anticipate this annual maximum capacity evolving into the future?
well I think I I answered some of this uh in an earlier question in terms of what our capacity is and and some of the conversations we're having with our supply chain
On the labor side. You know, it it's it's not it's not hard to get to a second shift, a third shift always tends to be the the difficult 1. Um and so that's what uh our our VP of Ops John tour is working on and, but but here's the beauty of the way we do things. Um, you know, at at this point, what we can set up is what we call a final assembly and final test facility. So, you know, we do balance our router groups here, and build our engines, and we test those as well as our Electronics, but we can feed multiple facilities. So we're in talks with the customer who wants a mobile manufacturing facility, uh, because they've got a 5 year buildout for their data center. Um, so we can do that and that's the beauty of the technology that we have. And and the way we're set up uh versus some of our competitions. So uh, we're not worried about running out of capacity here because we we feel like we've got the flexibility to find a very simple Warehouse type space.
We don't need cranes or any special equipment, just to, you know, some are skates and some test test facil, you know, test, uh equipment and uh, gas lines.
Thank you. The next 1 is for events as well.
And the investor presentation from December 2025 management assumes an average product revenue of 3.5 million megawatts per megawatt of power sold to data centers. In the last 4 quarters capstone's average product Revenue per megawatt sold has been below 2 megawatt. I mean, 2 million apologize.
Why do you expect product Revenue, per megawatt, sold to Data Center, to be higher than, what has been observed, historically at caps and across in markets?
An engineered equipment package and data centers, kind of like that because they don't want to have to piece part. All of these things out, they want 1 throw to choke and uh, and we feel that that is your true Energy System that matches up with their power blocks. So, so it's more than just micro turbines in that 3.5 million per megawatt.
Great. Thank you John. Can you please discuss balance sheet and the Goldman Sachs opportunity? Stake can you that state can be bought back or reduced to facilitate an up listing?
Yeah, of course a couple things that it's spelled out pretty well in our footnotes. But the, the preferred units that Goldman owns uh own controls 37.5% of the operating company. So it's it's a little it's a little confusing structure but it's it's not necessary for us to either redeem or or purchase that, um, instrument for us to relist or uplift. So it's, it's a possibility. Anybody could approach anybody and try to, uh, make an offer for their stake, but it's not necessary for us to uplift.
Wonderful, John.
How come Capstone does an articulated book to Bill ratio?
We we've got that question several times from investors and other calls, the, the challenge. We we've analyzed the data, we've gone backwards, we've looked at it and it's very unpredictable. Our business is Lumpy, you know, it's Project based its distributor, largely distributor based in the commercial industrial and there's just, there's just no. Uh, we couldn't find a useful Trend in the data, so what we decline to publish it,
Thank You. Vince is PG&E or SCE, a good Target for your micro grids behind their Trans Mountain line grids.
To cover the gaps for critical services companies and communities behind their grids and their inevitable. High wind shutdowns.
Well, that's a really good question and I think it could even go beyond PG&E and SCE. But, uh, there there's a couple of things we're working on, uh, in in, in regards to that, uh, the first 1 and we've mentioned this. And this was part of our, uh, micro grid strategy. We call the Transformer Protection Program. Um, so so that's an area that, uh, and we've talked to some folks at PG&E and and we've got some more, uh, meetings ahead with them. Um, so that's an area we think is, is going to be really helpful. Not, not only just on their major substations, uh, to protect against fires and and those kinds of shutdowns. But but also in in neighborhoods and in, uh, you know, other community centers and things like that, where smaller Transformers Transformers are being overloaded, especially, because of EV charging. And, uh,
Um, so you know, these utilities are getting very concerned about these transformers getting overloaded and they're they don't have a huge inventory. So we've got to help them find a way to solve that problem. The other really interesting thing that's happening is, um, is the uh, the the utilities and and PG&E and SE actually participate. In this, they call it the interconnect flexibility program.
And uh, that's something that they're looking at trying to solve the problem for when they can't get power to certain customers for 1 2, 3 years. And so we've started to have some conversations especially with the utilities here in California but there's some other folks in the midwest as well that uh are are participating in this. And our rentals business is, I think a perfect solution for that where we can bring in that power for 1 to 3 years until they're ready to bring in the service. So we're pretty excited with that opportunity.
Excellent. Thanks.
Why is the rental Fleet income down so significantly?
Yeah, you know that, uh, we don't like that, but, you know, it's the nature of the rental business. Um, and you know, when we look at our rental Fleet right now, it's primarily oil and gas and, you know, we all see the price of oil. And as oil goes below, $60. Uh, you know, the, uh, these folks start to move units off and and when they're coming up due for, for rental, take them off until they see.
Things are going to bounce back and and that's just the nature of the Beast. It's an ebb and flow and that's why you have to have a, a rental Fleet. That's ready to go, um, and we're going to get through it and we've got a great pipeline of opportunities, but the other thing we are looking to do is, is, is diversify our pipeline, uh, of opportunities and really our rental Revenue. Um, and that's why we also think that interconnect flexibility program is, uh, is a great way to help create some diversity in our rental program.
John.
We know that the gross margin was 39%, should we consider this an anomaly or to be considered a trend?
Like I said, we had a a pretty intense mix of part sales in the in the quarter. And uh, we also had, as I said before some uh, good news as we uh found some liabilities that were on the books for uh fpp program, liabilities that we were uh, didn't need so that those results fell straight to the bottom line.
Thank you.
That now concludes all the questions that were submitted on the webcast. I'd like to now turn this over to Vince for his closing remarks.
Thank you, Cam.
Uh, you know, this quarter really reaffirms that our strategy is working.
We're driving this business with speed, Simplicity and self-confidence. I think our execution and strengthening the company's fundamentals. Um and and it's increasingly clear that distributed generation is really shifting from selective Energy Solutions to an essential component of today's modern-day energy landscape.
So, you know, as we look at these high growth markets, the method, the message is really consistent, you know, customers need energy. That's cleaner. It's more resilient more flexible, and it has to be delivered with predictability and speed. And, uh, these are not temporary Trends. These are structural shifts and they really are accelerating and that's why we believe Capstone is Built For This Moment.
and as distributed generation continues shifting from alternative to essential, uh, we believe the demand profile for our technology and our Solutions will continue to strengthen
and so, I'd just like, to take this moment to thank our employees, our distribution partners, and our suppliers, for their continued, commitment in the Capstone cause
Uh, and most importantly, I want to extend our sincere appreciation to our customers and many of them who are repeat customers, who continue to place their trust in, not only what we do and how we do it. But in Who We Are,
So the progress we're making reflects that shared commitment and belief, we're confident in the p in the path ahead and we're firmly committed in delivering strong results. As we execute, our 3, pillar strategy, of Financial Health sustainable excellence, and revitalization of culture and talent.
And to us we believe that's how we continue to create long-term shareholder value. So thank you for your time and thank you for joining us today.
this concludes today's conference call, you may now disconnect