Capstone Turbine : Management Presentation - May 2020

INVESTOR RELATIONS PRESENTATION

NASDAQ: CPST| May 2020

Saving Money and the Environment -

One Turbine at a Time.

Safe Harbor

This presentation contains "forward-looking statements" regarding future events or financial performance of Capstone Turbine Corporation (Capstone), within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by words such as "believe," "expect," "objective," "intend," "targeted," "plan" and similar phrases.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties described in Capstone's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other periodic filings with the Securities and Exchange Commission that may cause Capstone's actual results to be materially different from any future results expressed or implied in such statements. Because of the risks and uncertainties, Capstone cautions you not to place undue reliance on these statements, which speak only as of the date of this presentation. We undertake no obligation, and specifically disclaim any obligation, to release any revision to any forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.

COVID-19 & The Changing Global Energy Markets

COVID-19 and the

Imminent Change

In Global Energy

Change is the law of life. And those who look only to the past or the present are certain to miss the future.

John F. Kennedy

COVID-19 Pandemic Highlights the Impact Mankind Has on the Planet 3

Making Green Being Green

30% of the Population is the First Generation to Have Grown up with Climate Change 4

Capstone Turbine Advantages

FEATURES & BENEFITS

Low Emissions

No exhaust aftertreatment

Fuel Availability

Operates on gaseous, renewable, and liquid fuels

Patented Air Bearing Technology	Free Clean Waste Heat
No lubricants or coolants needed	Thermal energy for
	cogeneration/trigeneration
Inverter Based w/ One Moving Part	Remote Monitoring
Low operating costs	View performance and diagnostics 24/7
High Power Density	Scalable To Match Demand
Compact footprint, small modular design	Multiple applications and industries
Stand Alone Or Grid Connect	Potential Emissions Credits
Supports aging utility infrastructure	Offset project costs

5

Energy Efficient Green Products

ELECTRIC

HOT WATER

STEAM

CHILLED WATER

DIRECT DRYING

6

6

CPST Revenue Growth Strategy

OEM, Direct Sales, National Accounts,

Expanded Product Portfolio,

New Product Partnerships,

Rentals, 24/7 Solar, B+K

New Non-	Target Pricing
Distributor	Program
Business

Implementation of Target Pricing Programs for key National Accounts, OEMs

Expanded Distribution in new geographies like Eastern Europe, Africa and the Middle East

Distribution

Improvement

GROWTH

STRATEGY

	Product + Service
	Product + Accessories
Sales	+ Service Installation +
Product + Accessories
Bundling
+ Service

Marketing	Customer
& Strategy	Satisfaction

Customized products by market with matched marketing campaigns. Improved targeted marketing strategy.

Improving C200 product performance with new parts supplier replacing legacy supplier with poor manufacturing quality. Improving reliability, lower Warranty and FPP costs.

7

Capstone Growth Catalysts

CATALYSTS FOR GROWTH

Focus On Reducing Cost	Green Building (LEED)
Low Cost Natural Gas	Severe Weather
Microgrid Adoption	Crude Oil Prices
Gas Flaring Regulations	Federal & State Subsidies
New Engine Emissions	Electrification

Positive

Neutral

Negative

8

Maturing Channel to Market

DISTRIBUTORS DISTRIBUTOR DISTRIBUTOR

EMPLOYEESLOCATIONS

14	12	11	199	115	94	44	191	42
	62	559
	TOTAL			TOTAL			TOTAL
						64		41
	2			151

NA/OEMS

3
TOTAL
9	5
1

U.S./CANADA	LATIN AMERICA	EMEA	APAC/
CARIBBEAN			RUSSIA

Note: The above employee and location figures are based on data provided by distributors and have not been independently verified.

9

Estimated Value of Distribution

NORTH	LATIN	EUROPE	APAC	TOTAL
AMERICA	AMERICA	MEA	RUSSIA

Distributor	115@$81k	94@$42k	151@$90k	199@$36k	$33.9M
Employees

Distribution	42@$55k	41@$31k	64@$39k	44@$12k	$6.6M
Locations

Total Annual Value of Distribution Channel is ~ $40M 10

Targeted Marketing Initiatives: CA Safety Power Shutdown

Print Advertising

• Two ¼ page advertisements placed in the main sections of the "Sacramento Bee" Sunday and mid-week issues.
• Incoming leads/inquiries tracked with QR code and in-bound call metrics tracking software.

Social Media - Paid and Organic

• Targeted paid advertising on LinkedIn and Facebook - Focus on industrial/commercial customers by location.
• Organic (non-paid) advertising on all corporate accounts (Facebook, Twitter, LinkedIn, Instagram)

Custom Landing Page

• Custom landing page was created on corporate website to qualify and score incoming leads.
• All lead data is automatically entered and tracked in customer relationship management (CRM) system.

11

POSITIVE ADJUSTED EBITDA GOAL

Nasdaq: CPST

Capstone Positive Adjusted

EBITDA Initiative - June 2020

• Hire additional salespeople for National Account development to drive incremental business for Capstone Turbine
• Lower quarterly operating expenses from an average of $6.5M to a range of $5.2M to $5.7M, with a range of $4.0M to $4.5M specifically in Q1 from the COVID-19 Business Continuity Plan
• Reduce direct material costs $3M annually
• Cut annual R&D spend by approximately 15%, delaying all non-essential product development
• Expand long-term microturbine rental fleet from current 8.6 MW up to 10 MW
• Increase aftermarket spare parts margins with newly upgraded United Kingdom Integrated Remanufacturing Facility (IRF)
• Help key distributors achieve higher Factory Protection Plan (FPP) service contract attachment rates from 38% of 45%
• Continue to focus on improving product reliability and drive warranty expenses from approximately 3% down to 1%
• Increase distributor management and push performance to produce near-term product backlog and revenue growth
• Accessories, Parts & Service margins to return to Q3/Q4 fiscal 2018 levels, after 2 years of working through costs driven by the supplier part defect issue identified in Q1 fiscal 2019

13

New Direct Sales Strategy

RENTAL	PROJECT
SYSTEMS	DEVELOPMENT
§ Oil & Gas	§ Major Projects
§ C&I	§ Energy Auditing
§ Reoccurring	§ High Margin
Revenue

KEY	PARTNERSHIPS
ACCOUNTS	/JV's
§ National Accounts	§ BOP Products
§ OEMs	§ New Technologies
§ IndyCar B2B	§ Services

14

Initial Direct Product Sales Results

DIRECT SALES		DISTRIBUTOR SALES
OEM, DIRECT, NATIONAL ACCOUNTS		TRADITIONAL DISTRIBUTION MODEL
26%		74%

REVENUE GROWTH STRATEGY

Target Pricing	Distribution	Sales	Marketing &	Customer
Program	Improvement	Bundling	Strategy	Satisfaction

15

Service Business Drives EBITDA

Clean, Efficient, Reliable Low Margin Product Sales

Drives High Margin Service Enterprise

Typical

Product

• Service Revenue

Microturbine Product

Accessories,

Parts, and

Service

Typical

Product

• Service Margin

Q2 FY2020 Capstone Aftermarket Service Business
Was 42% of Revenue, But 87% of Margin	16

Strengthening Aftermarket

Aftermarket is now composed of a healthy mix of offerings with both stable recurring revenue and higher margins

• FY20 is the culmination of a multi-year aftermarket strategic plan
• Positions Capstone for profitable growth beginning in FY21

Factory Protection Plan (FPP) long-term service contracts

• FPP Backlog hits a record $83.7M on December 31, 2019
• 54% of eligible fleet (265 MW) now covered under FPP

Strong OEM parts business with healthy margins

• $10.8M shipped YTD with >50% gross margin
• Annual spare parts price increase

54% of Eligible Fleet (in MW) Covered Under FPP

(incl. EXW & RSS)

Standard

Warranty

11%

T&M 33%

Russia

T&M (not

eligible)

17%

FPP*

39%

Growing long-term rental business with healthy margins

• 13% Q/Q growth with >50% gross margin
• Expands to 8.6 MW vs. a target of 10 MW

United Kingdom Integrated Remanufacturing Facility (IRF) ribbon cutting completed in December 2019

• Full Grid Connect test capability on schedule for early 2020
• Average 40% cost reduction using remanufactured parts for FPP
• Drives continued margin expansion of Capstone's aftermarket service business

Aftermarket Business Continues to Anchor Sustainable Profitability Strategy	17

DMC Cost Savings, Annualized

Other, $500K

Injector Line,

$400K

$3 Million in

DMC Cost

Savings

Batteries, $200K

Stators, $400K

Super Alloys

Stators

Batteries

Injector Line

Other

Super Alloys,

$1,500K

$3 Million in DMC Savings Supports Improved Product & Aftermarket Margins

18

Capstone's Focus on ESG

Increasing focus on Environmental, Social and Governance (ESG), principals, regulations and government policies is creating a strong tailwinds for the renewable energy sector globally. There's growing investor interest with ESG investing estimated to be over $20 trillion in AUM as investors demand corporate responsibility.

ENVIRONMENTAL

• Capstone (CPST) manufactures reliable and energy dense power systems that allow customers to lower both NOx and CO2 emissions without the use of exhaust after treatment that use precious metals and urea.
• In FY2019, CPST customers benefited from 350,000 tons in carbon savings while also saving $253 million in energy costs.
• CPST is developing new 100% renewable products together with new renewable fuels (hydrogen and methanol), allowing customers to generate power with a net-zero carbon footprint.
• CPST strives to improve the oil & gas industry by offering cleaner and "greener" power solutions that reduce methane emissions while utilizing associated gas that would otherwise be flared into the atmosphere.
• CPST supports energy efficiency initiatives through CHP and the U.S. DOE CHP Technical Assistance Partnership.

SOCIAL

• Capstone, through its Capstone Cares program, sponsors paid employees to volunteer work in the local community and routinely conducts annual toy, book, and blood donation drives.
• The Capstone Culture Club puts on company sponsored employee events, ranging from health & fitness activities, team building events, social events and celebrations.
• Capstone U is a company sponsored employee led internal education program that is free and open to all employees.
• The Capstone EH&S Team works continuously to achieve a zero waste facility, eliminate all lost time injuries, and reduce near miss accidents.

GOVERNANCE

• Capstone has a highly diverse set of outside Board of Directors comprised of 3 women and 4 men, with a female Chairperson and Audit Committee lead.
• 7 of the 8 CPST Board of Directors are outside independent directors who are free of any conflicts of interest and had no prior relationship with the President & CEO.
• The company subscribes to the highest levels of oversight, director education and management transparency.
• Capstone has worked diligently over the last several years on board "refresh" and each director is up for election annually.

19

NEW TECHNOLOGY & PRODUCTS

Nasdaq: CPST

New Technology Roadmap

6	STEPS TO		SIGNATURE
SUCCESS		SERIES C65		NEW C250S
			& C1250S
ELECTRONICS
		MODERNIZATION
HYDROGEN &
METHANOL

MICROGRID

PRODUCTS

RENEWABLE

PRODUCTS

21

New Technology &

Product Development

Capstone received two new patents by the U.S. Patent and Trademark Office

1. Patent 10,184,664, is for a multiple-fuel capable, pre-mixed, low emission injector for high flame speed fuel combustion.
2. Patent 10,197,282, is for a multi-staged, lean pre-vaporizing,pre-mixing fuel injector providing ultra-low emissions that meet EPA Tier 4 requirements for power generation.

These two patents support Capstone's Technology Roadmap -

Targeting the expansion of multiple fuels, including high flame speed fuels such as Hydrogen, while also maintaining Capstone's industry-leading low emissions

22

New Renewable Fuels

H Y D R O G E NM E T H A N O L

Capstone will soon offer renewable power with the use of hydrogen in our product line of microturbines as a fuel source. Today we have operated on a blend of natural gas and hydrogen, and we have a plan to release a commercial 100% hydrogen fuel capable microturbine over the next couple of years.

Capstone has worked with a Swiss company for years, operating a C30 on methanol. We just completed a multi-year test program, and together we are exploring the use of our full line of turbines as they move from the product development into the commercial deployment phase.

23

New 100% Renewable Products

100% renewable project with new customer, 247Solar, together we are installing a solar-powered microturbine at a test site in Morocco using concentrated solar energy to expand superheated air across the Capstone microturbine to generate 100% renewable power with our microturbines. Once completed, 247Solar has a host of additional opportunities.

An illustration of the pre-engineered 247Solar Plant, outfitted with Capstone microturbines.

Another 100% renewable project is with a German company, B+K, that is using wood waste to generate superheated air and also expanding it across the Capstone microturbine. B+K has been operating a Capstone powered pilot project for more than a year and is moving into commercial sales, with several projects planned in 2020.

An illustration of the pre-engineered ClinX CHP solution, outfitted with Capstone microturbine

24

TARGET ANNUAL BUSINESS MODEL

Nasdaq: CPST

Annual Target vs. FY2014 Actual

- Business Comparison

(in millions)	New Annual	FY14 (A)	Y/Y $ ∆			Y/Y % ∆
Target
Product Revenue	$	86.5		$	108.8		$	(22.3)	(20%)
Accessories, Parts & Service Revenue			44.4			24.3			20.1		83%
Revenue		130.9			133.1			(2.2)		(2%)
Direct Materials			74.5			83.4			8.9		11%
Warranty		2.6			3.9			1.3	33%
Royalties			0.2			2.9			2.7		93%
Manufacturing & Service costs			15.3			21.3			6.0		28%
Cost of Goods Sold			92.6			111.5			18.9		17%
Gross Margin		38.3			21.6			16.7	77%
Gross Margin %			29%			16%
Product Development		3.6			9.0			5.4	60%
Selling, G&A			23.7			27.9			4.2		15%
Total Operating Expenses			27.3			36.9			9.6		26%
Operating Income (Loss)			11.0			(15.3)			26.3		172%
Adjusted EBITDA		$	13.2		$	(10.8)		$	24.0		(222%)

26

COVID-19 BUSINESS CONTINUITY PLAN

Nasdaq: CPST

Distributed Energy Market

"Capstone previously announced a near-term goal of reaching positive Adjusted EBITDA in the upcoming June quarter by focusing on improving the business with high margin repetitive revenue streams in areas that the company has more control over and that are not directly impacted by external factors such as macroeconomic conditions, project delays, geopolitical events, exchange rates, crude oil prices, trade wars and now we can add global pandemics to the list of external factors we can mitigate with our recurring revenues," stated Darren Jamison

President & Chief Executive Officer

Capstone Turbine Corporation

28

Four Business Continuity Goals

Employee Health & Safety

Business Continuity for Essential End Use Customers

Increase Liquidity

• Improve Working Capital

Positive Adjusted

EBITDA in Upcoming

June Quarter

29

Business Continuity Plan

• Provide the Generally Recommended Safety Environment and Maintain Business Continuity
• Maintain All Employees' Health Insurance During the Period of Business Interruption
• Continue to Support the Critical Aftermarket Business and 60+ Worldwide Distributors
• Comply with the WARN Act Both Federal and State (California)
• Provides the Flexibility to Bring Back Employees Sooner or Later up to 180 Days
• Provides Cost Reduction with Lowest Risk of Unwanted Employee Turnover
• Immediately Reduce Payroll Expense and Provide Additional Liquidity
• Dramatically Slow Incoming Inventory to Improve Inventory Turns
• Generate Positive Working Capital in the June Quarter
• Provides a "Hard Reset" on Backlog and New Product Sales Forecast
• Afford the Opportunity to Right Size Payables and Drive Small Lot Sizes
• Applied for and Received Funding Under the New Government PPP/SBA Program
• Supports Q1 Positive Adjusted EBITDA Despite Pandemic and the Collapse of Oil Prices

Drive for Positive Adj. EBITDA Despite COVID-19 Pandemic30

Q4 FY2020 Business Highlights

• Total cash is $15.1 million, down only $1.6 million from to $16.7 million as of December 31, 2019 despite lower product revenues caused by the COVID-19 pandemic.
• Inventory receipts decreased by $4.6 million, or 36%, to $8.1 million in the fourth quarter compared to $12.7 million in the third quarter supporting improved liquidity and driving potential positive working capital in the upcoming quarter.
• Factory Protection Plan (FPP) long-term service contract revenue continued to expand despite impacts from the COVID-19 pandemic and was up 16% year-over-year.
• The Company allocated 0.6 MW of new production to grow its long-term microturbine rental fleet, which now stands at 8.6 MW, approaching its 10 MW goal.
• Pre-built5.9 MW of Finished Goods and shipped an elevated level of FPP spare parts during the quarter to ensure customer continuity of both units and spare parts supplies.
• New gross product orders were approximately $9.1 million during the fourth quarter compared to $9.3 million in the previous third quarter.
• Received $2.6 million from ATM during the quarter as the company focused on liquidity.

Q4 Shows Progress Despite COVID-19 Pandemic Slowdown

31

LEADERSHIP & BOARD OF DIRECTORS

Nasdaq: CPST

Leadership Team

Darren Jamison

President & Chief Executive Officer

Eric Hencken	James Crouse	Jeff Foster	Kirk Petty	Jennifer Derstine
Chief Financial Officer	Chief Revenue Officer	Senior Vice President of	Senior Vice President	Vice President of Marketing
& Chief Accounting Officer		Customer Service & Product	of Operations	& Distribution
		Development

33

Board of Directors

HOLLY

VAN DEURSEN

• Independent director for companies in the chemical, industrial and contract manufacturing sectors; previously a director for companies in the oilfield services and packaging sectors
• Group Vice President, Petrochemicals and Group Vice President, Strategy for BP plc/Amoco Corporation, a $250 billion oil, gas, and energy company, through 2005
• Executive roles with BP/Amoco in business management, business development and mergers & acquisitions, residing in North America, Asia and Europe
  Chair of the Board
  Member of the Audit Committee

• Previously an independent director for Maxwell Technologies, Magnetek Incorporated, Bioscrip Incorporated, and U.S. Oncology Corporation, companies in energy, automation and healthcare industries
• Chair of Audit, Compensation, or Nominating & Governance Committee for a number of Boards
• Chief Financial Officer of four publicly traded companies, including AdvancePCS, Informix Corporation, Oxford Health Plans, Inc., and WellPoint, Inc. through 2004

Chair of the Audit Committee

YON Member of the Compensation Committee

JORDEN

• Managing Director, Echo Holdings, LLC, advisory services for M&A in oil and gas since 2019
• Chief Executive Officer, Boomerang Tube, LLC, a supplier of steel pipes and services for the energy industry 2018-2019
• Chief Executive Officer, Epic Industrial Solutions, LLC, provider of parts and services for industrial engines and compressors in the oil, gas and industrial markets 2015-2018
• Chief Executive Officer, Southwest Oilfield Products, Inc., an aftermarket supplier for drilling rigs 2012-2015

PAUL	Chair of Nominating and Corporate Governance Committee
DEWEESE

• President and Chief Executive Officer, Dynegy Inc., an independent power producer and electricity marketer 2011-2018
• Chief Financial Officer of UGI Corporation, a distributor and marketer of energy products and services in 2011; and Chief Financial Officer then Chief Operating Officer of NRG Energy, Inc., a power generation and electricity marketer 2004-2009
• Chief Executive Officer of Foster Wheeler, a Swiss global engineering conglomerate 2009-2010

ROBERT	Member of Audit Committee
FLEXON	Member of the Compensation Committee

• President and Chief Executive Officer, Capstone Turbine Corporation since 2006
• President and Chief Operating Officer for Northern Power Systems, Inc., a
  company that designs, manufactures and sells wind turbines into the global marketplace 2003-2006
• Vice President and General Manager of Distributed Energy Solutions for
  Stewart & Stevenson Services, Inc., a leading designer, manufacturer and marketer of specialized engine-driven power generation equipment to the oil and gas, renewable and energy efficiency markets 1996-2003

DARREN

JAMISON

• Managing Principal of Sustainability Excellence Associates, LLC, a consulting firm specializing in strategic planning for sustainability and environment 2009-2016
• Vice President, Corporate Sustainability Strategies, MGM Resorts International, one of the world's leading global hospitality companies 2006-2008
• Leadership roles with Ford Motor Company and Visteon Corporation, including Director of Distributed Power Generation and Director of Government Affairs and Corporate Responsibility

Chair of the Compensation Committee

GARY Member of Nominating and Corporate Governance Committee

MAYO

• President and Chief Executive Officer, National Association of Water Companies since 2018
• Commissioner for the Federal Energy Regulatory Commission 2017-2018
• Served on the Pennsylvania Public Utility Commission 2008-2017, as Chair 2011- 2015, and on Pennsylvania's Marcellus Shale Advisory Commission 2011
• President of the National Association of Regulatory Utility Commissioners, 2011-2017
  Member of Nominating and Corporate Governance Committee

ROBERT

POWELSON

• Executive Vice President and President, New Business, for NRG Energy, Inc., a Fortune 500 company that generates electricity and provides energy solutions and natural gas to its customers 2011-2016
• Executive Vice President & Chief Administrative Officer for NRG Energy 2006-2011
• Executive leadership roles in human resources for Nash-Finch Company, Metris Companies, Inc. and General Electric

	Member of Nominating and Corporate Governance Committee
DENISE
Member of Compensation Committee
WILSON	34

Q&A SESSION

Nasdaq: CPST

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CAPMay2020

16640 Stagg Street, Van Nuys, CA 91406 USA - Tel: [phone], Toll Free: 866.422.7786

Nasdaq: CPST