Capstone Green Energy Holdings Inc

Three Months Ended December 31, 2024 and 2023

The following table summarizes our revenue by geographic markets (in millions):

Revenuefor the three months ended December 31, 2024 increased $5.5 million to $20.1 million from $14.6 million for the three months ended December 31, 2023. The $5.5 million increase was primarily driven by increases in revenue of $3.8 million in the United States and Canada, $1.4 million in Latin America and $0.7 million in Europe, offset by a decrease in revenue of $0.5 million in Asia and Australia. The increases in the United States and Canada, Latin America and Europe was due to increased microturbine product, parts and rental demand. The decrease in Asia and Australia were primarily due to decreases in product deliveries for projects in those regions during thethree months ended December 31, 2024.

The following table summarizes our revenue (revenue amounts in millions):

For the three months ended December 31, 2024, revenue from microturbine products and accessories increased $3.0 million, or 58%, to $8.2 million from $5.2 million for the three months ended December 31, 2023. The $3.0 million increase was driven primarily by a 2.1 megawatts shipped increase during the three months ended December 31, 2024, compared to the three months ended December 31, 2023. Average revenue per megawatt shipped was approximately $1.3 million and $1.2 million during the three months ended December 31, 2024 and 2023, respectively. The timing of shipments is variable and based on several factors (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, factory protection plan (“FPP”) contracts, rentals, and other service revenue) increased $2.5 million, or 27%, to $11.9 million for three months ended December 31, 2024 from $9.4 million for the three months ended December 31, 2023. The $2.5 million increase was primarily due to increases in our part shipments and rentals due to our growing EaaS business line as our distributors increase their sales. Parts and services revenue also increased due to order timing and improved parts availability.

E-Finity Distributed Generation (“E-Finity”), Lone Star Power Solutions, LLC (“Lone Star”) and Cal Microturbine, three of our domestic distributors, accounted for 15%, 14% and 11% of revenue for the three months ended December 31, 2024, respectively. Cal Microturbine, accounted for 17% of revenue for the three months ended December 31, 2023.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses. Gross profit was $5.0 million, or 25% of revenue for the three months ended December 31, 2024, compared to a gross profit of $3.0 million, or 21% of revenue for the three months ended December 31, 2023. The improvement was primarily the result of an increase in product sales volume and pricing, lower warranty charges and decreases in production and service center labor and overhead expenses. Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

The following table summarizes our gross profit (in millions except percentages):

The improvement of $0.6 million in product and accessories gross profit was primarily due to an increasing revenue per megawatt, as a result of previously announced product price increases, while decreasing the cost per megawatt.

Product and accessories gross margin as a percentage of product and accessories revenue increased to (10)% during the three months ended December 31, 2024, from (27)% during the three months ended December 31, 2023, primarily due to increased megawatts sold and a favorable product sales mix for the three months ended December 31, 2024. Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 49% during the three months ended December 31, 2024, compared to 47% during the three months ended December 31, 2023, primarily as a result of increased gross profit of $1.8 million of rentals the three months ended December 31, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $0.7 million and $0.6 million during the three months ended December 31, 2024 and 2023, respectively.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $3.4 million, or 35%, to $6.3 million for the three months ended December 31, 2024, from $9.7 million for the three months ended December 31, 2023, primarily due to a $2.4 million reduction of legal and accounting fees for the restatement and restructuring activities and a $1.4 million decrease in stock-based compensation expense.

Interest Expense Interest expense for the three months ended December 31, 2024 and 2023 was $1.0 million and $1.1 million, respectively, reflecting a decline in interest rates.

Nine Months Ended December 31, 2024 and 2023

The following table summarizes our revenue by geographic markets (in millions):

Revenue for the nine months ended December 31, 2024, decreased $8.4 million to $58.5 million from $66.9 million for the nine months ended December 31, 2023. The $8.4 million decrease was primarily driven by decreases in revenue of $5.7 million in Europe, $2.8 million in Asia and Australia, and $0.7 million in the United States and Canada. The decrease was offset by an increase in revenue of $0.5 million in Latin America and $0.3 million in the Middle East and Africa. The decreases in Europe, Asia and Australia and the United States and Canada were primarily due to lower product deliveries for projects in those regions during the nine months ended December 31, 2024. The increases in Latin America and in the Middle East and Africa was primarily due to an increase in our parts shipments to the region, compared to the nine months ended December 31, 2023.

The following table summarizes our revenue (revenue amounts in millions):

For the nine months ended December 31, 2024, revenue from microturbine products and accessories decreased by $8.6 million, or 26%, to $24.9 million from $33.5 million for the nine months ended December 31, 2023. The $8.6 million decrease was primarily driven by a decrease of 10.3 in megawatts shipped during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023. Average revenue per megawatt shipped was approximately $1.4 million and $1.2 million during the nine months ended December 31, 2024 and 2023, respectively, which resulted from the previously announced product price increases. The timing of shipments is variable and based on several factors (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals and other service revenue) increased $0.2 million, or 1%, to $33.6 million for the nine months ended December 31, 2024, from $33.4 million for the nine months ended December 31, 2023, due to an increase in our rental and service contracts revenue of $1.0 million as a result of increased sales from our EaaS business line distributors and a $0.4 million increase in parts revenue, offset by a $1.2 million of DSS fees reported in revenue during the nine months ended December 31, 2023. Those fees are being recorded as Other Income for the nine months ended December 31, 2024.

E-Finity and Lone Star accounted for 16% and 13% of revenue for the nine months ended December 31, 2024, respectively. E-Finity and Cal Microturbine accounted for 14% and 11% of revenue for the nine months ended December 31, 2023, respectively.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses. Gross profit was $15.8 million, or 27% of

revenue for the nine months ended December 31, 2024, compared to a gross profit of $11.7 million, or 18% of revenue for the nine months ended December 31, 2023. The increase was primarily the result of an increase in product pricing, parts pricing and rental pricing, lower warranty and inventory charges and lower production and service center labor and overhead expense. Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

The following table summarizes our gross profit (in millions except percentages):

Product and accessories gross margin as a percentage of product and accessories revenue increased to (3)% during the nine months ended December 31, 2024, from (8)% during the nine months ended December 31, 2023, primarily due to increased revenue per megawatt in the nine months ended December 31, 2024. Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 49% during the nine months ended December 31, 2024, compared to 43% during the nine months ended December 31, 2023, primarily as a result of increases in parts price, rental price, rental utilization and lower overhead costs in the nine months ended December 31, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $1.9 million during both the nine months ended December 31, 2024 and 2023.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $6.2 million, or 24%, to $19.5 million for the nine months ended December 31, 2024, from $25.7 million for the nine months ended December 31, 2023, primarily due to a $3.4 million reduction of legal and accounting fees for the restatement and restructuring activities and a $1.7 million decrease in stock-based compensation expense.

Interest Expense Interest Expense for the nine months ended December 31, 2024 and 2023 was $3.0 million and $4.6 million, respectively, resulting from the Company’s lower debt level following the December 2023 restructuring.

Liquidity and Capital Resources

Cash Flows

Our cash requirements depend on many factors, including the execution of our business strategy and plan. Ourcash and cash equivalents balance increased $1.2 million during the nine months ended December 31, 2024, primarily due to net cash provided by operating activities, partially offset by cash used in investing and financing activities.

Operating Activities During the nine months ended December 31, 2024, $2.2 million in cash was provided by our operating activities, which consisted of a net loss for the period of $7.1 million, changes in operating assets and liabilities of $0.7 million and offset by non-cash adjustments of $10.0 million. For the nine months ended December 31, 2023, $22.1 million in cash was used in operating activities, which consisted of net income of $12.7 million, non-cash adjustments of $9.4 million, offset by $35.3 million in non-cash reorganization items and $8.7 million change in operating assets and liabilities. Non-cash charges consist of primarily of depreciation and amortization, non-cash lease expenses and paid-in-kind (“PIK”) interest, and stock-based compensation.

The following is a summary of the significant sources (uses) of cash from operating activities (in thousands):

The change in non-cash operating activities during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, was primarily due to a decrease in non-cash reorganization expenses of $35.3 million.

The $4.3 million of cash provided from inventory during the nine months ended December 31, 2024, was the result of improved supply chain management from reduced lead times for parts and the sale of rental equipment returned to inventory, compared to the $6.6 million of cash provided from inventory during the nine months ended December 31, 2023, primarily due to the reduction in finished goods inventory levels. The change in accounts receivable was primarily the result of reduced revenue and collections during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023. The change in effect of payable and accrued expenses was primarily due to establishing a normal payment rate to vendors during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023 when vendor payments were accelerated to be in line with their terms. The change in other operating assets and liabilities during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, was primarily due to the decreases in deferred revenue attributable to customer deposits and the removal of the DSS service fees.

Investing Activities Net cash used in investing activities of $0.8 million and $4.6 million during the nine months ended December 31, 2024 and 2023, respectively, was primarily due to investments in operating and rental fleet assets, respectively.

Financing Activities Net cash used in financing activities during the nine months ended December 31, 2024, was used for repayment of finance lease obligations. The funds generated from financing activities during the nine months ended December 31, 2023 were primarily the result of $12.0 million of funding under the DIP Facility, cash of $3.0 million received from the issuance of additional pre-petition senior secured notes under the A&R Note Purchase Agreement during the second quarter of Fiscal 2024 and $3.0 million of funding under the Exit Facility during the third quarter of Fiscal 2024, partially offset by issuance costs of $0.2 million.

Debt Refer to Note 11— Debt in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our notes.

Lease Commitments Refer to Note 14— Leases in the Notes to Condensed Consolidated Financial Statements for information related to our leases.

Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the nine months ended December 31, 2024, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our financial statements. As of December 31, 2024, we had cash of $3.3 million, and a working capital deficit of $15.6 million. We incurred a net loss of $7.1 million during the nine months ended December 31, 2024.

On September 28, 2023, we filed for a prepackaged financial restructuring with our senior lender, Goldman Sachs under the U.S. Chapter 11 Bankruptcy laws. We emerged from bankruptcy on December 7, 2023, and effected a financial and organizational restructuring. Given its current cash position, lack of liquidity, limits to accessing capital and debt funding options, current economic and market risks, and the continued impact of the Chapter 11 Bankruptcy and the Reorganization on customer and vendor relationships, there is substantial doubt regarding the Company’s ability to continue as a going concern and its ability to meet its financial obligations as they become due over the next twelve months from the date of issuance of the financial statements as of, and for the period ended December 31, 2024.

New Accounting Pronouncements

Refer to Note 3— Recently Issued Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.