~ Achieved record quarterly revenue of $8.9 million
~ Gross margin expanded 5.5 points to 23.9% of sales
~ Operating leverage drove operating income growth to $1.2 million
~ Net income of $1.1 million increased $1.8 million over a net loss in prior-year period
~ Raised third quarter 2016 revenue guidance to over $9.0 million
~ Uplist to OTCQB Venture Market scheduled for August 22, 2016
DEERFIELD BEACH, FL, August 15, 2016 – Capstone Companies, Inc. (OTC: CAPC, CAPCD) (“Capstone” or the “Company”), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the second quarter 2016.
Stewart Wallach, Capstone’s CEO, commented, “Our strong results for the quarter, with record revenue and solid profitability, reflect the great execution of our growth strategy by the Capstone team. Momentum continues to build with a growing number of consumers purchasing and enjoying our products at record levels. The holiday shopping season is our strongest period in the year, and we are expecting third quarter revenue to meet or exceed what we reported today for the second quarter.
“Importantly, we are gaining more traction with our international presence as well. Sales to international markets have increased dramatically in the second quarter and more than quadrupled in the first half of 2016. We will continue to deepen our relationships with both domestic and international retailers, and take advantage of growing momentum to drive further sales growth.”
Revenue growth in the second quarter of 2016 was primarily the result of strong demand for the Company’s battery powered portable lighting products. Products sold under both the Capstone Lighting and Hoover® Home LED brands experienced significantly improved revenue. International sales also contributed to sales growth, with an incremental $489 thousand of revenue.
Increased gross profit was driven by leverage of fixed costs on improved sales volume. Gross margin as a percent of revenue improved significantly over the prior-year period, despite the occurrence of a $0.7 million marketing allowance in the second quarter 2016, which resulted in a 580 basis point negative impact on gross margin. This marketing allowance was related to our 2016 holiday shopping season marketing campaign.
Selling, general and administrative expenses (SG&A) increased to $1.0 million, from $0.7 million in the prior-year period, due to higher revenue. SG&A as a percent of revenue decreased significantly to 10.9%, from 241.8% in the prior-year period, reflecting strong leverage opportunity as sales volume increases. As a result, income from operations improved significantly, from a second quarter 2015 operating loss.
Diluted earnings per share was $0.02 in the second quarter of 2016. The 2015 period’s loss per diluted share of $0.02 reflects the impact of the Company’s 1-for-15 reverse stock split which became effective on July 25, 2015, reducing the weighted average number of shares outstanding in that quarter to 46,439,403, from the pre-reverse-split count of 696,591,051.
Financial results for the first half of 2016 improved significantly over the prior-year period, reflecting the successful introduction of new products and the Hoover Home LED® brand. Increased gross margin as a percent of revenue, operating margin as a percent of revenue and net margin as a percent of revenue reflect the scalability of Capstone’s business model and associated operating leverage.
Mr. Wallach added, “We believe that given the great progress we are making and the strong momentum we have going forward, this was an ideal time to bolster our investor relations strategy. The reverse split that became effective on July 25th and the up-listing to the OTCQB Venture Market planned for August 22nd are important steps toward ensuring that investors are willing to consider Capstone as an investment opportunity. We believe that our story will resonate with a growing number of investors as they discover the great value proposition we offer our customers and the strong financial performance we are able to deliver. This is an exciting time for Capstone, and we are focused on executing both our operational strategy and investor relations strategy for the benefit of all of our shareholders.”
Webcast and Teleconference to Review Results and Outlook
The Company will host a live webcast and conference call on Tuesday, August 16, 2016 at 10:30 a.m. Eastern Time. During the call, management will review the financial and operating results and discuss the Company’s corporate strategy and outlook, followed by a question-and-answer session. The conference call can be accessed by dialing (201) 689-8562. The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.
A telephonic replay will be available from 1:30 p.m. Eastern Time the day of the teleconference until Tuesday, August 23, 2016. To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13640937. Alternatively, the archive of the webcast will be available on the Company’s website at www.capstonecompaniesinc.com. A transcript will also be posted to the website, once available.
About Capstone Companies, Inc.
Capstone Companies, Inc. is a public holding company that engages, through its wholly-owned subsidiaries, Capstone Industries, Inc., Capstone Lighting Technologies, LLC, and Capstone International HK, Ltd., in the development, manufacturing, logistics, and distribution of consumer and institutional products, including the Hoover® HOME LED lighting product line, to accounts throughout North America and in international markets. See www.capstonecompaniesinc.com for more information about the Company and www.capstoneindustries.com for information on our current product offerings.
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