SOURCE: Active Power

Active Power

November 18, 2013 16:39 ET

Active Power Reports Third Quarter 2013 Results

AUSTIN, TX--(Marketwired - Nov 18, 2013) - Active Power (NASDAQ: ACPW), manufacturer of uninterruptible power supply (UPS) systems and modular infrastructure solutions (MIS), reported results for the third quarter ended Sept. 30, 2013.

Q3 2013 Highlights

  • UPS sales increased $3.7 million to $6.5 million compared to the previous quarter, but decreased $8.3 million compared to the third quarter of 2012.

  • Service revenue increased $321,000 to $5.1 million compared to the previous quarter and increased $2.2 million or 73% compared to the third quarter of 2012.

  • Gross margin decreased to 30.0% compared to 34.3% in the previous quarter, but improved compared to 28.6% in the third quarter of 2012.

  • Deployed second set of two PowerHouse™ systems to support expansion of two modular data centers for global manufacturer of oil and gas drilling products, now totaling nearly three megawatts of power infrastructure installed onsite.

  • Shipped multiple CleanSource® UPS systems totaling more than three megawatts of total rated UPS capacity to one of the largest pharmaceutical companies in the world to support their new drug manufacturing facility in the eastern U.S.

  • Appointed Mark A. Ascolese as company's new president and CEO, bringing to the company extensive experience serving a variety of mission critical markets including the energy storage and data center markets.

Restatement
On November 4, 2013, the audit committee of the board of directors of Active Power concluded, in consultation with management and after discussion with the company's independent registered public accounting firm, that the company would restate its quarterly interim financial statements for the periods ending March 31, 2013, and June 30, 2013. For information regarding the restatement, please refer to the company's Form 8-K filed on November 7, 2013, and the company's amended quarterly reports on Form 10-Q/As for the periods ending March 31, 2013, and June 30, 2013, filed on November 18, 2013, with the Securities and Exchange Commission.

Financial Results
Revenue in the third quarter of 2013 was $13.2 million compared to $20.2 million in the previous quarter and $19.6 million in the third quarter of 2012. The sequential decrease was due primarily to lower MIS revenue while the decrease from the year-ago quarter was primarily attributed to a decrease in UPS revenue. For the first nine months ended Sept. 30, 2013, revenue totaled $47.8 million compared to $61.1 million in the same period in 2012.

Gross margin in the third quarter of 2013 was 30.0% compared to 34.3% in the previous quarter and 28.6% in the third quarter of 2012. The sequential decrease in gross margin was due to higher margin shipments of MIS products in the second quarter of 2013. The increase in gross margin from the year-ago quarter was primarily due to higher service sales in the third quarter of 2013 compared to the third quarter of 2012. For the nine months ended Sept. 30, 2013, gross margin was 31.9% compared to 30.6% in the same period in 2012.

Net loss in the third quarter of 2013 was $3.1 million or $(0.16) per share, compared to a net income of $0.3 million or $0.02 per share in the previous quarter and net loss of $0.8 million or $(0.04) per share in the third quarter of 2012. The change from net income to net loss from the previous quarter and the increase in net loss from the third quarter of 2012 was primarily due to the impact of lower revenue in the quarter compared to the two comparable quarters. For the nine months ended Sept. 30, 2013, net loss was $4.2 million or $(0.22) per share, compared to a net loss of $1.5 million or $(0.08) per share in the same period in 2012.

Adjusted EBITDA for the third quarter of 2013 was a negative $2.3 million compared to a positive $1.1 million in the previous quarter and a negative $0.1 million in the third quarter of 2012. For the nine months ended Sept. 30, 2013, adjusted EBITDA was a negative $2.1 million compared to a positive $0.9 million in the same period in 2012. The adjusted EBITDA decrease in the periods is primarily due to lower revenue and higher depreciation expense. See "About Presentation of Adjusted EBITDA" below for the definition of adjusted EBITDA, a non-GAAP financial metric, and an important discussion about the use of this metric and its reconciliation to GAAP net income, the most directly comparable GAAP financial measure.

Cash and cash equivalents were $14.3 million at Sept. 30, 2013, compared to $14.5 million in the previous quarter and $13.5 million at Dec. 31, 2012.

Management Commentary
"The third quarter was challenging with overall product revenues down compared to the third quarter of 2012," said Mark A. Ascolese, president and CEO of Active Power. "However, our service business continued to grow and improved 73 percent or by $2.2 million compared to the same period in 2012."

"As we exit the year and enter 2014, we will focus on driving more consistent performance and predictability throughout the business through the addition of our CSHD product line and sales performance management. We will also leverage and enhance the unique flywheel technology we have in place to grow product revenue and expand into new and relevant markets where our products can immediately solve customers' problems."

Change to Guidance Practice
Active Power does not plan to provide quarterly or annual guidance due to continued variability in the business. However, the company plans to continue to provide commentary on industry trends that affect its business and impact its growth prospects.

Conference Call and Webcast
Active Power will host a conference call today, Monday, Nov. 18, 2013, at 5:00 p.m. (ET) to discuss its third quarter 2013 results. Interested parties can dial into the conference call at the time of the event at (888) 427-9411. For callers outside the U.S. and Canada, please dial (719) 325-2429.

To listen to the live webcast, click here. A replay of the webcast will be available via Active Power's investor relations website at http://ir.activepower.com.

About Active Power
Founded in 1992, Active Power (NASDAQ: ACPW) designs and manufactures uninterruptible power supply (UPS) systems and modular infrastructure solutions that enable data centers and other mission critical operations to remain 'on' 24 hours a day, seven days a week. The combined benefits of its products' power density, reliability, and total cost of ownership are unmatched in the market and enable the world's leading companies to achieve their most forward thinking data center designs. The company's products and solutions are built with pride in Austin, Texas, at a state-of-the-art, ISO 9001:2008 registered manufacturing and test facility. Global customers are served via Austin and three regional operations centers located in the United Kingdom, Germany, and China, that support the deployment of systems in more than 50 countries. For more information, visit www.activepower.com.

Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements that involve risks and uncertainties, including statements relating to focus on driving more consistent performance and predictability throughout the business; and plans to leverage and enhance the unique flywheel technology we have in place to grow product revenue and expand into new and relevant markets.

Such forward-looking statements and all other statements that may be made in this news release that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. Factors that could cause the actual results to differ materially from the results predicted include, among others, our dependence on our relationships with Hewlett Packard, Caterpillar, other original equipment manufacturers (OEM), other strategic IT partners, and on our distributors; our increased emphasis on larger and more complex system solutions; the success of our product development efforts and our ability to manufacture and deliver products in a timely manner; the level of acceptance of our current and future products in the market; the deferral or cancellation of sales commitments as a result of general economic conditions or uncertainty; risks related to our international operations; and product performance and quality issues.

For more information on the risk factors that could cause actual results to differ from these forward looking statements, please refer to Active Power filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2012, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K filed since then. Active Power assumes no obligation to update any forward-looking statements or information which are in effect as of their respective dates.

   
Active Power, Inc.  
Condensed Consolidated Statement of Operations and Comprehensive Loss  
(in thousands, except per share amounts; unaudited)  
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2013     2012     2013     2012  
                                 
                                 
Revenues:                                
  Product revenue   $ 8,023     $ 16,647     $ 34,858     $ 50,534  
  Service and other revenue     5,131     $ 2,964       12,915       10,534  
    Total revenue     13,154       19,611       47,773       61,068  
                                 
Cost of goods sold:                                
  Cost of product revenue     6,784       12,254       25,373       35,608  
  Cost of service and other revenue     2,426       1,742       7,180       6,766  
    Total cost of goods sold     9,210       13,996       32,553       42,374  
Gross profit     3,944       5,615       15,220       18,694  
                                 
Operating expenses:                                
  Research and development     2,149       1,325       5,580       4,045  
  Selling and marketing     2,714       3,447       8,684       10,891  
  General and administrative     2,046       1,691       4,759       5,175  
    Total operating expenses     6,909       6,463       19,023       20,111  
Income (Loss) from Operations     (2,965 )     (848 )     (3,803 )     (1,417 )
                                 
Interest expense, net     (118 )     (80 )     (282 )     (246 )
Other income (expense), net     (52 )     81       (139 )     159  
                                 
Net Income (Loss)   $ (3,135 )   $ (847 )   $ (4,224 )   $ (1,504 )
Net Income (Loss) per share, basic   $ (0.16 )   $ (0.04 )   $ (0.22 )   $ (0.08 )
                                 
Shares used in computing net loss per share, basic     19,337       19,115       19,188       18,399  
                                 
Comprehensive loss:                                
  Net Loss   $ (3,135 )   $ (847 )   $ (4,224 )   $ (1,504 )
  Translation gain (loss) on subisidiaries denominated in foreign currencies     238       211       39       (99 )
Comprehensive loss:   $ (2,897 )   $ (636 )   $ (4,185 )   $ (1,603 )
                                 
                                 
                                 
Active Power, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
   
    September 30, 2013     December 31, 2012  
    (unaudited)        
                 
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 14,252     $ 13,524  
  Restricted cash     511       -  
  Accounts receivable, net of allowance for doubtful accounts of $838 and $488 at September 30, 2013 and December 31, 2012, respectively     8,713       17,862  
  Inventories, net     13,244       11,079  
  Prepaid expenses and other     2,390       567  
    Total current assets   $ 39,110     $ 43,032  
Property and equipment, net     2,859       2,458  
Deposits and other     294       309  
    Total assets   $ 42,263     $ 45,799  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 4,461     $ 4,036  
  Accrued expenses     5,134       4,948  
  Deferred revenue     3,064       4,568  
  Revolving line of credit     5,535       5,535  
    Total current liabilities   $ 18,194     $ 19,087  
Long-term liabilities     737       713  
Stockholders' equity                
  Preferred stock - $0.001 par value; 2,000 shares authorized     -       -  
  Common stock - $0.001 par value; 30,000 shares authorized; 19,421 and 19,171 issued and 19,362 and 19,125 outstanding at September 30, 2013 and December 31, 2012, respectively     19       19  
  Treasury stock     (200 )     (144 )
  Additional paid-in capital     290,193       288,619  
  Accumulated deficit     (267,041 )     (262,817 )
  Other accumulated comprehensive income     361       322  
    Total stockholders' equity     23,332       25,999  
    Total liabilities and stockholders' equity   $ 42,263     $ 45,799  
                     
                     
                     
Active Power, Inc.  
Supplemental Information  
                                         
Revenue by Product   3 Months Ended     9 Months Ended  
    September 30,     September 30,  
    2013   % of total     2012   % of total     2013   % of total     2012   % of total  
UPS   $ 6,495   49 %   $ 14,783   75 %   $ 16,731   35 %   $ 28,551   47 %
MIS     1,528   12 %     1,864   10 %     18,127   38 %     21,983   36 %
  Total Product Revenue     8,023   61 %     16,647   85 %     34,858   73 %     50,534   83 %
Service     5,131   39 %     2,964   15 %     12,915   27 %     10,534   17 %
  Total Revenue   $ 13,154   100 %   $ 19,611   100 %   $ 47,773   100 %   $ 61,068   100 %
                                                 
Revenue by Geography                                                
                                                 
Americas   $ 8,522   65 %   $ 7,973   41 %   $ 39,087   82 %   $ 36,557   60 %
Asia     2,914   22 %     2,177   11 %     3,193   7 %     4,931   8 %
EMEA     1,718   13 %     9,461   48 %     5,493   11 %     19,580   32 %
  Total Revenue   $ 13,154   100 %   $ 19,611   100 %   $ 47,773   100 %   $ 61,068   100 %
                                                 
                                                 
                                                 
Adjusted EBITDA  
(Thousands)  
                         
    Three     Nine  
    Months Ended     Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
Net Income (Loss)   $ (3,135 )   $ (847 )   $ (4,224 )   $ (1,504 )
  Interest Expense     118       80       282       246  
  Depreciation Expense     245       308       804       955  
  Stock Based Compensation     388       358       916       1,131  
  Impairment of Long-Lived Assets     132       4       102       31  
Adjusted EBITDA   $ (2,252 )   $ (97 )   $ (2,120 )   $ 859  
                                 
                                 
                                 

About Presentation of Adjusted EBITDA
Beginning with the reporting of results for the fourth quarter of 2012, the company began to report the measure of adjusted EBITDA. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines adjusted EBITDA as net loss before impairment of long-lived assets, depreciation, interest, and non-cash stock based compensation. Other companies (including competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because management believes it is to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Active Power Inc. nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of the company's results as reported under GAAP.

SOURCE: Active Power, Inc.