SOURCE: Active Power

Active Power

October 28, 2014 07:30 ET

Active Power Reports Third Quarter 2014 Results

AUSTIN, TX--(Marketwired - Oct 28, 2014) - Active Power (NASDAQ: ACPW) reported results for the third quarter ended September 30, 2014.

Highlights

  • UPS revenue increased $1.9 million from the third quarter of 2013 and $2.2 million from the previous quarter to $8.4 million

  • Americas sales improved $600,000 from the third quarter of 2013 and $3.0 million from the previous quarter to $9.1 million

  • Sales through OEM partner Caterpillar increased 13 percent to $6.0 million in the first nine months ended September 30, 2014, from the same period in 2013

  • Reduced net inventory over two consecutive quarters, down $4.0 million or 31 percent from first quarter of 2014

  • Entered into memorandums of understanding to settle previously disclosed shareholder lawsuits

Q3 2014 Financial Results
Revenue in the third quarter of 2014 was $12.7 million compared to $13.2 million in the year-ago period and $10.2 million in the previous quarter. The increase in revenue from the previous quarter is due to higher product and service sales. The decrease in revenue from the third quarter of 2013 is attributable to lower service revenue associated with a large modular infrastructure solutions (MIS) project versus year-ago results, largely offset by increased product revenue in the 2014 period versus the third quarter of 2013. For the nine months ended September 30, 2014, revenue was $33.8 million compared to $47.8 million in the first nine months of 2013.

Gross margin in the third quarter of 2014 was 29.6% compared to 30.0% in the year-ago period and 18.9% in the previous quarter. The increase in gross margin from the previous quarter is primarily related to improved product margins driven by higher overhead absorption in the factory and favorable mix of sales of higher margin products and services. For the nine months ended September 30, 2014, gross margin was 25.5% compared to 31.9% in the first nine months of 2013.

Operating expenses in the third quarter of 2014 were $5.9 million compared to $6.9 million in the year-ago period and $6.2 million in the previous quarter. The decrease in operating expenses from the previous quarter was largely due to improved expense control. The decrease from the third quarter of 2013 is largely due to lower bad debt expense and product development cost. For the nine months ended September 30, 2014, operating expenses were $18.7 million compared to $19.0 million in the first nine months of 2013.

Net loss in the third quarter of 2014 was $2.5 million or $(0.11) per share compared to net loss of $3.1 million or $(0.16) in the year-ago period and a net loss of $4.4 million or $(0.19) per share in the previous quarter. The decrease in net loss from the previous quarter is primarily due to higher revenue, improved gross margin, and operating expense control. The lower net loss versus the third quarter of 2013 is due to lower operating expenses compared to year-ago results.

An income tax expense of approximately $0.3 million was recorded in the third quarter of 2014 in settlement of a tax examination of the company's German subsidiary for the years 2007 through 2011. For the nine months ended September 30, 2014, net loss was $10.8 million compared to a net loss of $4.2 million in the first nine months of 2013.

Adjusted EBITDA in the third quarter of 2014 was a negative $1.8 million compared to a negative $2.3 million in the year-ago period and a negative $3.8 million in the previous quarter. The improvement in adjusted EBITDA from both periods is primarily due to lower net losses in the third quarter of 2014. For the nine months ended September 30, 2014, adjusted EBITDA was a negative $8.8 million compared to a negative $2.1 million in the first nine months of 2013.

Cash and cash equivalents totaled $13.8 million at September 30, 2014. This compares to cash and cash equivalents of $12.3 million at December, 31, 2013, and $14.3 million at September 30, 2013.

Bookings and Backlog
Bookings in the third quarter of 2014 were $13.6 million compared to bookings of $12.6 million in the year-ago period and $16.0 million in the previous quarter. On a cumulative year to date basis through September 30, 2014, we have booked $43.5 million in orders resulting in a book to bill ratio of 1.29. The dollar amount of backlog believed to be firm was approximately $24.4 million at September 30, 2014. Of the total backlog, approximately $5.8 million, primarily associated with long-term service contracts, is not expected to be filled in the following 12 months. Backlog represents anticipated revenue from unfulfilled product orders and from service work not yet performed under signed contracts. Please refer to the Supplemental Information following the Condensed Consolidated Balance Sheets for more detail regarding bookings.

Management Commentary
"Our UPS sales improved 27 percent in the first nine months of 2014 compared to the same period in 2013," said Mark A. Ascolese, president and CEO, for Active Power. "We believe this increase is due in part to the deployment of a more technically oriented sales organization, sales of our CleanSource HD UPS product, and an increase in sales via our OEM channel. Our bookings again exceeded shipments for the third consecutive quarter. Our efforts to increase productivity are also yielding results as we reduced net inventory by 31 percent over two consecutive quarters from first quarter of 2014, which is favorably impacting our cash flow."

"With improving revenue performance and an opportunities pipeline that continues to grow, we believe we will exit 2014 in a better position than when we entered the year from both a revenue and backlog standpoint. As we enter 2015, our key priorities will remain in place -- generating increased bookings, leveraging products we have in place to grow the business, and positioning Active Power as a mission critical and energy storage company."

Conference Call and Webcast
Active Power will host a conference call today, Tuesday, October 28, 2014, at 8:30 a.m. (ET) to discuss its third quarter 2014 results. Interested parties can dial into the conference call at the time of the event at (888) 438-5524. For callers outside the U.S. and Canada, please dial (719) 325-2452.

For parties wanting to listen live via the web, a webcast button is located on Active Power's investor relations website at http://ir.activepower.com. A replay of the webcast will be available via Active Power's investor relations website.

About Active Power
Founded in 1992, Active Power (NASDAQ: ACPW) is a global leader in flywheel energy and power technology for mission critical applications. The company's products and solutions are unique because of its patented flywheel and power electronics technology that delivers critical power to leading innovators across multiple industries. The combined benefits of its products' power density, reliability, and total cost of ownership are unmatched in the market. 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.

Non-GAAP Financial Measure
This press release includes information about adjusted EBITDA, which is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles. At the end of the following tables, under Adjusted EBITDA, Active Power has provided a reconciliation of historical adjusted EBITDA to GAAP net loss, the most directly comparable GAAP financial measure, under the heading "Adjusted EBITDA." Active Power encourages investors to review this reconciliation in conjunction with our presentation of adjusted EBITDA. See "About Presentation of Adjusted EBITDA" in the following tables for our definition of adjusted EBITDA and for an important discussion about the use of this metric.

Cautionary Note Regarding Forward-Looking Statements
Statements in this press release that relate to future results and events (including statements about our efforts to increase productivity yielding results; growing the opportunities pipeline; exiting 2014 in a better position than when we entered the year; our future financial and operating performance; leveraging products we have in place to grow the business; increasing bookings and improving backlog; improving cash flow; and positioning the organization as a mission critical energy storage company) are forward-looking statements based on Active Power's current expectations. Actual results and the outcomes of future events may differ materially from those expressed or implied by these forward-looking statements because of a number of risks and uncertainties, including: our history of significant operating losses; our increased emphasis on larger and more complex system solutions and customer concentration; the possibility backlog may not result in revenue; the deferral or cancellation of sales commitments as a result of general economic conditions or uncertainty; financial results that may vary significantly from quarter to quarter; an increase in sales of our MIS products may materially increase the amount of working capital required to fund our operations; risks related to our international operations; our dependence on our relationships with Caterpillar, Hewlett Packard, other original equipment manufacturers (OEM), other strategic IT partners, and on our distributors; product performance and quality issues; our underutilized manufacturing capacity and lack of experience manufacturing our products in large quantities; the level of acceptance of our current and future products in the market; significant competition; intellectual property claims; pending legal matters that have increased our costs and could result in fines and penalties; and our continued ability to borrow under our credit agreement or raise capital as needed to support the business.

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, 2013, 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  
(in thousands, except per share amounts; unaudited)  
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2014     2013     2014     2013  
                                 
                                 
Revenues:                                
  Product revenue   $ 9,729     $ 8,023     $ 24,670     $ 34,858  
  Service and other revenue     2,963       5,131       9,114       12,915  
    Total revenue     12,692       13,154       33,784       47,773  
                                 
Cost of goods sold:                                
  Cost of product revenue     7,490       6,784       19,747       25,373  
  Cost of service and other revenue     1,442       2,426       5,434       7,180  
    Total cost of goods sold     8,932       9,210       25,181       32,553  
Gross profit     3,760       3,944       8,603       15,220  
                                 
Operating expenses:                                
  Research and development     1,516       2,149       5,196       5,580  
  Selling and marketing     2,891       2,714       8,931       8,684  
  General and administrative     1,455       2,046       4,530       4,759  
    Total operating expenses     5,862       6,909       18,657       19,023  
Loss from Operations     (2,102 )     (2,965 )     (10,054 )     (3,803 )
                                 
Interest expense, net     (94 )     (118 )     (301 )     (282 )
Other income (expense), net     (42 )     (52 )     (170 )     (139 )
                                 
Loss before income taxes     (2,238 )     (3,135 )     (10,525 )     (4,224 )
Income tax expense     (258 )     -       (258 )     -  
Net loss   $ (2,496 )   $ (3,135 )   $ (10,783 )   $ (4,224 )
                                 
Net loss per share, basic and diluted   $ (0.11 )   $ (0.16 )   $ (0.48 )   $ (0.22 )
                                 
Shares used in computing net loss per share, basic and diluted     23,124       19,337       22,271       19,188  
                                 
                                 
   
Active Power, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands, except par value)  
       
    September 30, 2014     December 31, 2013  
    (unaudited)        
                 
                 
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 13,804     $ 12,261  
  Restricted cash     42       520  
  Accounts receivable, net of allowance for doubtful accounts of $217 and $313 at September 30, 2014 and December 31, 2013, respectively     11,186       9,075  
  Inventories, net     8,964       12,020  
  Prepaid expenses and other     715       680  
    Total current assets     34,711       34,556  
Property and equipment, net     2,333       3,056  
Deposits and other     297       295  
    Total assets   $ 37,341     $ 37,907  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 2,476     $ 2,993  
  Accrued expenses     4,119       5,583  
  Deferred revenue     3,590       2,749  
  Revolving line of credit     5,535       5,535  
    Total current liabilities     15,720       16,860  
Long-term liabilities     852       741  
Stockholders' equity                
  Preferred stock - $0.001 par value; 2,000 shares authorized     -       -  
  Common stock - $0.001 par value; 40,000 and 30,000 shares authorized; 23,160 and 19,452 shares issued and 23,091 and 19,388 shared outstanding at September 30, 2014 and December 31, 2013, respectively     23       19  
  Treasury stock     (229 )     (215 )
  Additional paid-in capital     302,325       290,964  
  Accumulated deficit     (281,951 )     (271,168 )
  Other accumulated comprehensive income     601       706  
    Total stockholders' equity     20,769       20,306  
    Total liabilities and stockholders' equity   $ 37,341     $ 37,907  
                 
                 
 
Active Power, Inc.
Supplemental Information (in thousands)
                                                   
Revenue by Product   Three Months Ended     Nine Months Ended  
 
 
 
 
September 30, 2014  
 
 % of total  
 
 
 
September 30, 2013  
 
 % of total  
 
 
 
June 30, 2014  
 
% of total  
 
 
 
September 30, 2014  
 
 % of total  
 
 
 
September 30, 2013  
 
 % of total  
 
                                                             
UPS   $ 8,383   66 %   $ 6,495   49 %   $ 6,159   61 %   $ 21,178   63 %   $ 16,731   35 %
MIS     1,346   11 %     1,528   12 %     1,325   13 %     3,492   10 %     18,127   38 %
  Total Product Revenue     9,729   77 %     8,023   61 %     7,484   74 %     24,670   73 %     34,858   73 %
Service     2,963   23 %     5,131   39 %     2,670   26 %     9,114   27 %     12,915   27 %
  Total Revenue   $ 12,692   100 %   $ 13,154   100 %   $ 10,154   100 %   $ 33,784   100 %   $ 47,773   100 %
                                                             
Revenue by Geography                                                            
                                                             
Americas   $ 9,124   72 %   $ 8,522   65 %   $ 6,078   60 %   $ 23,106   68 %   $ 39,087   82 %
EMEA     2,920   23 %     1,718   13 %     3,513   35 %     8,581   25 %     5,493   11 %
Asia     648   5 %     2,914   22 %     563   6 %     2,097   6 %     3,193   7 %
  Total Revenue   $ 12,692   100 %   $ 13,154   100 %   $ 10,154   100 %   $ 33,784   100 %   $ 47,773   100 %
                                                             
                                                             
                         
Active Power, Inc.
Supplemental Information (in thousands)
                         
Total Bookings   Three Months Ended   Nine Months Ended
    September 30, 2013   December 31, 2013   March 31, 2014   June 30, 2014   September 30, 2014   September 30, 2014
                                     
Bookings   $ 12,626   $ 13,046   $ 13,918   $ 15,963   $ 13,580   $ 43,461
Book to Bill Ratio     0.96     0.94     1.27     1.57     1.07     1.29
                                     
                                     
                     
Adjusted EBITDA  
(in thousands)  
                     
  Three Months Ended   Nine Months Ended  
  September 30, 2014   September 30, 2013   June 30, 2014   September 30, 2014   September 30, 2013  
                               
                               
Net loss $ (2,496 ) $ (3,135 ) $ (4,413 ) $ (10,783 ) $ (4,224 )
  Interest Expense   94     118     106     301     282  
  Depreciation Expense   304     245     306     925     804  
  Stock Based Compensation   247     388     219     798     916  
  Impairment of Long-Lived Assets   4     132     (19 )   (15 )   102  
Adjusted EBITDA $ (1,847 ) $ (2,252 ) $ (3,801 ) $ (8,774 ) $ (2,120 )
                               
                               

About Presentation 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.