Active Power CEO Discusses Q3 2010 Results - Earnings Call Transcript

Active Power CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Active Power, Inc. (

ACPW

)

Q3 2010 Earnings Call Transcript

October 26, 2010 11:00 am ET

Executives

Jim Clishem – President and CEO

John Penver – VP, Finance and CFO

Analysts

Michael Legg – Merriman Capital

Dilip Warrier – Stifel Nicolaus

Matthew Crews – Noble Financial

Walter Nasdeo – Ardour Capital

Presentation

Operator

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Previous Statements by ACPW
» Active Power, Inc. Q2 2010 Earnings Call Transcript
» Active Power Inc. Q1 2010 Earnings Call Transcript
» Active Power Inc. Q4 2009 Earnings Call Transcript
» Active Power Inc. Q3 2009 Earnings Call Transcript

Good morning, everyone. Thank you for participating in today’s conference call to discuss Active Power’s financial results for the third quarter ended September 30

th

, 2010. With us today is Mr. Jim Clishem, President and Chief Executive Officer of Active Power; and Mr. John Penver, the company’s Chief Financial Officer. Following their remarks, we will open up the call for questions.

Before I continue, I would like to take a moment to read the company’s Safe Harbor statement. The company’s management on this call may make forward-looking statements that involve risks and uncertainties, including statements relating to Active Power’s current expectations of operating results for the fourth quarter and for fiscal 2010, its future operating results, and its customers’ current intentions.

Any forward-looking statements and all other statements that may be made during this call 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, 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 those 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

st

, 2009 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. I would like to remind everyone that this call will be available for replay online until November 9

th

, 2010 via Active Power’s website at www.activepower.com.

I would now like to turn the call over to the President and Chief Executive Officer of Active Power, Mr. Jim Clishem. Sir, please go ahead.

Jim Clishem

Thank you and good morning to everyone for joining us here today. Earlier today, we issued a press release announcing our third quarter 2010 results. I’m happy to report we achieved record revenues this quarter of $18.5 million; this was a 15% increase over our previous quarter and a 116% increase over the same quarter a year ago.

For the nine months ending September 30

th

, 2010, our revenues totaled a record $45.6 million, increasing 73% over the same period the previous year. In fact, in the first nine months of 2010, our revenues are already 13% more than our total sales for all of 2009. We are well on track for a substantial year-over-year revenue increase in 2010. This significant revenue increase drove several improvements in gross, operating, and net margins across the board. As a result, I’m pleased to announce that Active Power was successful in achieving its first ever net profit of $55,000 in its 18-year history.

This major milestone was accomplished through a great deal of hard work and very focused execution strategy to build a profitable business serving mission-critical clients. While the profit was small in the sense of what we look forward to generating in future quarters, this is nonetheless an important first step in our long-term plan.

Along with this significant achievement, it’s important to acknowledge that we also achieved record EBITDA of $826,000 or 4% of revenues. I believe it’s also worth mentioning here a few other highlights from the quarter to provide additional color on our results. We shipped 97 flywheels in UPS systems at an average selling price of $88,000 per unit, a $10,000 increase in our average selling price versus the same quarter a year ago.

We also achieved 7.4 million in revenue from the sale of continuous infrastructure solutions. We recorded 30% gross margins. We generated $31,000 in operating income compared to an operating loss of $3 million in the same quarter of 2009.

We received a large number of orders since the beginning of the third quarter, 77% of which came from existing clients and 23% from new clients, a very nice mix indicating both significant new customer adoption and recurring client satisfaction.

Now, I’d like to turn the call over to our Chief Financial Officer, John Penver, who will take us through the financial details for the quarter. I will then come back to discuss some of the market trends we’re currently seeing, why we continue to win in the marketplace, and to further articulate our strategy to grow revenue and profitability moving ahead. We’ll then open the call to your questions. John?

John Penver

Thank you, Jim. Good morning everyone. Thank you for joining us on the call today. As Jim mentioned, our revenue for the third quarter was a record $18.5 million, increasing sequentially by 15% and by 116% over the same quarter a year ago.

On a year-to-date basis and through the first nine months, our revenues were $45.6 million, which is 73% higher than the 26.3 million we had in the first nine months of 2009. We view this as substantial revenue growth under either measure. Revenue this quarter was favorably impacted by $7.4 million of revenue from containerized data center infrastructure that we manufactured for one of our IT partners. This enabled our partner to sell modularized data centers to their customers.

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