Active Power's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Active Power, Inc. ( ACPW)

Q4 2011 Earnings Call

February 14, 2012 4:30 am ET

Executives

Jan H. Lindelow – Interim President and Chief Executive Officer

John K. Penver – Chief Financial Officer and Vice President, Finance

Analysts

Walter Nasdeo – Ardour Capital Investments LLC

Shawn E. Lockman – Piper Jaffray, Inc.

Presentation

Operator

Good afternoon, everyone. Thank you, for participating in today’s conference call to discuss Active Power’s Financial Results for the Fourth Quarter and our Year Ended December 31, 2011.

With us today is Mr. Jan Lindelow, Interim 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’d 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 first quarter of 2012, its future operating results, and its customers’ current intentions.

Any forward-looking statements and all other statements that may be made during this call are not historical facts are subject to a matter 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 these forward-looking statements, please refer to Active Power’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2010 and its current reports on Form 8-K filed since then.

Active Power assumes no obligation to update forward-looking statements or information, which are in effect as of their respective dates. I’d like to remind everyone that this call will be available for replay via Active Power’s website at www.activepower.com.

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

Jan H. Lindelow

Thank you. Good afternoon and thank you for joining us today. A moment ago, we issued a press release announcing our fourth quarter and full year results for 2011.

Before we discuss these results, I will share some observations of the business in the market and why I’m optimistic about 2012. Active Power has a passionate executive team and a dedicated employee base that demonstrates whatever it takes out to meet customer needs and to propel the business forward.

In 2011, we saw a global demand for our products and solutions as evidenced by the revenue increases we recorded across all regions and all channels, particularly our IT channels.

We see this momentum continuing in 2012, having already received orders from more than a 140 flywheels for delivery this year. This is very positive for our UPS business. We can contribute much of this demand to the growth we are seeing in the data center and power infrastructure markets, which makes me optimistic for the foreseeable future.

The inherent benefits of our products and solutions continued to resonate with clients. Most also agreed that energy is the fastest growing cost in the data center, including Gartner, who forecasted energy cost would be more than 20% of all data center expenses in five years compared to 12% at present.

From a global perspective, the U.K. data center market for example is anticipated to be one of the world’s largest 25% growth in data center investments to $3 billion during 2011 and’12. These investments would be made in new construction and facility expansion projects according to a recent report from Datacenter Dynamics research. This trend aligns well with what we are seeing and reflected in the 47% increase in sales we achieved in 2011.

Datacenter growth isn’t limited to the U.K. In China, for example, the government plans to invest more than $300 billion in IT and associated infrastructure over the next five years. In fact, the [country’s] cloud computing market is anticipated to grow 30% in 2012 according to IDC.

In Europe, research firm BroadGroup suggested in a recent report that [key seven] markets in Central and Eastern Europe are now perceived as growth areas for datacenters. With the dedicated sales resources in this region, we anticipate increased sales activity and order generation for Active Power.

And in the U.S., we continue to see an increase in demand for both our UPS and continuous power solutions, as reflected in several large orders deriving from co-location customers, one of our key market segments. In fact, the market for co-location datacenters is anticipated to increase nearly 70% between now and 2015 according to a recent report from the [Maritz Research].

And containerized datacenter market is also anticipated to grow according to IDC. The research firm estimates a 50% increase in number of modular units deployed from 2011 to 2012. This is consistent with that we are seeing from HP, a strong increase in containerized datacenter product sales, which in turn drives sales of our continuous power and infrastructure solutions.

In summary, we believe Active Power is well positioned in the market. We will continue to take market share with our consultative approach and a set of products and solutions directly addressing the business and IT challenges that mission critical operators face on a daily basis.

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