8-K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
October 27, 2015 
Active Power, Inc.
(Exact name of registrant as specified in its charter) 
Delaware
000-30939
74-2961657
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
2128 W. Braker Lane, BK 12, Austin, Texas
 
78758
(Address of principal executive offices)
 
(Zip Code)

(512) 836-6464
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02.
Results of Operations and Financial Condition.
On October 27, 2015, Active Power, Inc. issued a press release reporting its financial results for its fiscal quarter ended September 30, 2015.  A copy of the press release is furnished as Exhibit 99.1 and incorporated into this Item 2.02 by reference.

Item 9.01.
Financial Statements and Exhibits.

(d)
Exhibits.
Exhibit No.
Description
99.1
Press Release of Active Power, Inc. dated October 27, 2015.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
ACTIVE POWER, INC.
 
 
Date:  October 27, 2015
By: /s/ James A. Powers
 
James A. Powers
 
Chief Financial Officer and Vice President of Finance






EXHIBIT INDEX
 
Exhibit No.
Description
99.1
Press Release of Active Power, Inc. dated October 27, 2015.



Exhibit

Active Power Reports Third Quarter 2015 Results

Backlog Improves 45% Year-over-Year

AUSTIN, Texas (Oct. 27, 2015) - Active Power, Inc. (NASDAQ: ACPW), a manufacturer of flywheel technology solutions for mission critical and renewable applications worldwide, reported results for the third quarter and nine months ended Sept. 30, 2015.

Highlights
Total revenue increased 17% to $14.9 million in the third quarter of 2015 from $12.7 million in the third quarter of 2014, and grew 33% to $44.9 million for the first nine months ended Sept. 30, 2015, compared to $33.8 million in the first nine months of 2014

Bookings increased 25% to $17.0 million in the third quarter of 2015 from $13.6 million in the third quarter of 2014, and grew by 23% to $53.5 million for the first nine months ended Sept. 30, 2015, compared to $43.4 million in the first nine months of 2014

Increased bookings included large CleanSource® HD uninterruptible power supply (UPS) orders to be shipped over the next several quarters, including two multimillion dollar orders from one of the world’s largest online services providers

Book-to-bill ratio of 1.14 for the third quarter of 2015 marked seven consecutive quarters above 1.0





Backlog improved 45% or $11 million to $35.4 million at Sept. 30, 2015, compared to $24.4 million at Sept. 30, 2014

Gross margin was 31% for the first nine months ended Sept. 30, 2015, compared to 25% in the first nine months of 2014

Reduced net loss to $3.6 million in the first nine months ended Sept. 30, 2015, compared to a net loss of $10.8 million in the first nine months of 2014

Improved Adjusted EBITDA to a loss of $1.5 million in the first nine months ended Sept. 30, 2015, compared to a loss of $8.8 million in the first nine months of 2014

Management Commentary
“Our business is in a far healthier position now as compared to the same period in 2014 with strong bookings and backlog growth year-to-date and operating expenses continuing to trend down,” said Mark A. Ascolese, president and CEO, of Active Power.
“We remain focused on increasing bookings and backlog, operational excellence, and prudent cash management as we invest in targeted growth initiatives amid supportive trends, driving the need for optimized energy storage and power conditioning technologies. These priorities, coupled with an expanding opportunities pipeline and a highly differentiated product set, position the company for meaningful and sustainable long-term top and bottom line growth.”

Financial Results
Revenue in the third quarter of 2015 was $14.9 million, an increase of $2.2 million or 17% compared to $12.7 million in the year-ago period. The increase in revenue from the year-ago quarter was driven by higher modular infrastructure solutions (MIS) and service sales in the third quarter of 2015 and strength in the Americas, partially offset by slight weakness in the EMEA region. For the nine months ended Sept. 30, 2015, revenue was $44.9 million, an increase of $11.1 million or 33% compared to $33.8 million in the first nine months of 2014. This increase is primarily attributable to increases in MIS business from the company’s IT channel partner.





Gross margin in the third quarter of 2015 was 26% compared to 30% in the year-ago period. The decrease in gross margin from the year-ago quarter was primarily attributed to an unfavorable mix of lower margin UPS products, MIS mix containing a high proportion of third party content at lower margins, and lower absorption. For the nine months ended Sept. 30, 2015, gross margin was 31% compared to 25% in the first nine months of 2014. This increase was primarily related to a favorable mix of higher margin UPS sales along with higher MIS margins and improvements in manufacturing absorption on increased production.

Operating expenses in the third quarter of 2015 were $5.6 million compared to $5.9 million in the year-ago period, which reflects management’s productivity improvements and disciplined spending initiatives. For the nine months ended Sept. 30, 2015, operating expenses were $17.0 million compared to $18.7 million in the first nine months of 2014. The decreases in operating expenses were primarily due to lower spending on materials and services for product development and lower salary, commissions, and employee benefits, partially offset by increased expense for management incentive plan accruals.

Net loss in the third quarter of 2015 was $1.7 million or $(0.08) per share compared to a net loss of $2.5 million or $(0.11) per share in the year-ago period. The decrease in net loss from the year-ago quarter was due to higher revenue and lower operating expenses in the third quarter of 2015. For the nine months ended Sept. 30, 2015, net loss was $3.6 million or $(0.15) per share compared to a net loss of $10.8 million or $(0.48) per share in the first nine months of 2014. This decrease was due to higher revenue and lower operating expenses.

Adjusted EBITDA in the third quarter of 2015 was a loss of $1.0 million compared to a loss of $1.8 million in the year-ago period. The improvement in Adjusted EBITDA from the third quarter of 2014 was primarily due to increased revenue resulting in a lower net loss in the third quarter of 2015. For the nine months ended Sept. 30, 2015, Adjusted




EBITDA loss was $1.5 million compared to a loss of $8.8 million in the first nine months of 2014. An EBITDA reconciliation is provided below.

Bookings and Backlog
Bookings in the third quarter of 2015 were $17.0 million compared to bookings of $13.6 million in the year-ago period. Third quarter orders of $17.0 million resulted in a book-to-bill ratio of 1.14. On a cumulative year-to-date basis through Sept. 30, 2015, bookings were $53.5 million, resulting in a book-to-bill ratio of 1.20. Backlog was $35.4 million at Sept. 30, 2015, up from $24.4 million at Sept. 30, 2014. Of the total backlog, $6.8 million, primarily associated with long-term service contracts, is not expected to be filled in the following 12 months.

Bookings amounts represent anticipated revenue from product orders received during the period that are believed to be firm and from service contracts. Backlog represents the amount of anticipated revenue from prior bookings at the end of the period. Please refer to the Supplemental Information following the Condensed Consolidated Balance Sheets for more detail regarding bookings.

Conference Call and Webcast
Active Power will host a conference call today, Tuesday, Oct. 27, 2015, at 8:30 a.m. (ET) to discuss its third quarter 2015 results. Interested parties can dial into the conference call at the time of the event at (888) 427-9419. For callers outside the U.S. and Canada, please dial (719) 325-2464.

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
Active Power (NASDAQ: ACPW) designs and manufactures flywheel uninterruptible power supply (UPS) systems, modular infrastructure solutions (MIS), and energy storage products for mission critical and renewable applications worldwide. The




company’s products deliver an unmatched combination of reliability and total cost of ownership for the world’s leading organizations. 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.

Active Power and CleanSource are registered trademarks of Active Power, Inc. Driven by Motion and the Active Power logo are trademarks of Active Power, Inc.

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 (“GAAP”). At the end of the following tables, Active Power has provided a reconciliation of historical Adjusted EBITDA to GAAP net loss, the most directly comparable GAAP financial measure, under the heading “Reconciliation of Net Loss to Adjusted EBITDA.” Active Power encourages investors to review this reconciliation in conjunction with our presentation of Adjusted EBITDA. See “About Presentation of Adjusted EBITDA” at the end of 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
This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by references to future periods, and include statements we make regarding anticipated:

bookings and backlog;
expense control;
cash management;
customer need and demand for our products; and
positioning the company for meaningful and sustainable long-term top and bottom line growth.





Actual results and the outcomes of future events could differ materially from those expressed or implied by these forward-looking statements because of a number of risks and uncertainties, including, but not limited to: 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 due to seasonality and volatility in customer demand; 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, Inc., 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; significant competition; intellectual property claims; 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, 2014, 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.





Media Contact:
Lee Higgins
Senior Manager, PR and IR
(512) 744-9488
lhiggins@activepower.com


Investor Contact:
Jordan Darrow
Darrow Associates
(631) 367-1866
jdarrow@darrowir.com






















Active Power, Inc.
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended September 30,
 
(unaudited)
 
(unaudited)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
  Product revenue
$
11,168

 
$
9,729

 
$
33,621

 
$
24,670

  Service and other revenue
3,744

 
2,963

 
11,275

 
9,114

     Total revenue
14,912

 
12,692

 
44,896

 
33,784

 
 
 
 
 
 
 
 
Cost of goods sold:
 
 
 
 
 
 
 
  Cost of product revenue
8,496

 
7,490

 
24,556

 
19,747

  Cost of service and other revenue
2,492

 
1,442

 
6,611

 
5,434

     Total cost of goods sold
10,988

 
8,932

 
31,167

 
25,181

Gross profit
3,924

 
3,760

 
13,729

 
8,603

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
  Research and development
1,448

 
1,516

 
4,394

 
5,196

  Selling and marketing
2,636

 
2,891

 
8,057

 
8,931

  General and administrative
1,468

 
1,455

 
4,550

 
4,530

     Total operating expenses
5,552

 
5,862

 
17,001

 
18,657

Loss from Operations
(1,628
)
 
(2,102
)
 
(3,272
)
 
(10,054
)
 
 
 
 
 
 
 
 
Interest expense, net
(95
)
 
(94
)
 
(252
)
 
(301
)
Other income (expense), net
(13
)
 
(42
)
 
(29
)
 
(170
)
 
 
 
 
 
 
 
 
Loss before income taxes
(1,736
)
 
(2,238
)
 
(3,553
)
 
(10,525
)
Income tax expense

 
(258
)
 

 
(258
)
Net loss
$
(1,736
)
 
$
(2,496
)
 
$
(3,553
)
 
$
(10,783
)
 
 
 
 
 
 
 
 
Net Loss per share, basic and diluted
$
(0.08
)
 
$
(0.11
)
 
$
(0.15
)
 
$
(0.48
)
 
 
 
 
 
 
 
 
Shares used in computing net loss per share, basic and diluted
23,135

 
23,124

 
23,132

 
22,271











Active Power, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
 
September 30,
2015
 
December 31, 2014
 
 
 
(unaudited)
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
   Cash and cash equivalents
$
10,615

 
$
14,824

   Restricted cash
37

 
40

Accounts receivable, net of allowance for doubtful accounts of $109 and $212 at September 30, 2015 and December 31, 2014, respectively
14,063

 
11,222

   Inventories, net
7,938

 
6,845

   Prepaid expenses and other
438

 
800

     Total current assets
33,091

 
33,731

Property and equipment, net
2,064

 
2,076

Deposits and other
280

 
291

     Total assets
$
35,435

 
$
36,098

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
   Accounts payable
$
5,119

 
$
4,044

   Accrued expenses
4,330

 
4,134

   Deferred revenue
3,678

 
2,771

   Revolving line of credit
5,535

 
5,535

     Total current liabilities
18,662

 
16,484

Long-term liabilities
630

 
821

Commitments and contingencies
 
 
 
Stockholders' equity
 
 
 
   Preferred stock - $0.001 par value; 2,000 shares authorized

 

Common stock - $0.001 par value; 40,000 shares authorized; 23,169 and 23,162 issued and 23,108 and 23,094 outstanding at September 30, 2015 and December 31, 2014, respectively
23

 
23

   Treasury stock
(239
)
 
(231
)
   Additional paid-in capital
303,710

 
302,667

   Accumulated deficit
(287,548
)
 
(283,995
)
   Other accumulated comprehensive income
197

 
329

     Total stockholders' equity
16,143

 
18,793

     Total liabilities and stockholders' equity
$
35,435

 
$
36,098





Active Power, Inc.
Supplemental Information (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Product
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
%
of total
September 30, 2014
%
of total
June 30,
2015
%
of total
 
September 30, 2015
%
of total
September 30, 2014
%
of total
 
 
 
 
 
 
 
 
 
 
 
 
UPS
$
5,528

37
%
$
8,383

66
%
$
8,838

53
%
 
$
21,543

48
%
$
21,178

63
%
MIS
5,640

38
%
1,346

11
%
4,067

24
%
 
$
12,078

27
%
$
3,492

10
%
  Total Product Revenue
11,168

75
%
9,729

77
%
12,905

77
%
 
$
33,621

75
%
$
24,670

73
%
Service
3,744

25
%
2,963

23
%
3,950

23
%
 
$
11,275

25
%
$
9,114

27
%
  Total Revenue
$
14,912

100
%
$
12,692

100
%
$
16,855

100
%
 
$
44,896

100
%
$
33,784

100
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
12,057

81
%
$
9,124

72
%
$
11,582

69
%
 
$
33,502

75
%
$
23,106

68
%
EMEA
1,878

13
%
2,920

23
%
4,991

29
%
 
$
9,893

22
%
$
8,581

25
%
Asia
977

6
%
648

5
%
282

2
%
 
$
1,501

3
%
$
2,097

6
%
  Total Revenue
$
14,912

100
%
$
12,692

100
%
$
16,855

100
%
 
$
44,896

100
%
$
33,784

100
%


Active Power, Inc.
Supplemental Information (in thousands)
 
 
 
 
 
 
 
 
Total Bookings
Three Months Ended
 
Nine Months Ended
 
September 30, 2014
December 31, 2014
March 31, 2015
June 30, 2015
September 30, 2015
 
September 30, 2015
 
 
 
 
 
 
 
 
Bookings
$
13,580

$
18,500

$
19,171

$
17,322

$
16,992

 
$
53,485

Book to Bill Ratio
1.07

1.21

1.46

1.03

1.14

 
1.20






Reconciliation of Net Loss to Adjusted EBITDA
(Thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
June 30, 2015
 
September 30, 2015
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
Net Loss
$
(1,736
)
 
$
(2,496
)
 
$
(258
)
 
$
(3,553
)
 
$
(10,783
)
   Interest Expense
95

 
94

 
78

 
252

 
301

   Depreciation Expense
239

 
304

 
231

 
763

 
925

   Stock Based Compensation
369

 
247

 
351

 
1,043

 
798

Impairment of Long-Lived Assets

 
4

 

 

 
(15
)
Adjusted EBITDA
$
(1,033
)
 
$
(1,847
)
 
$
402

 
$
(1,495
)
 
$
(8,774
)


About Presentation of Adjusted EBITDA
Adjusted EBITDA is not a financial measure calculated and presented in accordance with 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 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.