Active Power Announces Third Quarter 2006 Results

Active Power, Inc. announced results for its third quarter ended September 30, 2006. Revenue for the third quarter of fiscal 2006 was $5.7 million, up 27% from the same period last year and up 5% from the previous quarter. For the nine-month period ended September 30, 2006 revenues were $16.8 million compared to $12.6 million in 2005, an increase of 33%.

Net loss for the third quarter of 2006 was $4.9 million, or 10 cents per share, compared to a net loss of $5.2 million, or 11 cents per share, for the same period last year and a net loss of $6.0 million, or 12 cents per share in the previous quarter. Net loss for this quarter includes $728,000, or 1 cent per share, for stock-based compensation and $458,000 related to severance expenses following a reduction in headcount in July. Excluding the effects of stock-based compensation expense, which the company began reporting in 2006 and the severance costs, our loss for the quarter represents a 29% improvement as compared to the $5.2 million loss recorded in the third quarter of 2005.

For the quarter, the company reported a record gross profit of $911,000 or 16% of total revenue. This was an improvement of 18 percentage points from the -2% gross profit reported in the immediately prior quarter and a 15 percentage point improvement from the 1% gross profit recorded in the same period last year. This improvement reflects our recent initiatives to address premium markets, accelerate our growth in power quality services, the benefit of recent price increases and a continued shift in our sales mix towards higher margin direct sales transactions. Cash and investments usage for the quarter was $6.3 million, within the previously provided guidance as compared to $6.8 million for the same period last year and $4.0 million for the previous quarter. Cash and investments at September 30, 2006 were $26.7 million.

"In the third quarter we began to see positive results from our efforts to diversify our sales channels, increase prices, grow services, manage operating costs, and in general focus the company towards profitable growth," said Jim Clishem, President and CEO of Active Power. "Our gross profit improvements reflect our determined activities to focus on the business fundamentals while increasing our brand awareness in the power quality industry. Bookings have grown significantly in the quarter. We have seen particularly strong growth in our MegaWatt-Class UPS products where our advantages of higher efficiency and unmatched power density are magnified compared to alternative technologies."

"I was particularly pleased with the substantial increase in our service revenues this quarter to $905,000, representing a 69% increase from the same period last year. We continue to execute upon our multi-channel sales strategy while deploying global sales initiatives. I believe we will continue to opportunistically garner additional market share from our competition as we focus upon delivering innovative power solutions in the more profitable market segments," continued Clishem.