Active Power, Inc. :ACPW-US: Earnings Analysis: Q3, 2016 By the Numbers : November 7, 2016

Active Power, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Active Power, Inc. – Generac Holdings Inc., Emerson Electric Co., Caterpillar Inc., Maxwell Technologies, Inc. and Edison International (GNRC-US, EMR-US, CAT-US, MXWL-US and EIX-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 10.19 million, Net Earnings of USD -1.33 million.
  • Gross margins widened from 26.31% to 30.20% compared to the same period last year, operating (EBITDA) margins now -10.64% from -9.31%.
  • Year-on-year change in operating cash flow of 400.97% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 14.91 12.53 5.67 10.73 10.19
Revenue Growth (%YOY) 17.49 -18.41 -56.85 -36.34 -31.67
Earnings (mil) -1.74 -2.91 -4.06 -1.84 -1.33
Earnings Growth (%YOY) 30.45 -42.17 -160.1 -612.02 23.27
Net Margin (%) -11.64 -23.2 -71.58 -17.12 -13.07
EPS -0.08 -0.13 -0.18 -0.08 -0.06
Return on Equity (%) -41.18 -78.28 -138.84 -81.47 -69.46
Return on Assets (%) -19.08 -35.21 -56.05 -27.81 -21.91

Access our Ratings and Scores for Active Power, Inc.

Market Share Versus Profits

Revenues History
Earnings History

ACPW-US‘s change in revenue this period compared to the same period last year of -31.67% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ACPW-US is holding onto its market share. Also, for comparison purposes, revenues changed by -5.03% and earnings by 27.49% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 26.31% to 30.20%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ACPW-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 57.56 days from 92.98 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

ACPW-US‘s change in operating cash flow of 400.97% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Active Power, Inc.

Company Profile

Active Power, Inc. engages in the design, manufacture and sale of flywheel-based uninterruptible power supply products and modular infrastructure solutions. Its products and solutions deliver continuous conditioned power during power disturbances and outages, voltage sags and surges, and provides ride-through power in the event of utility failure. The company was founded by Joseph F. Pinkerton in 1992 and is headquartered in Austin, TX.

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