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Active Power, Inc. (NASDAQ: ACPW ) Q1 2016 Earnings Conference Call April 26, 2016 08:30 AM ET Executives Mark Ascolese – President and CEO Jay Powers – CFO and VP, Finance Analysts Craig Irwin – ROTH Capital Partners Amit Dayal – Rodman & Renshaw Operator Good morning, everyone. Thank you for participating in today’s conference call to discuss Active Power’s Financial Results for the Frist Quarter Ended March 31, 2016. With us today are Mr. Mark A. Ascolese, President and Chief Executive Officer of Active Power; and Mr. Jay Powers, Chief Financial Officer and Vice President of Finance. Following their remarks, we will open up the call for questions. Any statements made by management on this call that relate to future results and events are forward-looking statements based on Active Power’s current expectations. Actual results and the outcome of future events could differ materially from those projected in the forward-looking statements because of a number of risks and uncertainties, which are discussed in the company’s filings with the SEC and in the cautionary note regarding forward-looking statements in the company’s press release. Active Power assumes no obligation to update these forward-looking statements. On today’s call, the company will be referring to adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is reconciled to GAAP net loss in the company’s press release, which we encourage you to review. I would like to remind everyone, that this call will be available for replay via Active Powers’ website at www.activepower.com. Also please note that information presented on today’s call, speaks only as of today April 26, 2016. Any time sensitive information provided may no longer accurate at the time of the webcast replay. I would now like to turn the call over to the President and Chief Executive Officer of Active Power, Mr. Mark A. Ascolese. Sir, please go ahead. Mark Ascolese Good morning everyone. We issued a press release earlier today, announcing results for our first quarter ended March 31. There’s no way to dress up our results in the first quarter. We anticipated going in, but based on our low bookings in the fourth quarter that we turned in a poor sales performance. Our fourth and first quarters have been impacted by deferments in delivery for orders already in backlog that are anticipated to ship until later period, and buyers scrutinizing their capital investment spending during this downward cycle. Delaying orders being awarded. As disappointing is the results for us in the quarter, other trends we’re seeing in the cade are refined value proposition and activities that support this effort are having a positive impact. I’d like to take a few minutes to discuss where we’re seeing an increased interest for our products, specific actions we’ve take to support our sales organization, and early results from taking our story to the market. We’re generating interest from those customers who want to do more with less; that is less capital and operating spending, less downtime and less carbon emissions. This interest is particularly gaining momentum among healthcare and industrial operators where our technology is uniquely suited. In fact bookings for non-IT applications experienced double-digit growth in both total number and total dollar values than the first quarter of 2014 to the first quarter of 2016. Our success rate is also far better in these non-IT applications that in datacenter markets where a bias towards battery energy storage still exists. The concept to Total Cost of Ownership or TCO has been emerging at the forefront of business decisions as the market continues to be cost sensitive. This was certainly the sentiment of some of the largest product reserves of electrical infrastructure equipment for datacenters that we spoke with prior to our recent TCO thrust. It is important to note, these changes we are now addressing are not changes that we’ve driven our customers to make. The changes we are making are addressed to shift in demand and the questions being asked of us by our customers. In other words, as you might expect, customer are driving changes to industry dynamics and we are responding to highlight how our technology the same as we have been offering does a much better job of addressing their current and future needs as they might have previously perceived. These are profound advantages to working with Active Power solutions and now we have our TCO proposition front and center to make our case known. As we discussed on our last call, we’re now sharing at the very outset with perspective customers, how we can significantly lower their TCO, reduce our carbon footprint and improve their operations resiliency. We have been and continue to focus our efforts on tools to support our value proposition of 40% less cost, 12 times less likely to fail and nine times less carbon emissions by deploying our technology. These tools included tailored presentations for key vertical markets, a revamp TCO calculator, new white papers that back our TCO reliability claims and refinements to our web page. Our home page now places front and center the three industries we are pursuing; datacenter, healthcare and industrial manufacturing, enabling visitors to quickly get to where they need to go for more information. Each industry page is tailored to their respective audience and appeals to the customers’ strongest decision making drivers. These pages are chalked full of relevant case studies, solution guides, white papers and industry articles. I’d now like to share recent feedback from the field, where early indications point to our refined value proposition resonating with perspective customers. Earlier this year, we presented to our global foods producer to support one of the cardboard manufacturing plants in Central America. We led with our TCO story and demonstrated compelling cost savings versus conventional products due to our systems high efficiency, permanent energy storage and lower cooling requirements. With an approximately 4% UPS energy efficiency improvement over the competition in this scenario, and utility rates at an average of $0.21 per kilowatt hour, TCO savings are even more magnified particularly over a 15 year period. What keeps me excited is knowing the large datacenter market from which we generate roughly 50% of our revenues is increasingly up for grabs. Now more than ever, the legacy decision making for sticking with battery based solutions is seemingly yet gradually being second guess. By way of example, one of the leading e-tailers is coming to see us in the next few weeks because of our TCO. Also one of the world’s largest datacenter co-location provider is coming to see us because of our TCO. We anticipate these being really good sized deals and they are more out there. These developments have taken shape within the past few months since we repositioned our TCO and went to market with it and made a 15% decline in the three phased UPS market we serve. Put plainly, we aren’t concerned with the size or growth of the overall datacenter market. But we are concerned with significantly increasing our share of it and I like our chances of succeeding in that mission. We believe our success on the datacenter side of the market will be complemented by our success from the non-datacenter market. We’ve had productive discussions with three system designer integration firms to sell in the bottling companies to bundle their critical power equipment in support of their customers’ facilities. These firms manufacture filling lines and packaging equipment for the beverage industry. We have a proven track record in selling in to the bottling market having to deploy more than 45 wheels in UPS system and productions facilities in nine countries operated by one of the largest brewers in the world. We believe our experience and success in this market, coupled with a compelling value proposition has been well received. On the healthcare front, our value proposition is being embraced by the facilities and engineering networks we have been engaged with over the last few months. We’ve booked a UPS order earlier this month for medical research organization on the east coast as a direct result of our TCO story, which is anticipated to ship later this quarter. These efforts have also led us to a sales opportunity with a large healthcare operator in the Southeastern US that manages multiple hospitals. I recently returned from a trip to Singapore to meet with a large telecom company that is constructing a large co-location datacenter in the region. I was inspired by their response to our value proposition, specifically our TCO and sustainability advantage as interlines with their mission to provide resilient and energy efficient facilities that are reliable and cost efficient. As one of the leading datacenter developers in Asia, our stated mission represents the overall state of the industry for the foreseeable future and validates our TCO and value proposition. Further to these issues, the government of Singapore signed the Paris agreement on climate change on April 22, which will see the city state pledge submissions intensity by 36% by 2030 compared to 2005 levels. According to industry media source datacenter dynamics, datacenters there consume approximately 7% of the total energy used in the country, despite accounting for just 1% of the total land area. These factors favor Active Power and we’ve been aggressively building out our arsenal to make our presence more pronounced in Singapore and throughout the Asia-Pacific region. I’m excited to share that we received an order for four CleanSource HD UPS systems from the Singapore based telecom company, which was booked in the first quarter and is anticipated to ship this quarter. We anticipate building our future project phases with this new customers as well as targeting new prospects in the country. I’m also encouraged by the reception of our shift in sales strategy from these customers and by the marketing assets we’ve deployed and placed in the hands of our sales organization to go out and win business. We believe these are all positive steps that will enable field sales to clearly and distinctly demonstrate to perspective customers how we can save their money and reduce their impact on the environment. As I mentioned earlier, it is the customers who are driving change. Although they may seek change that addresses one purchasing decision be it TCO reliability or sustainability, they are increasingly open to change, they are also learning that beyond the primary reason for their change, we have to other main reasons to support their selection of Active Power. With our new sales and marketing strategy intact, our first quarter bookings include large follow-on UPS orders for an international brewer and a global technology company, both anticipated to ship in the second quarter. We also booked an order for CleanSource HD UPS for a shipment to western Africa later this year to support a production facility. We received a follow-on order for two of our modular prior products from a long standing customer for their co-location datacenter market in the mid-west. The two imposers will be deployed later this year and will make our CleanSource power systems onsite. Shipments in the quarter include two CleanSource HD unit for a healthcare facility in Florida which was awarded to our OEM partner Caterpillar. We also fulfilled orders for co-location datacenter in the UK, a pharmaceutical production farm based in Japan and a children’s hospital in Missouri. Before we go further, I’d like to turn the call over to Jay to give us more financial details about the quarter. I’ll then come back to provide some closing comments. Jay? Jay Powers As we anticipated and as Mark mentioned earlier, first quarter sales performance was driven by low bookings in the fourth quarter. Despite these challenges, bookings improved 25% to $10 million compared to the previous quarter, resulting in a book-to-bill ratio of 1.77. Bookings amount represent an anticipated revenue from products orders received during the period that are believed to be firm and from signed contracts for service works. Please refer to the supplemental information in our press release for more details regarding bookings. As we state, our business is inherently variable from quarter-to-quarter, so we longer term trends to be more meaningful as we access performance. First quarter revenues were $5.7 million down 56% compared to the first quarter of 2015 to 54% in the previous quarter. The decrease in revenue from both periods is due to lower product sales and service sales. We were impacted by both recent booking performance as well as customer project delays, resulting in deferral revenue to future periods. As a reminder, inherent variability in demand for our products contributes to quarterly fluctuations and mix as orders can range from multi-dollar MIS or UPS shipment to a single module UPS shipment for less than $100,000. One large MIS order in the quarter for example can have a significant impact in the business in a particular period. By region, revenue for the first quarter was $3.8 million in the Americas, a decrease of $6.1 million from the year ago period. In EMEA revenue was $900,000 down 2.1 million, in Asia revenue was $980,000, an improvement of $740,000. Please refer to the supplemental information in our press release for more detail on our revenue split by product and geography. The dollar amount of backlog was approximately $35.1 million at March 31. Of our total backlog, approximately $9.6 million is not expected to be filled in the following 12 months which includes long term service contract in UPS product orders. Backlog represents the amount of anticipated revenue from prior bookings at the end of period. Gross margin this quarter was 14% compared to 33% in the first quarter of 2015, and 25% in the previous quarter. The decrease in gross margin from both periods is primarily related to under absorption of fixed overhead cost to manufacturing against substantially lower product revenue and the decline in volume and service revenue which traditionally has higher margins. Total expenses were $4.7 million for the quarter, down $1.1 million from the first quarter of 2015 and 1.2 million from the previous quarter. The decreases were primarily due to lower payroll expenses, lower emissions and management’s focus on disciplined spending. In fact, the expenses are down 8 of the last 10 quarters. As we mentioned last quarter, we remain vigilant managing our expenses and identifying ways to improve operational efficiencies in light of current market conditions, while continuing to support the growth of the business. It is also worth noting, as we did last quarter, that problematic spending incurs through the regular course of business which can fluctuate from quarter-to-quarter and includes variable sales optimization, employee incentive compensation and product development activities for example. Adjusted EBITDA in the first quarter was a loss of $3.4 million compared to a loss of $864,000 in the year ago period. This compares to a loss in adjusted EBITDA of $2.2 million in the previous quarter. The decrease for both periods is primarily due to lower revenue resulting in higher net loss for the first quarter of 2016. Now turning to the balance sheet; we ended the first quarter with $11.2 million in cash, a decrease of $1.1 million from the end of the fiscal 2015. Cash requirements to fund any future working capital increases are expected to be funded through a revolving credit facility with Silicon Valley Bank, our outstanding borrowing amount at March 31 was $5.5 million. As a reminder and as we mentioned last quarter, we’ll not provide guidance, however we will continue to provide perspective and market trends that impact our business and growth prospects. This completes the financial portion of our presentation. I’d now like to turn the call back over to Mark. Mark Ascolese As we stated last quarter, we believe we will benefit from key industry drivers in 2016 as we emphasize our value proposition. Those market drivers include an increasingly cost conscious environment, a reduction in UPS run-time specifications, and a growing acceptance of modular design built. Our products and solutions can deliver significant capital and operating expense savings that reduces TCO by up to 40% over 15 years. Our products are 12 times less likely to fail compared to competitive offerings. Lastly and most importantly, our flywheel technology uses nine times less carbon than competitive offering over their use for life. Regardless of the overall market and the market size, we believe we can win an increasing share as our TCO sales strategies continue to gain traction. Although we have experienced two consecutive quarters of challenging business conditions, we remain focused on the depth of our fundamental long term planning. Our priorities remain unchanged and our aim is increasing bookings and backlog, improving operational efficiency and controlling cost. Expense and cash management is one that we will continue to emphasize from a strategic level, as initiatives on these fronts are particularly important in light of our performance and the condition of the markets we serve. We believe we’ll be in a position to capitalize on our earnings potential with an improved operating efficiency and meaningful leverage in our model as we continue to aggressively lead with our refined value proposition and as market conditions steadily improves. Now with that, we’ll be happy to open the calls to your questions. Question-and-Answer Session Operator [Operator Instructions] our first question comes from Craig Irwin of ROTH Capital Partners. Please go ahead. Craig Irwin – ROTH Capital Partners Mark can you may be discuss a little bit more the outlook for 2Q, how you see both your revenue and order progression taking shape? Mark Ascolese Okay, you know we don’t discuss specifics here, but we see a slightly improving market environment coupled with the fact that large customers, our large perspective customers are in fact engaging with us in this discussion of sustainability and cost. So we think, generally speaking, that bodes well going forward. Obviously our last two quarters you have to go back many years to see a performance at these levels. We do not expect for that to continue and we have shown progress in controlling expenses here and managing the cash. We expect that to also continue. Craig Irwin – ROTH Capital Partners My second question is related to the pipeline, could you may be give us some color on how you see the pipeline which changed since you reported your fourth quarter results, and update us on the potential for large orders to potentially materialize in the next quarter or two. Mark Ascolese Yeah, so we talked about this last quarter on our call. We’ve seen over the last let’s call it 15 months, a nice increase in opportunities coming in to the pipeline. And as we discussed on our last call, over the last 12 months, we have seen an increase in the number of jobs of over $1 million. We believe, especially since the fourth quarter of last year, we believe a portion of those opportunities are showing up because of the emphasis and the repositioning of the value proposition that we brought forth to the market. It will take time for deals that over $1 million to close, but we are feeling good at this point about the fact that there are more opportunities setting in the pipeline and that we are getting a favorable response to the discussions we have with prospects relative to our value proposition and relative to their interest in these technologies. Craig Irwin – ROTH Capital Partners My last question is related to expenses; so your bottom line number, I guess with the revenue was a big accomplishment, I mean that’s some pretty rigorous expense controls. Can you talk about whether or not this was more of a variable item or a timing or if there was anything one-time in there, and are you likely to add back expenses if we see the rebound in activity in the second half of the year. Mark Ascolese On a fundamental basis, we have for a company our size an inordinate amount of fixed overhead cost especially related to our factory. Those are costs that we can’t do a lot about in the short term. Every other cost in the company from headcount to salaries to any type of spending is a target for us to figure out how to manage and control. We’ve been doing that quite honestly for the last two and a half years. We got much more aggressive after the fourth quarter of last year with the bookings results and we do not plan on a short term to be adding cost back in to the business. I would have to see a couple of quarters of upward growth, let’s say the bookings number to do that. We would add variable direct labor cost in to the shop if need be obviously, which is not hard for us to do. So that would definitely be on the cards. Craig Irwin – ROTH Capital Partners Great, thank you for that and I guess strong execution given the revenue run in the quarter. Operator Our next question comes from Amit Dayal of Rodman & Renshaw. Please go ahead. Amit Dayal – Rodman & Renshaw Last quarter you indicate that the drop in revenue is more of a push-out versus loss of customers. Do you still believe these levels of revenues are not indicated with customer’s losses, could you just clarify the sharp drop in the year-over-year revenues from at least the product side? Mark Ascolese Yes. So I think what I said last quarter was that we did not lose some of the bookings you would anticipate in the fourth quarter. The customer didn’t go away, they didn’t cancel projects. As a matter of fact I think we lost one deal to the competition that we thought we were going book in the fourth quarter. That has continued in the first quarter of this year. Like you I am concerned that if that continues over some period of time there’s always a possibility the projects may get cancelled. We did experience in the first quarter the push-out of some of our backlog that we had anticipated shifting in the first quarter that has moved to the second quarter. Again, orders were not cancelled but product and inventory that we fully expected to ship did not and is moving to the second quarter. So we were not seeing cancellation of backlog at this point and we’re not seeing a loss of especially large projects that we anticipated wining. We are merely seeing a longer decision cycle, more protracted decision cycle in this environment. Not surprising, I just came out with their figures for 2015 and the North American market for example was down 15% last year in the prior ranges we participate in, and globally it was down double-digit. So it’s not surprising to see that kind of behavior in a market that is contracting like that. But we still have as I mentioned, we still see lots of opportunity in our pipeline and we still have additional opportunities coming into the pipeline every quarter, especially of opportunities above $1 million. Amit Dayal – Rodman & Renshaw So the revenues that were recognized in the first quarter were these sales generated in the first quarter or were they part of the backlog from previous quarters? What I find like how much of the revenues are coming in the in-quarter sales versus from previous backlogs. Jay Powers Amit, it really is a combination, throughout the quarter we routinely get book bill, for example in our service business. Our service business does often get – the repair and spare parts opportunity will rise within the quarter. The hot bed was the third was backlog that we had entering in to the quarter that we anticipated shipping within the quarter that customers notified us they’d be to reschedule for a variety of reasons including delays at the site and their build-out schedule. So like any quarter, it’s a mixture of stuff that came in from backlog and book-to-bill. Amit Dayal – Rodman & Renshaw And on the margin, once we sort of get back on historical levels of revenue should we expect margins to sort of bounce back to those levels. Is it just from the additional overheads that were not absorbed because of the lower revenues, is that the key driver for the lower margins this time. Jay Powers It absolutely is, as a matter of fact here, we continue to take cost out even within the gross margin area, some of the variable costs and other things. I would anticipate that when volume returns to more normal levels that I think we could actually enjoy higher gross margins as we don’t replenish on those costs and we continue to work hard on projects that cost reduce the product. We continue to look at the product and look at our supply chain for opportunities to take private cost out. So the margin is not an indication of price changes in the market. It’s really due to the amount of those fixed cost of people and overheads that were not able to absorb the significant decline in the volume in the quarter. Amit Dayal – Rodman & Renshaw Just one last question, backlogs improved slightly, is it more MIS or UPS products that’s stronger for you in terms of backlog. Jay Powers It also is a combination, we did have one large order for an MIS opportunity that was in Mark’s comments, a repeat customer that ordered two of our power house units which will contain our UPS system with inside the power house. So there was an increase in the MIS area, but the predominant number would be increase in UPS side of the business. Operator [Operator Instructions] our next question comes from John [Fanning] of [Coast Capital]. Please go ahead. Unidentified Analyst I want to dig a little bit deeper in to your non-datacenter projects. You’ve mentioned within the call that your pipeline’s getting better. In fact I think you mentioned a couple of firms are coming to see you soon. Why are you wining these projects over competitors and just from your perspective to the extent you can share, what do you think your success rate is for wining these projects maybe a little bit better than your datacenter projects. Mark Ascolese Well number one, we don’t have to overcome the issue of electrochemical storage with these customers. They are not pre-disposed to deploy those types of system, as a matter of fact they don’t like those type of systems because they really – if you’re talking about a shop full of production facility, they really don’t have the wherewithal to build special rooms and air conditioning and special environments to protect all that stuff. So first of all we don’t have that argument. Secondly when you look at our footprint and you look at our efficiencies and you look at the design life of the product and the cost to maintain it, we are head and shoulders above a double conversion battery based solution or even the drugs products that are out there. So it is just all around an easier sale for us to make, and the value proposition and the cost is really significant to the customer. And in these cases the customer may only be looking for 10 or 15 or 20 seconds of [life] through time where in datacenter applications they may be looking for more than that. So our solution to choose up with 15 second or 18 seconds also meets their design spec for that and we’re much more cost effective for example that super caps or some of these other technologies that are out there for bridging times in that order. Unidentified Analyst Mark, just if I can expand on this just a little bit more, for your non-datacenter versus datacenter deals from initial engagement to deal closing, I’m just asking kind of on the sales cycle, is it a little bit quicker, is it a little bit longer? Just give me some idea of what the sales cycle would be? Mark Ascolese So for a new customer last quarter we experienced 25% to 28% new customers again. For a new customer when we enter the project and early on when they’re just starting to figure about designing sector that can take a year in that market. If there’s an existing customer that we have supplied product to in the past, from the time we hear about a project to the time that we actually ship product can be half that time or even less. Sometimes we’ll hear about a product in the industrial space, a project that’s four months or five months out. We had one of those in the fourth quarter of last year, brand new customer. I think we talked about it on our last call. Where the opportunity came up and it was shipped within the quarter, they had a mean, we had a solution. They bought obviously our TCOs story and we were able to ship and commission the product for them. So it’s a little bit less than datacenters and the projects tend to be lower in value. Okay, so a typical datacenter project with a large datacenter operator can be a couple of million dollars or better. A very large opportunity in the industrial space could be a 1.2 million or 1.3 million. So difference in size generally speaking. Unidentified Analyst And just as a follow-up to my last question is, on your healthcare and industrial verticals the two that you’re going after can you give me some idea of kind of the market size and the dynamics that are shaping these two verticals and how you’re attacking both of these. Mark Ascolese So within the UPS market space, the UPS market that we address is around $1.6 billion, $1.7 billion. Within that space, first of all, datacenter is the largest vertical. Healthcare and industrial are the next two largest vertical and they happen to be growing at this point within the mix, where the datacenter space is not. And so they are significant markets in the $300 million to $400 million range that we are playing in they are growing. And forgot the second part of your question, you’re going to have to remind me. Unidentified Analyst Sure, it was the market size and kind of the dynamics, what’s driving growth within these markets. Mark Ascolese It’s a little bit different than a datacenter where they kind of have obviously an organized shutdown of the computer system that can take 30-40 seconds; they got to get generators up online. Typically in a manufacturing environment they want to have an organized shut down of a production line and that is normally counted in seconds. So they just want to stop the production line in an organized fashion and they want to stop the flow of raw material to the production line in an organized fashion, so that they don’t have to go in and clean out all their tubs and vessels and pipes. If they don’t do it in a realized fashion especially if it’s a glass operation where you break a lot of glass in a process, you also have to go and clean out everything and that could take a day, just to reset. So they are trying to solve the typical non-power anomalies that we resolve, but they are trying to do it in an organized fashion should there be an outage and they typically don’t to go to generators. And so they typically wanted to have a process that could be automated, that if there is an issue of power outage within a matter of let’s say 10 or 12 seconds, our equipment and their equipment working together and communicating together could have a very soft shutdown of their production line and then bring it back up online when the power comes back. And we fit what they are looking for obviously from a technical perspective. You add to that fact that we’re 60% smaller than a competitive solution and that are our maintenance requirements are de-minimus compared to the other solutions, and it’s just a very good solution for the customer. Operator Our next question comes from Tim [Macquarey] of Shardain Capital. Please go ahead. Unidentified Analyst Can you talk a little about pricing trends in the major product areas, and I think that’s it. Mark Ascolese In this industry there are four large multinational companies that compete and three of them sell battery based solutions, one of them sells a diesel rotary UPS system, and the guys that are selling the battery based solutions have over time learned to get all the cost out or a significant amount cost out of the upfront cost of their solutions. And the fundamental reason for that is because they have huge operating costs, after the first couple of years of an installation and that operating cost comes in the form of the requirement to check out the batteries every quarter and requirement to replace those batteries. Sometime between your three and your six, those are significant cost to a customer. Their systems also tend to be a little bit more less efficient. So let’s put it another way, we may use and do use less electricity in the fulfillment of our filling up of the power than they do. So when a customer is buying a product, they tend to look at upfront cost. And they will compare our cost to the upfront cost of the battery based solution and the mindset in many cases especially for large purchasers are, they were a little bit more expensive on the front end. This discussion we’re having about TCO is the education of those customers to show them that we’re really a cost parity at the front end and we can save them 40% over the life of the installation. And quite honestly money does talk in the industry and it’s a matter of showing those facts, it’s a matter of delivering the TCO calculator and letting the prospect apply all their known costs in to that model and to calculate the results for themselves and determine whether or not the packs that we present them are correct. And so that is the discussion we’re having with prospects and it is resonating obviously because these are hard dollars we’re talking about. We’re talking about what you pay for electricity every month, we’re talking about what you pay for maintenance every month, we’re talking about not having to replace massive bags of batteries and battery cabinets every so many years, over a 15 year life of a datacenter. Unidentified Analyst I get, I’m asking something a little bit differently is that even includes accounting for that discussion that you’re having and the lower total cost of ownership, what pricing trends are you seeing for your products. Have they been relatively flat, down at some normal price decline, increase, that’s what I’m trying to get at. Even accounting for those discussions what price experience have you had over the past let’s call it 6 to 12 months. Mark Ascolese Let’s talk about the US market first; we actually have kind of maintained price and we’ve done that mainly due to this TCO discussion. We’ve also done a lot of work on the margin side in some instances on large opportunities for we have to get a little more aggressive on price. We’ve got aggressive cost out programs going on within the company. In places like Europe where the euro has declined so much in value, it’s a very big issue for us, and we’re still selling at premium over there. We’ve not been able to raise prices over there, obviously we’ve had to lower our prices somewhat, and we’ve had to make concerted effort on the TCO story to offset what’s going on with the euro currency valuation. Plus our major competitors in Europe, people like Piller, Eurodiesel, and Hitec are all European based companies, and so in that market we tend to have a harder time against those guys than we do in other markets. But we’ve been, at least in the last 2.5 years, we’ve been able to maintain pricing good here. We’ve not been able to raise price, but we’ve been able to maintain price and we’ve been able to get cost out of the product. Operator This concludes the question and answer session. I’d like to turn the conference back over to the management team for any final remarks. Mark Ascolese Thank you for being on our call this morning. On behalf of the entire senior management team, our employees and our Board, I would like to express our appreciation for your continued interest in and support of Active Power. We look forward to speaking to you again next quarter. Operator Thank you, sir. This now concludes today’s call. Thank you for joining us. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. 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