Active Power Announces Second Quarter 2008 Results

For the quarter, Active Power reported a gross profit margin of 14 percent compared to 10 percent in the previous quarter and compared to 17 percent in the same period last year. The decrease in cash and investments during the quarter was $3.2 million compared to a decrease of $5.1 million in the previous quarter and a decrease of $4.4 million in the same period last year. Cash and investments on June 30, 2008, were $14.2 million.

"Our quarterly results were achieved within the guidance provided," said Jim Clishem, president and CEO of Active Power. "As we advised at the beginning of second quarter, we anticipated delays in receiving orders and recognizing revenue due to a higher mix of large systems and containerized product opportunities that typically have longer sales cycles. As anticipated, we have seen a significant increase in new orders. Since April, we have received orders valued at more than $15 million, positioning us for a strong second half of the year. We believe our key differentiators of efficient, reliable and green are becoming even more attractive to major data center operators who are struggling in an environment of economic uncertainty and increasing energy demand and cost."

Business Highlights

-- Announced multiple sales orders for Megawatt Class CleanSource UPS systems and PowerHouse solutions from global customers including Tesco and a Chinese utility, one of the largest subsidiaries of the China National Power Grid.

-- Announced relationship with Sun Microsystems where Active Power's PowerHouse containerized solution will complement Sun's Modular Datacenter.

-- Received multiple product certifications from China Ministry of Information Industry for CleanSource(R) UPS 300 Series product line which will allow Active Power to sell UPS solutions in China.

-- Direct sales accounted for 50 percent of total second quarter sales while indirect channels contributed 50 percent.

-- Service revenues for first half of 2008 were 15 percent higher compared to 2007 levels, which continue to reflect benefits of having a direct sales model in place and selling full solutions.

-- Shipped equipment to eight countries outside the U.S. in second quarter, which represented 39 percent of revenue.

Outlook

Active Power expects third quarter 2008 revenues to be between $9 and $12 million. Third quarter earnings per share are expected to be a loss of approximately 4 to 6 cents. Active Power expects its cash and investments balance to decrease in the third quarter by $3 and $4 million as we fund an anticipated increase in working capital due to the expected higher business levels.

Conference Call Details

Active Power will host a conference call today, Friday, July 25, 2008, at 11:00 a.m. (ET), to further review second quarter 2008 results. Interested parties can listen via Web cast at http://www.videonewswire.com/event.asp?id=49404. A replay of the Web cast will be available until August 8, 2008. Investors may access the live broadcast and replay via Active Power's Web site at www.activepower.com.

About Active Power

Active Power (NASDAQ: ACPW | Quote | Chart | News | PowerRating) provides efficient, reliable and green critical power solutions and uninterruptible power supply (UPS) systems to enable business continuity in the event of power disturbances. Founded in 1992, Active Power's flywheel-based UPS systems protect critical operations in data centers, healthcare facilities, manufacturing plants, broadcast stations and governmental agencies in more than 40 countries. Active Power also offers CoolAir, the only solution that provides both backup power and backup cooling. With expert power system engineers and worldwide services and support, Active Power ensures organizations have the power to perform. For more information, please visit www.activepower.com.

Cautionary Note Regarding Forward-Looking Statements

This release may contain forward-looking statements that involve risks and uncertainties. Any forward-looking statements and all other statements that may be made in this news release that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. Specific risks include delays in new product development, product performance and quality issues and the acceptance of our current and new products by the power quality market. Please refer to Active Power filings with the Securities and Exchange Commission for more information on the risk factors that could cause actual results to differ.

Active Power, CleanSource and CoolAir are registered trademarks of Active Power, Inc. The Active Power logo, PowerHouse and PowerCentre are trademarks of Active Power, Inc. All other trademarks are the properties of their respective companies.

ACTIVE POWER, INC. CONDENSED STATEMENTS OF OPERATIONS (Thousands, except per share amounts) (unaudited) Three Six Months Ended Months Ended June 30, June 30, 2008 2007 2008 2007 -------- -------- -------- --------- Product revenue $ 5,592 $ 7,725 $11,840 $ 12,996 Service and spares revenue 1,196 1,457 2,486 2,159 -------- -------- -------- --------- Total revenue 6,788 9,182 14,326 15,155 Cost of product revenue 4,765 6,469 10,422 11,380 Cost of service and spares revenue 1,081 1,166 2,179 1,891 -------- -------- -------- --------- Total cost of revenue 5,846 7,635 12,601 13,271 Gross profit 942 1,547 1,725 1,884 Operating expenses: Research and development 1,304 1,326 2,706 2,910 Selling and marketing 3,055 2,621 6,005 5,246 General & administrative 1,186 2,456 2,368 5,207 -------- -------- -------- --------- Total operating expenses 5,545 6,403 11,079 13,363 -------- -------- -------- --------- Operating loss (4,603) (4,856) (9,354) (11,479) Interest income 91 159 254 360 Other income (expense) 85 51 204 49 -------- -------- -------- --------- Net loss $(4,427) $(4,646) $(8,896) $(11,070) ======== ======== ======== ========= Net loss per share, basic & diluted $ (0.07) $ (0.09) $ (0.15) $ (0.22) Shares used in computing net loss per share, basic & diluted 60,124 50,090 60,124 50,089 Comprehensive loss: Net loss $(4,427) $(4,646) $(8,896) $(11,070) Translation loss on subsidiaries in foreign currencies 152 38 322 (106) Unrealized gain (loss) on investments in marketable securities (5) 5 (2) 17 Comprehensive loss $(4,280) $(4,603) $(8,576) $(11,159) ======== ======== ======== =========

ACTIVE POWER, INC. CONDENSED BALANCE SHEETS (In thousands) June 30, December 31, 2008 2007 Assets (unaudited) Current assets: Cash and cash equivalents $ 12,298 $ 15,504 Short-term investments in marketable securities 655 6,581 Accounts receivable, net 5,934 5,177 Inventories 8,678 9,198 Prepaid expenses and other 593 540 ----------- ------------ Total current assets 28,158 37,000 Property and equipment, net 5,191 5,530 Long-term investments 1,241 407 Deposits and other 439 389 ----------- ------------ Total assets $ 35,029 $ 43,326 =========== ============ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 2,526 $ 2,342 Accrued expenses 4,681 5,793 Deferred revenue 2,351 1,918 ----------- ------------ Total current liabilities 9,558 10,053 Long-term liabilities 25 25 Stockholders' equity: Common stock 60 60 Treasury stock (59) (5) Additional paid-in capital 259,458 258,630 Accumulated deficit (234,297) (225,401) Other accumulated comprehensive income (loss) 284 (36) ----------- ------------ Total stockholders' equity 25,446 33,248 ----------- ------------ Total liabilities and stockholders' equity $ 35,029 $ 43,326 =========== ============

SOURCE: Active Power, Inc.

Active Power Investor Relations: John Penver, Chief Financial Officer, 512-744-9234 jpenver@activepower.com or Media Relations: Lee Higgins, Public Relations Manager, 512-744-9488 lhiggins@activepower.com