American Superconductor Corporation (AMSC) — Q2 FY2023 Form 10-Q
Reporting period: Three and six months ended September 30, 2023; fiscal year ends March 31. All financial amounts below are in U.S. dollars. AMSC provides power-grid and U.S. Navy solutions through its Grid segment and power electronics, designs and support for wind turbine manufacturers through Wind.
Financial results and liquidity
| Metric | Three months ended Sep. 30, 2023 | Prior-year quarter | Six months ended Sep. 30, 2023 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $34.0 million | $27.7 million | $64.3 million | $50.4 million |
| Gross margin | $8.6 million; 25% | $2.0 million; 7% | $14.9 million; 23% | $4.2 million; 8% |
| Operating loss | $2.4 million | $8.1 million | $7.7 million | $17.0 million |
| Net loss | $2.5 million; $0.09/share | $9.9 million; $0.35/share | $7.9 million; $0.28/share | $18.6 million; $0.67/share |
| Operating cash flow | Not presented by quarter in the filing | Use of $1.3 million | Use of $11.6 million |
- Grid revenue was $28.5 million for the quarter, up 11%; Wind revenue was $5.5 million, up 177%. For the six-month period, Grid revenue rose 19% to $54.3 million and Wind revenue more than doubled to $10.0 million.
- Management attributed improved gross margin to higher revenue, favorable product mix, more spares and service revenue, and pricing increases. Supply-chain inflation and sourcing delays continued to pressure costs and disrupt production.
- At September 30, cash and cash equivalents were $22.8 million, with restricted cash of $1.2 million; total cash, cash equivalents and restricted cash were $24.0 million. Current assets were $104.1 million and current liabilities $85.3 million. Total liabilities were $94.4 million.
- Debt was minimal: $57,000 current and no long-term debt reported. Lease liabilities totaled $2.6 million. Inventory increased to $47.8 million from $37.0 million at March 31, 2023.
Material changes and unusual items
- Revenue growth and improved gross margin substantially reduced GAAP losses compared with the prior-year periods. The prior-year results included a $1.9 million China dissolution expense; there was no comparable charge in 2023.
- The NEPSI acquisition earnout revaluation produced a $0.9 million loss for the quarter and a $2.2 million loss for the six months, reflecting increased likelihood of meeting revenue targets and a higher share price. AMSC expects to issue 400,000 shares in the quarter ending December 31, 2023, subject to certification of the earnout objectives.
- Six-month operating cash use improved year over year, partly reflecting a $3.0 million Employee Retention Credit reimbursement and changes in working capital. Inventory growth used cash, as did lower accounts payable and accrued expenses.
- AMSC recorded a non-GAAP net income of less than $0.1 million for the quarter and a non-GAAP net loss of $2.1 million for the six months. These company-defined measures exclude specified items, including stock compensation and acquisition-related amortization.
Outlook, risks and contingencies
- Management stated it believes available liquidity is sufficient for operations and capital expenditures for the next 12 months. It also said liquidity depends on revenue growth, cost control and, if needed, raising capital; there is no assurance additional financing will be available on favorable terms or at all. A shelf registration allowing up to $250 million of securities was due to expire in February 2024.
- Remaining performance obligations were approximately $128.3 million expected to be recognized within 12 months and $43.2 million over 13–60 months. Timing is subject to customer actions and cannot be reliably estimated. These amounts are not a forecast of recognized revenue.
- The January 2023 workforce reduction affected approximately 5% of employees. AMSC expected $1.0 million in cash costs, of which $0.8 million had been paid by September 30, and approximately $5.0 million in annualized savings beginning in fiscal 2023.
- Principal disclosed risks include recurring operating losses and historical negative operating cash flow; inflation, material delays and supply-chain disruption; dependence on suppliers and a significant Wind customer; possible financing needs; and uncertainty over customer demand, backlog conversion, government funding and U.S. Navy spending. Management cited ongoing geopolitical conflicts and macroeconomic instability as possible adverse factors.
- The filing reports no material change to the risk factors in the FY2023 Form 10-K, no legal proceedings listed in Part II, and no subsequent events to report. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether revenue growth and improved gross margins continue, especially given ongoing sourcing constraints and inflation.
- Whether the $128.3 million near-term performance obligations convert to revenue on the expected schedule and whether customer actions affect timing.
- Cash generation excluding the $3.0 million ERC reimbursement, and the trajectory of inventory, receivables and payables.
- Certification and settlement of the expected 400,000-share NEPSI earnout, including dilution and future fair-value remeasurement.
- Progress toward the stated restructuring savings and management’s 12-month liquidity assessment, including any financing requirements.