American Superconductor Corporation (AMSC) — Form 10-Q Summary
Reporting period: Three months ended June 30, 2021, AMSC’s fiscal first quarter of fiscal 2022. Comparisons are with the three months ended June 30, 2020. Amounts are in U.S. dollars unless stated otherwise.
Business context
AMSC provides power-grid resiliency and Navy ship-protection solutions through its Grid segment, and power electronics, turbine designs and support services through its Wind segment. The quarter included results from Neeltran from its May 6, 2021 acquisition; NEPSI had been acquired in October 2020.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $25.4 million | $21.2 million |
| Gross profit / margin | $3.4 million / 13% | $5.0 million / 24% |
| Operating loss | $7.5 million | $3.2 million |
| Net loss | $5.4 million | $3.4 million |
| Diluted loss per share | $0.20 | $0.16 |
| Cash used in operating activities | $5.8 million | $3.1 million |
- Revenue increased 20%. Grid revenue grew 33% to $23.5 million, reflecting acquisitions and growth in the ship-protection product line. Wind revenue fell 45% to $1.9 million, primarily because the prior-year period included Doosan shipments that did not recur.
- Gross margin declined to 13% from 24%, which management attributed to unfavorable product mix and Neeltran purchase-accounting costs, including a $0.3 million inventory step-up charge.
- Operating expenses rose to $10.9 million from $8.3 million, including higher compensation and acquisition-related costs, greater acquired-intangible amortization, and a $0.1 million increase in the NEPSI contingent-consideration liability.
- The $2.1 million income-tax benefit reflected release of a valuation allowance associated with deferred tax liabilities recorded in the Neeltran acquisition. A preliminary purchase-price allocation remains subject to adjustment.
- Management-reported non-GAAP net loss was $2.7 million, versus $2.4 million. This measure excludes stock compensation, acquisition-related intangible amortization, acquisition costs, contingent-consideration remeasurement and other specified items.
Financial position and liquidity
- At June 30, 2021, cash and cash equivalents were $50.1 million, marketable securities $5.2 million, and restricted cash $7.9 million; combined, these totaled $63.1 million, down from $80.7 million at March 31, 2021. Cash, cash equivalents and marketable securities excluding restricted cash were $55.2 million.
- Current assets were $109.5 million and current liabilities $61.9 million. Total liabilities were $73.6 million. Reported debt was approximately $0.2 million, primarily equipment-financing obligations assumed with Neeltran.
- Operating cash outflow was $5.8 million; investing cash outflow was $11.7 million, mainly due to the Neeltran acquisition. The quarter’s net decrease in cash, cash equivalents and restricted cash was $17.6 million.
- AMSC reported an accumulated deficit of $1,006.7 million and a history of operating losses and negative operating cash flows. Management believes available liquidity is sufficient for operations and capital expenditures for the next twelve months, while noting dependence on revenue growth, collections, cost control and potentially raising capital.
Material changes, outlook and risks
- Neeltran acquisition: AMSC reported total consideration of $16.4 million, including cash, 301,556 AMSC shares and debt paid on behalf of the sellers. Neeltran contributed $5.5 million of revenue and $0.2 million of net loss after acquisition. The preliminary allocation included $8.8 million of goodwill; final purchase accounting may change.
- Revenue visibility: Remaining performance obligations were approximately $86.9 million expected to be recognized within twelve months and $15.9 million over months 13–60. Timing is subject to customer actions. The near-term amount includes forecast shipments to Inox.
- Inox collection and contract risk: On July 21, 2021, AMSC notified Inox of default for €0.7 million of unpaid royalties under the 2009 technology-transfer and license agreement. If unpaid within the cure period, AMSC may terminate the agreement; termination could reduce Inox demand for AMSC wind-control systems and affect revenue and liquidity. Management also cited the pandemic’s potential effect on Inox’s ability to perform.
- Other risks: Management identified risks from ongoing COVID-19 effects, supplier shortages and price changes, customer and project timing, government contract funding and termination provisions, performance bonds and restricted cash, and the company’s ability to access additional capital. AMSC had $7.9 million of restricted cash, including $5.0 million collateralizing a letter of credit for the ComEd project.
- AMSC stated that the ComEd resilient electric grid system was expected to be operational in 2021. The filing provides no specific revenue or earnings guidance. Management said COVID-19 had not materially disrupted operations to date, but future effects remained uncertain.
- The filing reported no legal proceedings in Part II, no material changes to previously disclosed risk factors, and effective disclosure controls as of June 30, 2021.
Important facts for investors to verify
- Whether Inox paid the €0.7 million royalties within the stated cure period, and any resulting effect on the license agreement, shipments and collections.
- Whether Grid growth and Neeltran/NEPSI integration improve gross margins, given the quarter’s sharp margin decline and higher operating loss.
- Actual shipment timing and conversion of remaining performance obligations into revenue and cash, particularly Inox-related forecasts.
- Cash burn, restricted-cash requirements, and whether management needs to use its shelf registration statement, which permits offerings of up to $250 million.
- Final Neeltran purchase accounting, including the acquired deferred revenue, inventory step-up, tax liability and goodwill estimates.