American Superconductor Corporation (AMSC) — Q1 FY2022 Form 10-Q
Reporting period: Three months ended June 30, 2022; fiscal year began April 1. Unaudited results are compared with the three months ended June 30, 2021. AMSC provides grid-resiliency and U.S. Navy solutions through its Grid segment and power electronics, designs and services through its Wind segment.
Financial performance
| Metric | Q1 FY2022 | Prior-year quarter |
|---|---|---|
| Revenue | $22.7 million | $25.4 million |
| Gross profit / margin | $2.2 million / 9.8% | $3.4 million / 13.3% |
| Operating loss | $8.9 million | $7.5 million |
| Net loss | $8.7 million; $0.32 per share | $5.4 million; $0.20 per share |
| Non-GAAP net loss | $6.8 million; $0.25 per share | $2.7 million; $0.10 per share |
| Cash used in operating activities | $5.9 million | $5.8 million |
Revenue fell 11% year over year. Grid revenue declined 16% to $19.8 million, primarily on lower D-VAR sales; Wind revenue rose 49% to $2.9 million, driven by additional electrical control system shipments to Inox. Grid and Wind reported operating losses of $7.3 million and $0.4 million, respectively, versus $5.3 million and $0.8 million a year earlier.
Gross margin contracted as lower revenue and unfavorable product mix coincided with supply-chain inflation and material-sourcing delays. Operating expenses were $11.1 million, up from $10.9 million: lower R&D expense was more than offset by higher SG&A and acquisition-related amortization. The prior-year quarter included a $2.1 million income-tax benefit related to the Neeltran acquisition; current-quarter tax expense was less than $0.1 million.
Balance sheet, liquidity and cash flow
At June 30, 2022, AMSC had $33.4 million of cash and cash equivalents and $9.7 million of restricted cash, for $43.1 million in total cash, cash equivalents and restricted cash. Total current assets were $98.2 million and current liabilities $64.7 million. Total assets were $176.5 million; stockholders’ equity was $101.9 million.
Total debt was approximately $0.14 million, including $0.07 million current and $0.07 million long-term. Lease liabilities totaled $3.6 million. Cash decreased $6.4 million during the quarter: operating activities used $5.9 million, investing activities used $0.5 million, and financing activities used less than $0.1 million. Operating cash use was largely associated with inventory purchases, partly offset by collections and increases in payables and deferred revenue.
Inventory rose to $32.9 million from $23.7 million at March 31, 2022. Deferred revenue totaled $33.8 million, and accounts receivable was $21.7 million. The company reported an accumulated deficit of $1.029 billion.
Changes, outlook and risks
- Management believes available liquidity is sufficient for operations and capital expenditures for the 12 months following issuance of the financial statements. It also says liquidity depends on revenue growth, improved gross margins, expense control and, if needed, additional capital. A shelf registration permits offerings of up to $250 million through February 2024; no assurance is given that financing would be available on favorable terms or at all.
- AMSC reported approximately $101.5 million of remaining performance obligations expected to be recognized within 12 months and $13.1 million over months 13–60. These obligations are subject to customer actions; revenue timing is not assured. The 12-month amount includes anticipated Inox shipments based on its rolling forecast, with only the first three months’ forecast quantities firm and irrevocable.
- No specific revenue, earnings or margin guidance is provided in the filing. Management says results may fluctuate and are not necessarily indicative of full-year results.
- Management cites substantial supply-chain inflation, material delays and production disruption from higher employee absenteeism as factors pressuring costs and margins. COVID-19, the Russia-Ukraine war, labor availability and wider supply-chain disruptions could adversely affect operations and liquidity.
- Other stated risks include recurring operating losses and negative operating cash flows, potential need for financing, restricted cash pledged for performance obligations, reliance on third-party suppliers, customer and market adoption, and dependence of a significant portion of Wind revenue on a single customer. The company says there were no material changes to the risk factors in its FY2022 Form 10-K.
- Restricted cash includes $5.0 million collateralizing a letter of credit for the ComEd subcontract. The REG system became operational on ComEd’s grid in August 2021. The filing reports no legal proceedings in Part II and no subsequent events to report.
Important facts for investors to verify
- Whether the Grid revenue decline and lower gross margin persist, and whether cost inflation and sourcing constraints ease.
- Inox shipment expectations and the extent to which the disclosed remaining performance obligations convert to revenue on schedule.
- Cash use, inventory levels, customer collections and the company’s ability to fund operations without raising capital.
- Wind segment customer concentration and the status of customer orders, including risks tied to India’s renewable-energy market.
- Availability of restricted cash and performance-bond or letter-of-credit requirements, including the ComEd collateral.