Business context and reporting period
American Superconductor Corporation (AMSC) filed this unaudited Form 10-Q for the quarter ended September 30, 2021, the second quarter of fiscal 2022, and the six months then ended. AMSC supplies power-grid resiliency systems and products for the U.S. Navy, as well as power electronics, controls, designs, and services for wind-turbine manufacturers. It reports Grid and Wind segments. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial results and position
| Metric | Three months ended Sep. 30, 2021 | Prior-year quarter | Six months ended Sep. 30, 2021 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $27.9 | $21.1 | $53.3 | $42.3 |
| Gross profit / gross margin | $3.3 / 11.7% | $5.5 / 26.1% | $6.6 / 12.4% | $10.6 / 25.0% |
| Operating loss | $(4.3) | $(3.2) | $(11.8) | $(6.4) |
| Net loss | $(4.4) | $(3.7) | $(9.8) | $(7.1) |
| Basic and diluted loss per share | $(0.16) | $(0.17) | $(0.36) | $(0.33) |
- Quarterly revenue rose 32%; six-month revenue rose 26%. Grid revenue increased 51% and 41%, respectively, while Wind revenue declined 31% and 37%.
- Management attributed the Grid growth primarily to NEPSI and Neeltran acquisitions. Neeltran, acquired May 6, contributed $12.5 million revenue and $0.4 million net loss in the six-month period.
- Gross margin fell substantially, which management attributed to product mix, higher raw-material costs, and Neeltran purchase-accounting adjustments, including a $0.6 million inventory step-up charge for the six months.
- Quarterly and six-month GAAP net losses increased year over year. The six-month tax benefit of $1.9 million included a valuation-allowance release associated with the Neeltran acquisition.
- Management-reported non-GAAP net loss was $5.1 million for the quarter versus $2.7 million, and $7.8 million for six months versus $5.1 million. This measure excludes specified items and is not a substitute for GAAP results.
- Operating cash use was $11.7 million for six months, versus $6.6 million a year earlier. Investing cash use was $6.8 million, including $11.5 million net cash paid for Neeltran; capital expenditures were $0.5 million.
- Cash and cash equivalents were $48.5 million at September 30, down from $67.8 million at March 31. Including $8.5 million restricted cash, total cash, cash equivalents, and restricted cash was $57.0 million, versus $80.7 million at March 31. Restricted amounts primarily secure letters of credit and are not freely available.
- Current assets were $102.5 million and current liabilities $57.3 million. Reported debt totaled approximately $0.2 million; lease liabilities were $3.7 million. The filing reports an accumulated deficit of $1,011.1 million.
Material changes, outlook, and risks
- AMSC completed the Neeltran acquisition for total consideration of $16.4 million, including cash, 301,556 shares, and debt payments on behalf of sellers. The preliminary purchase-price allocation included $8.8 million goodwill; final adjustments could be made through May 2022. AMSC also acquired NEPSI in October 2020.
- Grid generated an operating loss of $5.8 million in the quarter and $11.2 million for six months. Wind had quarterly operating income of $0.2 million but a six-month operating loss of $0.6 million. The quarterly Grid loss reflected weaker mix and acquisition accounting; Wind results benefited from reduced manufacturing overhead after consolidation.
- AMSC said it expects available liquidity to fund operations and capital expenditures for the next 12 months. It also stated that liquidity depends on revenue growth, collecting amounts due under agreements including Inox, cost control, and potentially raising capital. Its shelf registration permits offerings of up to $250 million through February 2024; no such offering is reported here.
- Outstanding performance obligations were approximately $89.5 million for recognition within 12 months and $10.5 million over months 13–60. Timing is subject to customer actions; the near-term amount includes anticipated Inox shipments based on its rolling forecast.
- AMSC reported inflation pressure and delays sourcing materials, which had increased costs and reduced gross margin. Prolonged COVID-19 or supply-chain disruption could materially affect operations, liquidity, and results.
- Inox had previously failed to pay €0.7 million in royalties under its wind-turbine license agreement; it paid during the cure period after AMSC’s July 2021 default notice. Future payment and Inox’s ability to execute on orders remain uncertain and could affect AMSC’s revenue and liquidity.
- Additional risks include reliance on suppliers and customers, government-contract funding and termination provisions, performance-bond collateral, and potential workforce attrition associated with federal contractor vaccination requirements. Management said disclosure controls were effective; no material internal-control changes or legal proceedings were reported.
- The filing provides no specific financial guidance or quantified forecast. Management’s liquidity assessment is not a guarantee of future results.
Important facts for investors to verify
- Whether margins recover as acquisition-related inventory charges roll off and supply costs and product mix evolve.
- Cash conversion and receivable collections: accounts receivable increased to $25.2 million from $13.3 million at March 31, while six-month operating cash use was $11.7 million.
- Inox royalty payments, wind-turbine orders, and shipments, and whether the reported remaining performance obligations convert to revenue on expected timelines.
- Neeltran and NEPSI integration, contribution to operating performance, and any final purchase-accounting adjustments or contingent consideration changes.
- Availability of additional financing if operating losses and cash use continue, including the effect of restricted cash and any future securities issuance.