American Superconductor Corporation — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended September 30, 2020; amounts are unaudited and in U.S. dollars. The company provides grid power systems and services, Navy ship-protection products, and wind-turbine electronics and support through its Grid and Wind segments.
Financial performance
| Metric | Three months ended Sept. 30, 2020 | Prior-year quarter | Six months ended Sept. 30, 2020 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $21.1 million | $14.0 million | $42.3 million | $27.8 million |
| Gross margin | $5.5 million; 26% | $3.8 million; 27% | $10.6 million; 25% | $5.3 million; 19% |
| Operating loss | $3.2 million | $4.1 million | $6.4 million | $10.4 million |
| Net loss | $3.7 million; $0.17 per share | $0.8 million; $0.04 basic per share | $7.1 million; $0.33 per share | $4.4 million; $0.21 basic per share |
- Quarterly revenue rose 51%; six-month revenue rose 52%. Grid revenue increased 42% for the quarter and 60% for the six months, led by D-VAR, VVO and ship-protection systems. Wind revenue increased 89% and 28%, respectively, driven by higher Doosan electrical-control-system shipments and spare-parts revenue.
- Quarterly gross margin was slightly lower year over year; six-month margin improved, which management attributed to higher revenue and a more favorable product mix. Both segments continued to report operating losses.
- Six-month operating cash outflow was $6.6 million, versus $10.5 million in the prior-year period. Investing activities provided $23.7 million, primarily reflecting the settlement of a $25 million certificate of deposit; financing activities used $0.6 million.
- At September 30, cash and cash equivalents were $41.2 million, marketable securities $10.2 million, and restricted cash $6.3 million—$57.7 million combined. Cash, cash equivalents and marketable securities totaled $51.4 million. Current assets were $86.4 million and current liabilities $32.6 million. The company reported no outstanding warrants or financial borrowings; operating lease liabilities totaled $4.0 million.
Changes, outlook and risks
- Net loss worsened in the quarter versus 2019, despite improved operating loss, partly because the prior-year period included warrant fair-value gains and current-period results included foreign-currency losses. For six months, improved operating performance was more than offset by the absence of those prior-year warrant gains and lower other income.
- Management said it believes available liquidity is sufficient for operations and capital expenditures for the 12 months following issuance of the financial statements. This is not revenue or earnings guidance. Liquidity depends on revenue growth, cost control, collecting Inox-related revenue and, if needed, raising capital.
- Inox had been in default for failing to provide required letters of credit. It delivered the remaining letters on October 1, 2020, curing the disclosed default. Management cautioned that COVID-19 and Inox’s ability to execute on wind-turbine orders could affect future shipments.
- On October 1, the company acquired Northeast Power Systems and related real estate for $26 million cash and 873,657 restricted shares, with up to 1 million additional shares potentially payable based on future revenue targets. The company assumed no debt. Results are included from October 1, after the reporting period.
- On October 26, the company completed a common-stock offering of 3.67 million shares at $15 per share, generating approximately $51.4 million net proceeds; underwriters also received a 30-day option for 550,500 additional shares.
- COVID-19 had not materially disrupted operations to date, but prolonged shutdowns affecting the company, customers or suppliers could materially harm results and liquidity. Other disclosed risks include recurring operating losses and negative cash flow, customer and supplier dependence, possible delays or lower sales from backlog, foreign-exchange exposure, and restricted cash pledged for letters of credit. The $5 million ComEd letter of credit supports the REG system project; hardware delivery was expected in late 2020 and system operation in 2021.
- The filing reported no material changes to previously disclosed risk factors and no legal proceedings listed in Part II. Management stated disclosure controls were effective as of September 30, 2020.
Important facts for investors to verify
- Whether revenue growth and improved six-month gross margin continue, and whether either segment approaches operating profitability.
- Inox’s performance, the timing and collectability of related orders, and whether COVID-19 or India’s wind-market conditions affect shipments.
- Cash use and liquidity after the NEPSI cash purchase, and the effect of the October offering and any underwriter option exercise on share count and dilution.
- Integration, results and revenue-target earn-out terms for NEPSI, including the potential additional share issuance.
- Execution and funding of the ComEd REG project, the status of restricted cash and performance-bond requirements, and ongoing effects of foreign-currency movements and inventory write-downs.