American Superconductor Corporation (AMSC) — Q1 FY2020 Form 10-Q
Reporting period: Three months ended June 30, 2020; fiscal year runs April 1–March 31. Amounts below are in U.S. dollars. AMSC supplies grid resiliency and Navy-related systems through its Grid segment, and power electronics, controls, designs and support for wind turbines through its Wind segment.
Financial performance
| Metric | Q1 FY2020 | Q1 FY2019 |
|---|---|---|
| Revenue | $21.2 million | $13.8 million |
| Gross profit / margin | $5.0 million / 24% | $1.6 million / 11% |
| Operating loss | $3.2 million | $6.2 million |
| Net loss | $3.4 million; $0.16 per share | $3.5 million; $0.17 per share |
| Operating cash flow | $(3.1) million | $(5.9) million |
- Revenue rose 54%. Grid revenue increased 80% to $17.7 million, led by stronger D-VAR, VVO and ship protection system sales. Wind revenue declined 11% to $3.5 million, mainly due to lower shipments to Inox, partly offset by shipments to Doosan.
- Gross margin improved on higher revenue and a more favorable product mix. Segment operating losses narrowed: Grid to $1.2 million from $4.7 million; Wind to $1.1 million from $1.3 million.
- Non-GAAP net loss was $2.4 million, or $0.11 per share, versus $6.2 million, or $0.30 per share. The company’s non-GAAP measure excludes stock-based compensation, acquired-intangible amortization, warrant fair-value changes and other specified items.
- Cash and cash equivalents were $20.7 million and marketable securities were $35.3 million at June 30; together, $56.0 million. Including $6.2 million of restricted cash, total cash, cash equivalents, marketable securities and restricted cash were $62.2 million, down from $66.1 million at March 31.
- Total assets were $109.7 million; stockholders’ equity was $69.4 million. No borrowing balance is presented in the balance sheet. Lease liabilities totaled $3.3 million. Current assets were $80.4 million versus current liabilities of $29.4 million.
Changes and significant items
- Compared with the prior-year quarter, revenue and gross margin rose substantially, and operating loss improved. Net loss improved only modestly: the prior-year period included a $2.9 million gain from changes in warrant fair value; no warrants remained outstanding at June 30, 2020.
- Operating cash use decreased year over year, primarily due to customer collections, partly offset by payments on accounts payable and accrued expenses. Accounts receivable fell to $8.2 million from $17.0 million at March 31.
- AMSC recorded a $0.8 million inventory write-down for excess and obsolete inventory, versus $0.1 million in the prior-year quarter. Stock-based compensation increased to $0.9 million from $0.2 million.
- Revenue concentration shifted: Siemens Gamesa represented 25% and EPC Services Company 24% of current-quarter revenue. Inox was below 10%, compared with 27% in the prior-year quarter.
Outlook, risks and contingencies
- Management said available liquidity should fund operations and capital expenditures for the 12 months following issuance of the financial statements. It also noted that liquidity depends on revenue growth, collections—including amounts under the Inox agreements—cost control and potential access to additional capital. AMSC has a history of operating losses and negative operating cash flows.
- Inox was delinquent on required letters of credit. On May 29, 2020, AMSC gave notice of default concerning €6.0 million of required letters of credit and stated it could terminate the supply contract if Inox did not cure within the 90-day period. Failure to post letters of credit or take delivery, or contract termination, could hurt revenue and liquidity. The filing does not report the outcome of the cure period.
- AMSC said COVID-19 had not materially disrupted operations to date, but warned prolonged shutdowns or business disruptions could materially affect operations, liquidity and results, and could limit access to capital. India’s manufacturing facilities had been closed from March through May and periodically thereafter, affecting Inox’s ability to perform.
- AMSC expected to deliver hardware for the ComEd resilient electric grid project in late 2020, with the system expected to be operational in 2021. A $5.0 million letter of credit for the project is collateralized by restricted cash.
- In July 2020, after quarter-end, the board approved a restructuring to consolidate Wind manufacturing in Massachusetts and reduce headcount at the Romania operation to reflect current wind-product demand. Costs were not expected to be material.
- No material changes to previously disclosed risk factors were reported; the filing lists no legal proceedings under Part II, Item 1. COVID-19, customer performance, wind-market demand, contract execution, and the need for possible additional financing remain relevant risks.
Key facts for investors to verify
- Whether Inox cured its letter-of-credit default, resumes contracted purchases, and what effect this has on Wind revenue, backlog and liquidity.
- Whether management’s 12-month liquidity assessment remains supported by cash generation, customer collections and spending control; also track restricted cash and access to financing.
- Execution and timing of the ComEd project, including late-2020 hardware delivery and expected 2021 operation.
- Effects of COVID-19 and the July restructuring on manufacturing, customer demand, costs and shipments.
- Quality and timing of the $53.7 million of remaining performance obligations expected within 12 months and the additional $14.5 million expected over 13–60 months; timing is subject to customer actions.