American Superconductor Corporation (AMSC) — Q1 FY2023 Form 10-Q
Reporting period: Three months ended June 30, 2023; comparable period is the three months ended June 30, 2022. AMSC provides power-grid resiliency and Navy ship-protection solutions through its Grid segment, and power electronics, designs and services for wind-turbine manufacturers through Wind. Amounts below are USD millions except per-share data.
Financial performance
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Revenue | $30.3 | $22.7 |
| Gross profit / gross margin | $6.3 / 20.8% | $2.2 / 9.8% |
| Operating loss | ($5.3) | ($8.9) |
| Net loss | ($5.4) | ($8.7) |
| Diluted loss per share | ($0.19) | ($0.32) |
| Non-GAAP net loss | ($2.1), or ($0.08) per share | ($6.8), or ($0.25) per share |
| Cash used in operating activities | $2.2 | $5.9 |
Revenue rose 33%, with Grid revenue up 30% to $25.7 million and Wind revenue up 58% to $4.5 million. Management attributed Grid growth mainly to higher new-energy power-systems revenue and Wind growth to additional electrical-control-system shipments to Inox. Gross margin improved primarily on higher revenue and a more favorable Grid product mix. Grid’s operating loss narrowed to $2.0 million from $7.3 million; Wind’s operating loss increased to $0.6 million from $0.4 million.
Operating cash outflow improved year over year, but included approximately $2.1 million of Employee Retention Credit reimbursement. Cash used in investing was $0.3 million, mainly capital spending; financing cash outflow was less than $0.1 million. Cash, cash equivalents and restricted cash totaled $23.1 million at June 30, down from $25.7 million at March 31, 2023.
Financial position and liquidity
- At June 30, 2023, cash and cash equivalents were $22.0 million; current assets were $102.2 million and current liabilities were $83.1 million.
- Total assets were $170.6 million, total liabilities $92.7 million, and stockholders’ equity $77.9 million. Debt was approximately $0.1 million; lease liabilities totaled $2.8 million.
- Inventory increased to $42.9 million from $37.0 million at March 31. Current and long-term deferred revenue totaled $58.1 million.
- Remaining performance obligations were approximately $123.3 million expected to be recognized within 12 months and $41.5 million over 13–60 months; timing depends on customer actions.
Management believes liquidity is sufficient for operations and capital expenditures for the next 12 months, while noting liquidity depends on revenue growth, cost control and potentially raising capital. The company has a shelf registration permitting up to $250 million of securities offerings, expiring February 2024; no future offering is assured.
Changes, outlook and risks
- Inflation, sourcing delays and supply-chain disruption continued to raise costs and disrupt production. The company said it was adjusting product and service pricing to mitigate pressures.
- A January 2023 workforce reduction affecting about 5% of employees is expected to yield approximately $5 million in annualized savings beginning in fiscal 2023. Expected cash costs were $1.0 million; $0.7 million had been paid by June 30.
- A $1.35 million non-cash loss from remeasurement of NEPSI acquisition contingent consideration increased operating expenses, reflecting a higher likelihood of achieving revenue targets and a higher share price. The liability was $2.62 million at quarter-end and may be settled in shares.
- The company recorded $0.4 million of inventory write-downs. Higher-than-planned design and material costs on acquired Neeltran contracts continued to affect margins; the quarter’s increase to the related contract-loss accrual was $0.1 million.
- AMSC has a history of operating losses and negative operating cash flows. Risks include continued supply disruption and inflation, dependence on suppliers, government funding and contracts, customer concentration, and uncertainty about raising capital. Inox represented 12% of quarterly revenue. Management stated risk factors were not materially changed from the FY2023 10-K.
- No specific revenue, earnings or cash-flow guidance was provided. Management’s liquidity statement is an assessment, not a forecast of profitability. No legal proceedings or subsequent events were reported; disclosure controls were assessed as effective.
Key facts for investors to verify
- Whether revenue growth and the improved gross margin persist, particularly as supply costs and production delays continue.
- How much of the lower operating cash outflow reflects recurring operations versus the one-time ERC reimbursement, and whether the remaining ERC amount is collected as expected.
- Whether the $5 million annualized restructuring savings are achieved and whether further restructuring or spending reductions are required.
- Execution, timing and profitability of the disclosed performance obligations, including exposure to customer actions and the 12% revenue contribution from Inox.
- Potential share dilution or other financial effects from the NEPSI earnout and any use of the shelf registration to raise capital.