American Superconductor Corporation (AMSC) — Form 10-Q
Business context and reporting period: AMSC provides grid resiliency and power systems, including products for utilities, industrial customers, renewable-energy projects and the U.S. Navy, as well as power electronics, designs and services for wind-turbine manufacturers. This filing covers fiscal Q2 and the six months ended September 30, 2022; comparisons are with the corresponding 2021 periods. Amounts below are in U.S. dollars.
Financial performance
| Metric | Three months ended September 30 | Six months ended September 30 |
|---|---|---|
| Revenue | $27.7m, down 1% from $27.9m | $50.4m, down 6% from $53.3m |
| Gross profit / margin | $2.0m / 7%, versus $3.3m / 12% | $4.2m / 8%, versus $6.6m / 13% |
| Operating loss | $8.1m, versus $4.3m | $17.0m, versus $11.8m |
| Net loss | $9.9m, or $0.35 per share, versus $4.4m, or $0.16 per share | $18.6m, or $0.67 per share, versus $9.8m, or $0.36 per share |
| Operating cash flow | $11.6m used in the six-month period, compared with $11.7m used in 2021 |
Grid revenue was $25.7m for the quarter, up 4%, and $45.5m for six months, down 5%. Wind revenue was $2.0m for the quarter, down 40%, and $4.8m for six months, down 7%. Management attributed the quarterly Grid increase mainly to higher NEPSI revenue; the six-month Grid decline mainly to lower D-VAR revenue. Wind declines reflected fewer royalty collections and Inox electrical-control-system shipments, and lower license and development revenue.
Gross margin weakened amid lower revenue, unfavorable product mix and supply-chain inflation. Operating expenses rose to $10.1m for the quarter and $21.2m for six months, with higher SG&A compensation and acquisition-related amortization contributing; R&D expense declined. The company reported non-GAAP net losses of $6.5m for the quarter and $13.3m for six months, versus $5.1m and $7.8m, respectively. This company-defined measure excludes specified items and should be considered alongside, not instead of, GAAP results.
Financial position and liquidity
- At September 30, cash and cash equivalents were $27.8m; cash, cash equivalents and restricted cash totaled $37.4m, down $12.1m from March 31. Restricted cash was $9.5m, primarily collateral for letters of credit and project obligations, including a $5.0m ComEd letter of credit.
- Current assets were $95.0m and current liabilities $66.9m (approximate current ratio 1.42). Inventory rose to $36.3m from $23.7m, while accounts payable and accrued expenses rose to $36.1m from $29.1m.
- Total liabilities were $76.4m and stockholders’ equity $95.4m. Debt was approximately $0.13m in total; lease liabilities were $3.4m.
- Six-month investing cash outflow was $0.7m, mainly capital spending; financing cash inflow was less than $0.1m. The company had an accumulated deficit of $1.039bn and a history of operating losses and negative operating cash flows.
Management said available liquidity should fund operations and capital expenditures for the 12 months following issuance of the statements. It also said liquidity depends on revenue growth, improved gross margins, cost control and, if needed, additional capital. A shelf registration statement permits offers of up to $250m in securities through February 2024; future financing is not assured and could dilute shareholders.
Changes, outlook and risks
- Unusual item: A $1.9m China-dissolution charge was recorded in the quarter and six-month period, related to liquidation of the China entity and release of cumulative foreign-currency translation amounts. The statements also report a corresponding $1.9m other-comprehensive-income item. The charge contributed to the increase in GAAP net loss.
- Forward revenue: Remaining performance obligations were approximately $101.0m expected to be recognized within 12 months and $18.1m over months 13–60. The filing cautions that these obligations are subject to customer actions and timing cannot be reasonably estimated; the Inox forecast is firm and irrevocable only for its first three months.
- Operating pressures: Management reported substantial supply-chain inflation, sourcing delays and production disruption from higher employee absenteeism, which increased costs and reduced gross margin. It also cited COVID-19, the Russia-Ukraine war, rising interest rates, labor availability and broader supply-chain disruptions as potential adverse factors.
- Other risks: The filing identifies reliance on third-party suppliers, possible shortfalls against backlog, U.S. government contract funding and termination provisions, and significant Wind-segment exposure to a single customer. Management reported no material change to the risk factors in its latest Form 10-K. No legal proceedings were reported in Part II.
- No specific revenue or earnings guidance was provided. Management said it would monitor expenses and could reduce operating and capital spending if required. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether margins recover as supply costs, product mix and sourcing conditions change, and whether inventory growth converts into shipments and cash.
- Whether the stated performance obligations translate into revenue on expected schedules, particularly given customer-action contingencies and the limited firm period in the Inox forecast.
- How much additional financing may be needed to support ongoing losses and cash use, and whether any securities issuance under the $250m shelf would dilute shareholders.
- Customer and market concentration, including Inox-related Wind exposure and the timing of government-funded and Navy-related work.
- The effect of the China-dissolution item and contingent NEPSI earnout revaluations on reported results; the earnout was a $1.08m liability at September 30.