Financial Data and Key Metrics Changes - The company reported revenues of $22.7 million for Q1 fiscal 2022, a decrease from $25.4 million in the same quarter last year, representing a decline of approximately 10.6% [11] - The net loss for Q1 fiscal 2022 was $8.7 million or $0.32 per share, compared to a net loss of $5.4 million or $0.20 per share in the year-ago quarter [13] - Non-GAAP net loss for Q1 fiscal 2022 was $6.8 million or $0.25 per share, compared to $2.7 million or $0.10 per share in the previous year [13] - Gross margin for Q1 fiscal 2022 was 10%, down from 13% in the year-ago quarter, impacted by an unfavorable product mix and backlog issues [11][12] Business Line Data and Key Metrics Changes - The Grid business unit accounted for 87% of total revenues, with a 16% decrease in revenues compared to the previous year [11] - The Wind business unit saw a 49% increase in revenues, contributing 13% to total revenues [11] Market Data and Key Metrics Changes - The company established an order book of over $100 million, indicating strong demand across various sectors including renewables, semiconductors, materials, and industrial [7][8] - The backlog grew by approximately 30% during Q1 fiscal 2022, with a book-to-bill ratio of over 2, meaning orders received were more than double the units shipped [22] Company Strategy and Development Direction - The company is focusing on the transition to a low carbon economy, which is expected to drive demand for semiconductors and critical materials [16] - The recent U.S. legislative acts, such as the Inflation Reduction Act and the CHIPS Act, are anticipated to provide significant tailwinds for the clean energy and semiconductor sectors [8][9][38] - The company aims to leverage its new energy power systems business to capitalize on the growing demand in the renewables and semiconductor markets [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a stronger second half of fiscal 2022, driven by new energy shipments and a reduction in backlog [10][22] - The company is navigating supply chain challenges but expects stabilization in component costs and availability [21] - Management highlighted the importance of maintaining strong customer relationships and adapting to their needs to ensure repeat business [48] Other Important Information - The company ended Q1 fiscal 2022 with $43.1 million in cash, down from $49.5 million at the end of the previous fiscal year [13] - Inventory levels increased by over $9 million to nearly $33 million, primarily to support new energy product lines [14] Q&A Session Summary Question: Breakdown of recent orders and expectations for the second half of 2022 - Management indicated that orders are diverse, spanning renewables, semiconductors, and industrial sectors, with most business expected to occur within the fiscal year [25][26] Question: Customer concentration in the semiconductor sector - Management clarified that they are working with multiple fabs and chip makers, reducing customer concentration risks [27][28] Question: Update on the Resilient Electric Grid (REG) system in Chicago - Management noted that the Chicago utility is pleased with the REG system's performance and is looking to expand its deployment [29][30] Question: Expectations for revenue growth in fiscal Q2, Q3, and Q4 - Management confirmed guidance for growth in Q2 and indicated that they are focused on delivering products on time to support revenue growth [32][33] Question: Potential for margin improvement with the Neeltran backlog rolling off - Management suggested that margins could approach historic averages, depending on revenue levels and project mix [34][35] Question: Impact of the CHIPS Act on order flow - Management confirmed increased conversations with customers regarding the CHIPS Act and its potential to drive growth [36][38] Question: Opportunities for geographic expansion in power management solutions - Management acknowledged historical business in various regions and expressed intent to expand further into Central and South America and Europe [40][43] Question: Risks associated with supply chain and labor in the second half of the year - Management acknowledged potential project delays due to supply chain and labor issues but emphasized a focus on customer needs [47][48] Question: Updates on Navy contracts and R&D orders - Management indicated ongoing discussions with the Navy for potential follow-on projects and emphasized the importance of successful integration of systems [49][50]

Financial Data and Key Metrics Changes - Total revenues for Q4 2021 were $28.3 million, a 34% increase from $21.2 million in the same quarter last year [13] - Full fiscal year revenues reached $108.4 million, representing over 24% growth year-over-year [13] - Gross margin for Q4 2021 was 11.6%, down from 13.9% in the previous year [14] - Full fiscal year gross margin was 12.4%, down from 20% in fiscal year 2020 [14][17] - Net loss for Q4 2021 was $5 million or $0.18 per share, compared to a net loss of $7.6 million or $0.29 per share in the prior year [16] - Non-GAAP net loss for Q4 2021 was $4.7 million or $0.17 per share, compared to $5.6 million or $0.21 per share in the year-ago quarter [16] Business Line Data and Key Metrics Changes - Grid business revenues for Q4 2021 were $25.7 million, a 33% increase year-over-year [13] - Wind business revenues for Q4 2021 were $2.6 million, a 46% increase compared to the previous year [13] - For the full fiscal year, grid business revenues grew by 40%, accounting for 91% of total revenues [13][14] - Wind business revenues decreased by 42% in fiscal 2021 due to reduced ECS shipments [14] Market Data and Key Metrics Changes - Over 60% of revenue in fiscal 2021 was U.S.-based, with nearly 40% from international projects [9] - The renewables market accounted for approximately 25% of sales, while the semiconductor market accounted for roughly 20% [10] Company Strategy and Development Direction - The company aims to continue diversifying its business through product offerings, geographic reach, and end markets [9] - AMSC has commercialized high-temperature superconductor technology in two markets, enhancing its product portfolio [11] - The company is focused on creating a sustainable and diversified business model, capitalizing on global decarbonization efforts [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in the renewables market, particularly in India and the U.S. [19][20] - The semiconductor industry is expected to see significant capital investment, providing a strong tailwind for AMSC [21] - Management acknowledged challenges from inflation and supply chain issues but believes these will improve over time [66] Other Important Information - The company ended fiscal year 2021 with $49.5 million in cash, down from $52.6 million at the end of 2020 [17] - Guidance for Q1 2022 anticipates revenues between $23 million and $26 million, with a net loss of no more than $8.9 million [17] Q&A Session Summary Question: What drove the sequential decline in margins? - Management indicated that both the Neeltran backlog and material cost inflation impacted the sequential decline in gross margin [35][37] Question: How long until price increases result in margin improvement? - Management expects to see improvement in margins over the next few quarters, with full impact anticipated by late fiscal 2022 [40][42] Question: What steps are needed to secure orders for the wind segment? - Management is assessing supply chain risks and preparing for discussions with Inox regarding future orders [43][44] Question: What is the potential for cross-selling with utility customers? - Management sees untapped potential for cross-selling various products to utility customers, particularly in the context of electrification challenges [50][51] Question: What indicators will signal a rebound in the wind business? - Management highlighted the health of the order book and relationships with key partners as primary indicators for future growth [55][56]

PART I [Item 1. Business Overview](index=5&type=section&id=Item%201.%20BUSINESS) AMSC is a leading provider of megawatt-scale power resiliency solutions for the power grid and U.S. Navy, and offers wind power solutions, leveraging proprietary smart materials and software to modernize grids, electrify the Naval fleet, and expand renewable energy, with recent acquisitions expanding its Grid business segment - **AMSC** provides **megawatt-scale power resiliency solutions** for the **power grid** and **U.S. Navy**, and offers **wind power solutions**, leveraging **proprietary smart materials** and software[10](index=10&type=chunk)[11](index=11&type=chunk) - Demand for **AMSC's solutions** is driven by the need for **modernized grids**, **U.S. Navy fleet electrification**, and increased **renewable energy adoption**[12](index=12&type=chunk) - Acquired **Northeast Power Systems, Inc.** (**NEPSI**) on **October 1, 2020**, a global provider of medium-voltage power capacitor and harmonic filter banks, integrated into the **Grid segment**[13](index=13&type=chunk) - Acquired **Neeltran, Inc.** on **May 6, 2021**, a supplier of rectifiers and transformers to industrial customers, also integrated into the **Grid segment**[14](index=14&type=chunk) [Market Opportunities](index=5&type=section&id=Market%20opportunities) AMSC addresses five key market opportunities: Transmission grid, Distribution grid, Urban Grid Infrastructure, Marine protection systems, and Wind Power, benefiting from solutions that improve efficiency, reliability, security, and capacity - **AMSC's power system products** address **five market opportunities**: Transmission grid, Distribution grid, Urban Grid Infrastructure, Marine protection systems, and Wind Power[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) [Competitive Strengths](index=7&type=section&id=Competitive%20strengths) The company's competitive strengths include differentiated technologies like proprietary smart materials (**Amperium® superconductor wire**) and smart software (**PowerModule™ power converters**), turnkey system solutions, a scalable and low-cost manufacturing platform, a robust patent portfolio, and unique integrated solutions for its target markets - **Differentiated technologies**: **Proprietary Amperium® superconductor wire** (**YBCO**) for minimal power loss and **PowerModule™ power converters** based on proprietary software/hardware[22](index=22&type=chunk) - **Turnkey systems**: Developed **full system solutions** sold directly to customers, leveraging application expertise[23](index=23&type=chunk) - **Scalable, low-cost manufacturing**: Primarily assembly operations with minimal fixed costs for wind turbine electrical control systems and power electronics; modular **HTS wire manufacturing**[23](index=23&type=chunk) - **Robust patent position**: Extensive portfolio of awarded patents and applications worldwide, with rights through exclusive and non-exclusive licenses[24](index=24&type=chunk) - **Unique solutions**: Provides integrated wind turbine design/engineering, support, and power electronics; also offers transmission planning, grid interconnection, and superconductor-based distribution systems for power grid operators[25](index=25&type=chunk) [Strategy](index=7&type=section&id=Strategy) AMSC's strategy focuses on driving revenue growth and enhancing operating results by providing solutions from power generation to delivery, concentrating on megawatt-scale power offerings, investing in product innovation (e.g., **REG**, **SPS**, **D-VAR VVO**), and expanding into emerging overseas markets while serving key markets locally - Focus on providing best-in-class engineering, support services, technologies, and solutions for smarter, cleaner, and more resilient power supplies[26](index=26&type=chunk) - Concentrate research, product development, and sales on **megawatt-scale power offerings**[26](index=26&type=chunk) - Continued investment in **product innovation**, including **Resilient Electric Grid** (**REG**) system, **Ship Protection Systems** (**SPS**) for the **U.S. Navy**, and **D-VAR Volt Var Optimization** (**VVO**)[27](index=27&type=chunk) - Pursue emerging overseas markets and serve key target markets locally with sales and field service personnel[28](index=28&type=chunk) [Grid Market Overview](index=8&type=section&id=Grid%20market%20overview) The global electricity grid requires modernization due to challenges like severe weather, cyber-attacks, increased renewable generation (wind and solar), and new loads (electric vehicles), which **AMSC's solutions** address by enhancing resiliency, stability, reliability, capacity, efficiency, and security of power grids - Global electricity grids need modernization due to challenges such as severe weather, physical/cyber-attacks, expanded renewable generation (wind: **136 GW** in **2021**, PV: **120 GW** in **2021**), and new loads like electric vehicles (**18.7 million** projected by **2030**)[29](index=29&type=chunk)[30](index=30&type=chunk) - **Biden Administration's energy plan**, if enacted, could positively impact demand for new energy power systems solutions by reforming tax incentives and developing financing mechanisms for clean energy[31](index=31&type=chunk)[32](index=32&type=chunk) - **Power grid operators** face challenges in resiliency, stability, reliability, capacity, efficiency, and security[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - **AMSC's solutions** for the **grid market** include **D-VAR® Systems**, **actiVAR® Systems**, **armorVAR™ Systems**, Transformers and DC Rectifiers, **D-VAR VVO®**, and **REG Systems**, designed to increase capacity, resiliency, reliability, security, and efficiency[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Marine Market Overview](index=11&type=section&id=Marine%20market%20overview) The **U.S. Navy** is modernizing its fleet, aiming for **355 battle force ships** by **2052**, and faces challenges in power capacity, space/weight limitations, and efficiency, which **AMSC** addresses with advanced **HTS-based degaussing systems** (**SPS**) and expanded **HTS technology** for fleet electrification - **U.S. Navy's 2022 shipbuilding plan** aims for a larger, modernized fleet of **355 battle force ships** by **2052**, up from **294** in September **2021**[45](index=45&type=chunk) - Navy fleets face challenges in power capacity for advanced weapon systems, space/weight limitations for new power solutions, and efficiency of conventional copper-based power cable systems[46](index=46&type=chunk)[47](index=47&type=chunk) - **AMSC's HTS-based Ship Protection Systems** (**SPS**) degaussing system reduces system weight by **50-80%** and energy consumption compared to copper-based systems[45](index=45&type=chunk)[48](index=48&type=chunk) - The first **HTS-based SPS system** was delivered in January **2022** for deployment on the **USS Fort Lauderdale** (San Antonio-class amphibious warfare ship)[46](index=46&type=chunk)[48](index=48&type=chunk) - **AMSC** is expanding **HTS technology** for in-board power delivery systems and power generation/electric propulsion systems to support the Navy's 'electrify the fleet' mission[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) [Wind Market Overview](index=13&type=section&id=Wind%20market%20overview) The global wind power market is growing, with **91 GW** added in **2021** and an estimated **85 GW** in **2022**, driven by government incentives, technological improvements, and cost reductions, with **AMSC** providing electrical control systems (**ECS**), licensing wind turbine designs, and offering extensive customer support services - Global wind generation capacity increased by approximately **91 GW** in **2021** (up from **84 GW** in **2020**), with an estimated **85 GW** to be added in **2022**[54](index=54&type=chunk) - Growth is driven by government incentives, technological improvements, turbine cost reductions, offshore wind development, and increasing cost competitiveness[55](index=55&type=chunk) - **AMSC's solutions** for the **wind market** include **Electrical Control Systems** (**ECS**), wind turbine designs (**2 MW** and higher), and extensive customer support services[56](index=56&type=chunk)[57](index=57&type=chunk) - **AMSC** has shipped enough core electrical components and complete **ECS** to power over **16,000 MW** of wind power[56](index=56&type=chunk) [Customers](index=13&type=section&id=Customers) **AMSC** serves over **100 global customers** in the **grid market**, including utilities and the **U.S. Navy**, and licenses wind turbine designs to manufacturers like **Inox Wind Limited** and **Doosan Heavy Industries**, with **Fuji Bridex Pte Ltd** accounting for **14%** of total revenues in fiscal **2021** - Served over **100 customers** in the **grid market**, including **Commonwealth Edison**, **YMC Incorporated**, the **U.S. Navy**, **SSE plc**, **Consolidated Power Projects** (**Pty**) Ltd, **Fuji Bridex**, **Vestas Wind Systems A/S**, and **Ergon Energy**[59](index=59&type=chunk) - Licensed wind turbine designs to **Inox Wind Limited** (India) and **Doosan Heavy Industries** (Korea)[59](index=59&type=chunk) Major Customers by Revenue Contribution | Customer | Fiscal Year 2021 Revenue Contribution | | :---------------------- | :------------------------------------ | | Fuji Bridex Pte Ltd | 14% | | EPC Services Company | <10% (13% in FY2020) | | Department of Homeland Security | <10% (10% in FY2019) | [Facilities and Manufacturing](index=13&type=section&id=Facilities%20and%20Manufacturing) **AMSC's primary facilities** are in Massachusetts, New York, and Connecticut for corporate, **Grid segment manufacturing**, and R&D, with a global footprint including sales/field service offices, and key raw materials mostly available from multiple sources, though some components rely on limited suppliers Significant Properties (as of March 31, 2022) | Location | Supporting | Square footage | Owned/Leased | | :--------------------------- | :----------------------------- | :------------- | :----------- | | Ayer, Massachusetts | Corporate & Grid Segment | 88,000 | Leased | | Westminster, Massachusetts | Grid Segment | 77,500 | Leased | | Queensbury, New York | Grid Segment | 35,000 | Owned | | New Milford, Connecticut | Grid Segment | 85,000 | Owned | - Global footprint includes sales and/or field service offices in Australia, India, South Korea, the United Kingdom, and McLean, VA[62](index=62&type=chunk) - Principal raw materials: nickel, silver, yttrium, copper, brass, stainless steel. Major components: insulated gate bi-polar transistors, heatsinks, inductors, enclosures, transformers, printed circuit boards. Most are available from multiple sources, but some materials/components depend on single or limited suppliers[63](index=63&type=chunk) [Sales and Marketing](index=15&type=section&id=Sales%20and%20Marketing) **AMSC** employs a direct sales force in core target markets globally, supplemented by manufacturers' sales representatives in North America, with the sales team collaborating with business development staff, wind turbine engineers, and power grid transmission planners to understand customer needs and provide cost-effective solutions - Strategy: Serve customers locally through a **direct sales force** in core target markets worldwide[65](index=65&type=chunk) - Utilizes manufacturers' sales representatives in the United States and Canada[65](index=65&type=chunk) - Sales force leverages business development staff, wind turbine engineers, and power grid transmission planners to understand customer needs and provide solutions[65](index=65&type=chunk) [Segments](index=15&type=section&id=Segments) **AMSC** operates under two market-facing business units: **Grid** and **Wind**, a structure designed to effectively anticipate and meet the needs of power generation project developers, the Navy's ship protection systems, electric utilities, and wind turbine manufacturers - Operations are segmented into **two market-facing business units**: **Grid** and **Wind**[66](index=66&type=chunk) - This market-centric structure helps anticipate and meet the needs of power generation project developers, Navy's ship protection systems, electric utilities, and wind turbine manufacturers[66](index=66&type=chunk) [Competition](index=15&type=section&id=Competition) **AMSC** faces competition across its technology and product development, with competitive performance relying on innovation, product range, quality, reliability, and customer support, from major industrial companies in **FACTS systems**, power capacitor banks, DC power supply systems, and traditional infrastructure providers, as well as defense contractors and global turbine manufacturers - **Competition** in **FACTS systems** (**D-VAR products**) from **ABB**, **Siemens**, **Mitsubishi**, **RXHK**, **NR Electric Co.**, **Ingeteam**, and battery-based **UPS systems**[67](index=67&type=chunk)[148](index=148&type=chunk) - **Competition** in medium-voltage metal-enclosed power capacitor banks and harmonic filter banks (**NEPSI products**) from **Controllix PowerSide**, **Elgin Power Solutions**, **Scott Engineering**, and **QVARx**[67](index=67&type=chunk)[149](index=149&type=chunk) - **Competition** in DC power supply systems (**Neeltran products**) from **Scr Controlled Rectifiers**, **IGBT controlled choppers** produced by **ABB**, **Siemens**, **Friem Dynapower**, and **Nidec**[68](index=68&type=chunk)[149](index=149&type=chunk) - For **HTS-based REG**, **competition** comes from traditional approaches like new full-sized substations, overhead/underground transmission, and urban power transformers[68](index=68&type=chunk)[149](index=149&type=chunk) - For **HTS-based SPS**, primary **competition** is from defense contractors providing copper-based systems (e.g., **Ultra EMS**, **L3 Harris**, **Raytheon**)[69](index=69&type=chunk)[150](index=150&type=chunk) - In wind, competitors include **ABB**, **Hopewind**, **Semikron** for components, and global turbine manufacturers like **Siemens Gamesa**, **General Electric**, **Vestas**, **Suzlon**. Design engineering firms like **Aerodyn** and **W2E** also compete for design services[70](index=70&type=chunk)[151](index=151&type=chunk) [Patents, Licenses and Trade Secrets](index=15&type=section&id=Patents%2C%20licenses%20and%20trade%20secrets) **AMSC** maintains a strong worldwide patent position and licenses for its technologies, including power quality and reliability systems (**Grid**), **HTS wire** (**Amperium®**), and wind turbine designs (**Windtec™ Solutions**), also protecting key technology through trade secrets with confidentiality agreements - **AMSC** has an **extensive portfolio of awarded patents** and patent applications worldwide, along with rights through exclusive and non-exclusive licenses[71](index=71&type=chunk) - **Grid products** (e.g., **D-VAR**) are covered by patents and pending applications focusing on performance improvement and cost reduction[75](index=75&type=chunk) - **HTS patents** cover **Amperium® wire production** (using **MIT's MOD process** and **Alcatel-Lucent's YBCO material licenses**) and applications like fault current limiting technology, rotating machines, and **ship protection systems**[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - **Windtec™ Solutions' wind turbine designs** are patented, including unique blade pitch control systems with a patented **SafetyLOCK™ feature**[80](index=80&type=chunk) - **Trade secrets** are protected through confidentiality agreements with employees and consultants, and by limiting access to confidential information[81](index=81&type=chunk) [Human Capital](index=17&type=section&id=Human%20Capital) As of **March 31, 2022**, **AMSC** employed **326 people**, none represented by a labor union, prioritizing a safe, positive, diverse, and inclusive work environment, offering competitive compensation, benefits, and growth opportunities to attract and retain talent - As of **March 31, 2022**, **AMSC** employed **326 persons**; none are represented by a labor union[82](index=82&type=chunk) - Focuses on providing a safe, positive, diverse, and inclusive work environment, competitive compensation (fixed and variable, including stock-based), and opportunities for growth to attract and retain talent[83](index=83&type=chunk)[84](index=84&type=chunk) [Available Information](index=17&type=section&id=Available%20information) **AMSC** makes its annual, quarterly, and current reports available free of charge on its website (www.amsc.com) as soon as practicable after filing with the **SEC**, with the website also disclosing amendments or waivers to its Code of Business Conduct and Ethics[85](index=85&type=chunk) [Information about Executive Officers](index=18&type=section&id=Information%20about%20our%20Executive%20Officers) Key executive officers include **Daniel P. McGahn** (President, CEO, and Chairman) and **John W. Kosiba, Jr.** (Senior Vice President, CFO, and Treasurer) Executive Officers (as of filing date) | Name | Age | Position | | :------------------ | :-- | :------------------------------------------- | | Daniel P. McGahn | 50 | President, Chief Executive Officer and Chairman | | John W. Kosiba, Jr. | 49 | Senior Vice President, Chief Financial Officer and Treasurer | [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) **AMSC** faces various risks, including a **history of operating losses** and **negative cash flows**, dependence on additional financing, and potential impacts from **performance bonds**, alongside operational, market, technological, and stock-related risks - The company has a **history of operating losses** and **negative operating cash flows**, requiring potential future financing[90](index=90&type=chunk)[92](index=92&type=chunk) - **Significant contracts** require **performance bonds** or letters of credit, restricting access to collateralized cash[94](index=94&type=chunk)[95](index=95&type=chunk) - **U.S. government contracts** are subject to audit, modification, or termination, and continued funding depends on annual congressional appropriation[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - The **COVID-19 pandemic** has caused **inflationary pressure** in the supply chain, material sourcing delays, and production disruptions, impacting profitability and financial condition[109](index=109&type=chunk)[111](index=111&type=chunk) - Success depends on the **commercial adoption** of the **REG system**, which currently has limited widespread use, and a robust commercial market may not develop[141](index=141&type=chunk)[142](index=142&type=chunk) - **International operations** (**38%** of **FY2021 revenues**) are subject to risks like longer payment cycles, collection difficulties, foreign laws, currency fluctuations, and geopolitical events (e.g., Russia-Ukraine war impact on raw materials)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - **Technological challenges** must be addressed for widespread commercial acceptance of **superconductor products**, including improving performance and reducing costs of **Amperium wire**[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 1B. Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section states that there are no unresolved staff comments applicable to the registrant[175](index=175&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) **AMSC's primary facilities** for corporate, **Grid manufacturing**, and R&D are located in Ayer and Westminster, Massachusetts, and Queensbury, New York, and New Milford, Connecticut, with the company also maintaining leased sales and/or field service offices globally Significant Properties (as of March 31, 2022) | Location | Supporting | Square footage | Owned/Leased | | :--------------------------- | :----------------------------- | :------------- | :----------- | | Ayer, Massachusetts | Corporate & Grid Segment | 88,000 | Leased | | Westminster, Massachusetts | Grid Segment | 77,500 | Leased | | Queensbury, New York | Grid Segment | 35,000 | Owned | | New Milford, Connecticut | Grid Segment | 85,000 | Owned | - Global footprint includes leased facilities in Australia, Austria, India, Wisconsin, Washington, and the United Kingdom, totaling approximately **72,000 square feet**, primarily for R&D, sales, and field service[176](index=176&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) **AMSC** is not currently a party to any material legal proceedings[179](index=179&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to **AMSC**[179](index=179&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) **AMSC's common stock** is listed on the **Nasdaq Global Select Market** under 'AMSC', with **182 holders of record** as of **May 27, 2022**, and the company has never paid cash dividends, intending to retain earnings for business development - **Common stock** listed on **Nasdaq Global Select Market** under symbol '**AMSC**' since **1991**[181](index=181&type=chunk) - As of **May 27, 2022**, there were **182 holders of record** for common stock[181](index=181&type=chunk) - No cash dividends have been paid; earnings will be retained for business development[182](index=182&type=chunk) 5-Year Cumulative Total Return (March 31, 2017 = $100.00) | Company/Index | 2017 | 2018 | Fiscal year ended 2019 | March 31, 2020 | 2021 | 2022 | | :------------------------------------------- | :----- | :---- | :--------------------- | :------------- | :----- | :----- | | American Superconductor Corporation | 100.00 | 84.84 | 187.46 | 79.88 | 276.38 | 110.93 | | Nasdaq Composite Index | 100.00 | 120.76| 133.60 | 134.52 | 233.26 | 252.05 | | Nasdaq Electrical Components & Equipment Index | 100.00 | 111.71| 110.99 | 92.04 | 171.00 | 170.22 | [Item 6. [Reserved]](index=38&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information[186](index=186&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an executive overview of **AMSC's business**, a detailed analysis of its financial performance for fiscal years **2021** and **2020**, including revenues, costs, operating expenses, and net loss, also discussing non-GAAP measures, liquidity, capital resources, legal proceedings, recent accounting pronouncements, and critical accounting policies and estimates [Executive Overview](index=39&type=section&id=Executive%20Overview) **AMSC** is a leading provider of **megawatt-scale power resiliency solutions** for the **power grid** and Navy, and wind power, leveraging **PowerModule™ converters** and **Amperium® HTS wires**, protected by extensive IP, with operations divided into **Grid** and **Wind segments**, and recent acquisitions (**NEPSI** in **2020**, **Neeltran** in **2021**) expanding the **Grid segment**, while the **COVID-19 pandemic** and the Russia-Ukraine war have led to **supply chain inflation** and disruptions - **AMSC** provides **megawatt-scale power resiliency solutions** for the **power grid** and Navy, and wind power, utilizing **PowerModule™ programmable power electronic converters** and **Amperium® high temperature superconductor** (**HTS**) wires[188](index=188&type=chunk)[190](index=190&type=chunk) - Business operates under **two market-facing units**: **Grid** (**Gridtec™ Solutions**) and **Wind** (**Windtec™ Solutions**)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Successfully integrated the **Resilient Electric Grid** (**REG**) system on **ComEd's electric power grid**, becoming fully operational in August **2021**[194](index=194&type=chunk) - Acquired **NEPSI** on **October 1, 2020**, and **Neeltran** on **May 6, 2021**, expanding the **Grid business segment**[195](index=195&type=chunk)[196](index=196&type=chunk) - Experiencing substantial **inflationary pressure** in the supply chain, material sourcing delays, and production disruptions due to **COVID-19** and the Russia-Ukraine war, increasing cost of revenues and decreasing gross margin[197](index=197&type=chunk) [Results of Operations (Fiscal Years Ended March 31, 2022 and 2021)](index=41&type=section&id=Results%20of%20Operations) Total revenues increased by **24%** in fiscal **2021** to **$108.4 million**, driven by a **40% increase** in **Grid revenues** due to acquisitions and product line growth, while **Wind revenues** decreased by **42%**, with gross margin declining to **12%** due to unfavorable product mix, inflation, and acquisition-related adjustments, and a net loss of **$19.2 million** in fiscal **2021** Total Revenues (in thousands) | Revenues | 2022 | 2021 | | :--------- | :---------- | :--------- | | Grid | $98,876 | $70,528 | | Wind | $9,559 | $16,597 | | Total | $108,435 | $87,125 | - Total revenues increased by **24%** to **$108.4 million** in fiscal **2021** from **$87.1 million** in fiscal **2020**[200](index=200&type=chunk) - **Grid revenues** increased **40%** to **$98.9 million** in fiscal **2021**, driven by **NEPSI** and **Neeltran acquisitions**, and growth in **D-VAR**, **VVO**, and **SPS product lines**[201](index=201&type=chunk) - **Wind revenues** decreased **42%** to **$9.6 million** in fiscal **2021**, primarily due to no similar **ECS shipments** to **Doosan** as in fiscal **2020**[202](index=202&type=chunk) - **Gross margin** decreased to **12%** in fiscal **2021** from **20%** in fiscal **2020**, due to **unfavorable product mix**, inflation, material sourcing delays, and purchase accounting adjustments from the **Neeltran Acquisition**[203](index=203&type=chunk) Operating Loss by Segment (in thousands) | Operating income (loss) | 2022 | 2021 | | :---------------------- | :---------- | :---------- | | Grid | $(20,725) | $(13,318) | | Wind | $(1,554) | $(3,302) | | Unallocated corporate expenses | $1,190 | $(6,545) | | Total | $(21,089) | $(23,165) | - **Net loss** was **$19.2 million** in fiscal **2021**, compared to **$22.7 million** in fiscal **2020**, primarily due to a **$5.9 million gain on contingent consideration** in fiscal **2021** (vs. **$3.0 million loss** in fiscal **2020**)[206](index=206&type=chunk)[209](index=209&type=chunk)[214](index=214&type=chunk) [Non-GAAP Measures](index=44&type=section&id=Non-GAAP%20Measures) **AMSC** uses **non-GAAP net loss** to evaluate performance by excluding **stock-based compensation**, amortization of acquisition-related intangibles, acquisition costs, changes in fair value of contingent consideration, and other non-cash or unusual charges, with **non-GAAP net loss** increasing to **$17.1 million** (**$0.63 per share**) in fiscal **2021** from **$14.1 million** (**$0.59 per share**) in fiscal **2020** - **Non-GAAP net loss** is defined as net loss before **stock-based compensation**, amortization of acquisition-related intangibles, acquisition costs, changes in fair value of contingent consideration, and other non-cash or unusual charges[216](index=216&type=chunk) Non-GAAP Net Loss (in thousands, except per share data) | Metric | 2022 | 2021 | | :------------------------------------ | :---------- | :---------- | | Net loss | $(19,193) | $(22,678) | | Stock-based compensation | $4,661 | $3,485 | | Amortization of acquisition-related intangibles | $2,623 | $1,697 | | Acquisition costs | $681 | $313 | | Change in fair value of contingent consideration | $(5,850) | $3,060 | | **Non-GAAP net loss** | **$(17,078)** | **$(14,123)** | | Non-GAAP net loss per share | $(0.63) | $(0.59) | | Weighted average shares outstanding | 27,203 | 23,879 | - The increase in **non-GAAP net loss** in fiscal **2021** compared to fiscal **2020** was due to a higher operating loss driven by lower gross margin and higher operating expenses[217](index=217&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) **AMSC** has an **accumulated deficit** of **$1,020.5 million** and recurring **operating losses**, with cash, cash equivalents, marketable securities, and restricted cash totaling **$49.5 million** as of **March 31, 2022**, a decrease of **$31.2 million** from **2021**, and while the company believes it has sufficient liquidity for the next twelve months, global market instability could impact fundraising - **Accumulated deficit** of **$1,020.5 million** as of **March 31, 2022**, with recurring **operating losses** and **negative operating cash flows**[219](index=219&type=chunk)[282](index=282&type=chunk) Cash, Cash Equivalents, Marketable Securities and Restricted Cash (in thousands) | Metric | March 31, 2022 | March 31, 2021 | | :---------------------------------------------------------------------- | :------------- | :------------- | | Cash and cash equivalents | $40,584 | $67,814 | | Marketable securities | — | $5,140 | | Restricted cash | $8,902 | $7,725 | | **Total cash, cash equivalents, marketable securities and restricted cash** | **$49,486** | **$80,679** | - **Net cash used in operating activities** increased to **$19.0 million** in fiscal **2021** from **$8.7 million** in fiscal **2020**, due to decreased collections and higher inventory balances[221](index=221&type=chunk) - Filed a **shelf registration statement** (**Form S-3**) in February **2021** to offer and sell up to **$250 million** of securities to fund future capital needs[219](index=219&type=chunk)[283](index=283&type=chunk) - Believes it has **sufficient liquidity** for the next twelve months but may seek additional capital; global market instability (**COVID-19**, Russia-Ukraine war) could impact ability to raise capital[225](index=225&type=chunk)[226](index=226&type=chunk)[288](index=288&type=chunk) [Legal Proceedings](index=46&type=section&id=Legal%20Proceedings) **AMSC** records liabilities for legal matters when a loss is probable and estimable, reviewing estimates periodically, and if a loss is not probable or estimable, no liability is recorded, but disclosure is made if necessary, with legal costs expensed as incurred[227](index=227&type=chunk) [Recent Accounting Pronouncements](index=48&type=section&id=Recent%20Accounting%20Pronouncements) **AMSC** adopted **ASU 2019-12** (Income Taxes) on **April 1, 2021**, with no material impact, and is evaluating the impact of **ASU 2016-13** (Credit Losses) and **ASU 2021-08** (Business Combinations) for effective dates after **December 15, 2022**, while **ASU 2021-10** (Government Assistance) is not expected to have a material impact - Adopted **ASU 2019-12** (Income Taxes) on **April 1, 2021**, with no material impact[231](index=231&type=chunk)[468](index=468&type=chunk) - Evaluating **ASU 2016-13** (Credit Losses) and **ASU 2021-08** (Business Combinations) for effective dates after **December 15, 2022**[230](index=230&type=chunk)[231](index=231&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) - **ASU 2021-10** (Government Assistance) is not expected to have a material impact[232](index=232&type=chunk)[469](index=469&type=chunk) [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements involves significant estimates and judgments, particularly in **revenue recognition** (over-time method for R&D and customized products), business acquisitions (fair value allocation, contingent consideration), valuation of long-lived assets (impairment indicators), **goodwill impairment testing** (annual assessment, discounted cash flow), and **income taxes** (deferred tax assets, valuation allowances, uncertain tax positions) - **Revenue recognition** for certain arrangements (R&D, prototype development, customized products) uses the over-time method, measured by costs incurred relative to total estimated contract costs, requiring significant judgment for total expected costs and variable consideration[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - Business acquisitions are accounted for using the purchase method, allocating purchase price to acquired assets and liabilities at fair value, with significant judgment in determining fair value of intangibles and contingent consideration[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - Long-lived assets are periodically evaluated for impairment based on events or circumstances suggesting carrying amount may not be recoverable from undiscounted future cash flows[243](index=243&type=chunk)[244](index=244&type=chunk) - **Goodwill** is assessed annually for impairment (**February 28th**) using a qualitative assessment first, followed by a quantitative test (discounted cash flow and market approach) if impairment is more likely than not[246](index=246&type=chunk)[247](index=247&type=chunk) - **Income tax provision** includes current and deferred portions; deferred tax assets are assessed for realizability, with valuation allowances recorded based on future taxable income uncertainty. Uncertain tax positions are evaluated using a two-step approach[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not required for smaller reporting companies, and therefore no disclosures are provided[251](index=251&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of **American Superconductor Corporation** for the fiscal years ended **March 31, 2022**, and **2021**, including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes to the financial statements [Report of Independent Registered Public Accounting Firm](index=53&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) **RSM US LLP** audited **AMSC's consolidated financial statements** for fiscal years ended **March 31, 2022** and **2021**, providing an unqualified opinion, with **critical audit matters** including **revenue recognition** due to significant management judgments in contract analysis and estimates, and **goodwill impairment assessment** due to significant estimates in fair value determination - **RSM US LLP** issued an unqualified opinion on the consolidated financial statements for fiscal years ended **March 31, 2022** and **2021**[253](index=253&type=chunk) - **Critical audit matters** identified: **Revenue Recognition** (due to significant management judgment in contract terms, estimates of total costs, and gross margin) and **Goodwill Impairment** (due to significant estimates in fair value of reporting units, including revenue/expense growth rates and discount rates)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) [Consolidated Balance Sheets](index=55&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets increased to **$173.9 million** in fiscal **2022** from **$168.9 million** in fiscal **2021**, with current assets decreasing primarily due to a reduction in cash and marketable securities, while inventory and accounts receivable increased, and total liabilities increased to **$64.5 million** from **$52.3 million**, mainly driven by accounts payable and deferred revenue, and stockholders' equity decreased to **$109.4 million** from **$116.6 million** Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | March 31, 2021 | | :------------------------------------ | :------------- | :------------- | | **ASSETS** | | | | Cash and cash equivalents | $40,584 | $67,814 | | Marketable securities | — | $5,140 | | Accounts receivable | $20,280 | $13,267 | | Inventory | $23,666 | $13,306 | | Total current assets | $94,336 | $105,230 | | Property, plant and equipment, net | $13,656 | $8,997 | | Intangibles, net | $11,311 | $9,153 | | Goodwill | $43,471 | $34,634 | | Total assets | **$173,887** | **$168,866** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable and accrued expenses | $29,140 | $19,810 | | Contingent consideration | $1,200 | $7,050 | | Deferred revenue, current portion | $22,812 | $13,266 | | Total current liabilities | $53,964 | $40,738 | | Total liabilities | **$64,498** | **$52,274** | | Total stockholders' equity | **$109,389** | **$116,592** | [Consolidated Statements of Operations](index=56&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal year **2022**, total revenues were **$108.4 million**, up from **$87.1 million** in **2021**, with gross profit decreasing to **$13.5 million** (**12% margin**) from **$17.5 million** (**20% margin**), operating expenses decreasing due to a **gain on contingent consideration**, and a net loss of **$19.2 million** compared to **$22.7 million** in **2021** Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 2022 | 2021 | | :------------------------------------ | :---------- | :---------- | | Revenues | $108,435 | $87,125 | | Cost of revenues | $94,943 | $69,671 | | Gross profit | $13,492 | $17,454 | | Operating expenses | $34,581 | $40,619 | | Operating loss | $(21,089) | $(23,165) | | Loss before income tax expense | $(21,042) | $(23,510) | | Income tax benefit | $(1,849) | $(832) | | Net loss | $(19,193) | $(22,678) | | Net loss per common share - Basic | $(0.71) | $(0.95) | | Weighted average common shares outstanding - Basic | 27,203 | 23,879 | [Consolidated Statements of Comprehensive Income (Loss)](index=57&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The consolidated statements of comprehensive income (loss) show a **net loss** of **$19.2 million** for fiscal year **2022** and **$22.7 million** for fiscal year **2021**, with other comprehensive loss, net of tax, primarily from foreign currency translation losses, being minimal, resulting in a total comprehensive loss of **$19.2 million** in **2022** and **$22.7 million** in **2021** Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Fiscal Year 2022 | Fiscal Year 2021 | | :------------------------------------ | :--------------- | :--------------- | | Net loss | $(19,193) | $(22,678) | | Other comprehensive loss, net of tax: | | | | Foreign currency translation losses | $(14) | $(61) | | Total other comprehensive loss, net of tax | $(14) | $(61) | | **Comprehensive loss** | **$(19,207)** | **$(22,739)** | [Consolidated Statements of Stockholders' Equity](index=58&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased from **$116.6 million** at **March 31, 2021**, to **$109.4 million** at **March 31, 2022**, primarily due to the **net loss** of **$19.2 million**, partially offset by increases in additional paid-in capital from **stock-based compensation** and stock issuances related to bonus payments and the **Neeltran acquisition** Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | March 31, 2022 | March 31, 2021 | | :------------------------------------ | :------------- | :------------- | | Common Stock, Par Value | $289 | $280 | | Additional Paid-in Capital | $1,133,536 | $1,121,495 | | Treasury Stock | $(3,639) | $(3,593) | | Accumulated Other Comprehensive Loss | $(291) | $(277) | | Accumulated Deficit | $(1,020,506) | $(1,001,313) | | **Total Stockholders' Equity** | **$109,389** | **$116,592** | - Key changes in fiscal **2022** include a **net loss** of **$19.2 million**, **stock-based compensation expense** of **$4.7 million**, and issuance of common stock for bonus payments (**$2.3 million**) and the **Neeltran acquisition** (**$4.4 million**)[276](index=276&type=chunk) [Consolidated Statements of Cash Flows](index=59&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) **Net cash used in operating activities** increased to **$19.0 million** in fiscal **2022** from **$8.7 million** in fiscal **2021**, primarily due to decreased collections and higher inventory, while **net cash used in investing activities** was **$7.2 million** in **2022**, mainly due to cash paid for acquisitions, and **net cash provided by financing activities** significantly decreased to **$0.1 million** in **2022** from **$50.8 million** in **2021** due to the absence of a public equity offering Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 2022 | 2021 | | :------------------------------------------------------------------ | :---------- | :---------- | | Net cash used in operating activities | $(18,977) | $(8,681) | | Net cash provided by (used in) investing activities | $(7,163) | $2,469 | | Net cash provided by financing activities | $142 | $50,828 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(26,053) | $44,675 | | Cash, cash equivalents and restricted cash at end of year | $49,486 | $75,539 | - **Net cash used in operating activities** increased in fiscal **2022** primarily due to decreased collections and higher inventory balances[221](index=221&type=chunk)[279](index=279&type=chunk) - **Net cash used in investing activities** in fiscal **2022** was primarily due to cash paid for the **Neeltran acquisition** (**$11.5 million**), partially offset by proceeds from marketable securities maturities[279](index=279&type=chunk) - **Net cash provided by financing activities** decreased significantly in fiscal **2022** due to the absence of a public equity offering, which provided **$51.5 million** in fiscal **2021**[222](index=222&type=chunk)[279](index=279&type=chunk) [Notes to the Consolidated Financial Statements](index=60&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed information supporting the consolidated financial statements, covering the nature of business, significant accounting policies, acquisitions (**Neeltran** and **NEPSI**), **revenue recognition**, goodwill, **fair value measurements**, accounts receivable, inventory, property/plant/equipment, intangible assets, accounts payable/accrued expenses, contingent consideration, **income taxes**, debt, leases, stockholders' equity, commitments/contingencies, employee benefit plans, business segments, and recent accounting pronouncements [1. Nature of the Business and Operations and Liquidity](index=60&type=section&id=1.%20Nature%20of%20the%20Business%20and%20Operations%20and%20Liquidity) **AMSC**, founded in **1987**, provides **megawatt-scale power resiliency solutions** for the grid and Navy, leveraging smart materials and software, with financial statements prepared on a going concern basis despite recurring **operating losses** and an **accumulated deficit** of **$1,020.5 million** as of **March 31, 2022**, and recent acquisitions and global events impacting liquidity - **AMSC** was founded on **April 9, 1987**, providing **megawatt-scale power resiliency solutions** for the grid and Navy[280](index=280&type=chunk) - As of **March 31, 2022**, the company had an **accumulated deficit** of **$1,020.5 million** and recurring **negative operating cash flows** (**$19.0 million** used in operations for **FY2022**)[282](index=282&type=chunk) - A **shelf registration statement** (**Form S-3**) filed in February **2021** allows for offering up to **$250 million** in securities to fund future capital needs[283](index=283&type=chunk) - The **Neeltran acquisition** on **May 6, 2021**, involved **$1.0 million** cash, **301,556 shares** of common stock, and **$7.6 million** debt payoff, totaling **$16.4 million**[284](index=284&type=chunk) - **COVID-19** and the Russia-Ukraine war have caused **inflationary pressure**, material sourcing delays, and production disruptions, impacting cost of revenues and gross margin[286](index=286&type=chunk) - Management believes it has **sufficient liquidity** for the next twelve months, but this is highly dependent on increasing revenues, controlling costs, and potentially raising additional capital[288](index=288&type=chunk) [2. Summary of Significant Accounting Policies](index=62&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note details **AMSC's accounting policies**, including consolidation, use of estimates, classification and valuation of cash equivalents and marketable securities, accounts receivable allowances, inventory valuation, **lease accounting** (**ASC 842**), property/plant/equipment depreciation, long-lived asset impairment, **goodwill impairment testing**, **revenue recognition** (**ASC 606**), business acquisitions, product warranty accruals, R&D expensing, **income tax provisions**, **stock-based compensation**, EPS computation, foreign currency translation, and risk disclosures - Consolidated financial statements include wholly-owned subsidiaries, eliminating intercompany balances and transactions[289](index=289&type=chunk) - Key estimates include **revenue recognition**, collectability of receivables, inventory realizability, goodwill and intangible assets, contingent consideration, warranty provisions, **stock-based compensation**, and tax reserves[290](index=290&type=chunk) - Inventory is stated at the lower of cost (**FIFO**) or net realizable value; reserves are recorded for excess or obsolete quantities[295](index=295&type=chunk)[297](index=297&type=chunk) - Leases are recognized on the balance sheet as right-of-use assets and lease liabilities, discounted by the incremental borrowing rate, with most classified as **operating leases**[298](index=298&type=chunk)[299](index=299&type=chunk) - **Goodwill** is reviewed annually on **February 28th** for impairment, using a qualitative assessment first, then a quantitative test (discounted cash flow) if necessary[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - **Revenue recognition** follows a **five-step model** (**ASC 606**), with **76%** of revenue recognized at a point in time in fiscal **2022** and the remainder over time[308](index=308&type=chunk)[310](index=310&type=chunk)[360](index=360&type=chunk) - **Stock-based compensation** is expensed based on fair value at grant date over the service period, using Black-Scholes for options and fair market value for restricted stock[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) [3. Acquisitions](index=72&type=section&id=3.%20Acquisitions) This note details the acquisitions of **Neeltran** in **May 2021** and **NEPSI** in **October 2020**, with the **Neeltran acquisition** involving **$16.4 million** in total consideration and **$8.8 million** in goodwill, and the **NEPSI acquisition** totaling **$42.4 million** and **$32.9 million** in goodwill, both accounted for using the purchase method, with unaudited pro forma operating results provided - **Neeltran Acquisition** (**May 6, 2021**): Total consideration of **$16.4 million**, including **$4.4 million** cash, **301,556 shares** of common stock (**$4.4 million** fair value), and **$7.6 million** in debt payments on behalf of sellers[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk) Neeltran Acquisition Purchase Price Allocation (in millions) | Asset/Liability | Amount | | :--------------------------------------------- | :----- | | Cash and short-term investments | $0.5 | | Net working capital (excluding inventory and deferred revenue) | $(0.9) | | Inventory | $9.0 | | Property, plant and equipment | $6.5 | | Deferred revenue | $(10.0)| | Deferred tax liability | $(2.3) | | Net tangible assets/(liabilities) | $2.8 | | Backlog | $0.1 | | Trade names and trademarks | $1.2 | | Customer relationships | $3.5 | | Net identifiable intangible assets/(liabilities) | $4.8 | | Goodwill | $8.8 | | **Total purchase consideration** | **$16.4**| - **Neeltran** contributed **$21.4 million** in revenue and **$3.4 million** in net loss to consolidated results for the twelve months ended **March 31, 2022**[348](index=348&type=chunk) - **NEPSI Acquisition** (**October 1, 2020**): Total consideration of **$42.4 million**, including **$26.0 million** cash, **873,657 shares** of common stock (**$12.4 million** fair value), and **$4.0 million contingent consideration**[349](index=349&type=chunk)[351](index=351&type=chunk)[353](index=353&type=chunk) NEPSI Acquisition Purchase Price Allocation (in millions) | Asset/Liability | Amount | | :--------------------------------------------- | :----- | | Net working capital (excluding inventory and deferred revenue) | $0.1 | | Inventory | $4.2 | | Property, plant and equipment | $2.3 | | Deferred revenue | $(2.7) | | Deferred tax liability | $(1.7) | | Net tangible assets/(liabilities) | $2.2 | | Backlog | $0.6 | | Trade names and trademarks | $0.6 | | Customer relationships | $6.1 | | Net identifiable intangible assets/(liabilities) | $7.3 | | Goodwill | $32.9 | | **Total purchase consideration** | **$42.4**| Unaudited Pro Forma Operating Results (in thousands, except per share data) | Metric | Twelve Months 2022 | March 31, 2021 | | :------------------------------------ | :----------------- | :------------- | | Revenues | $111,265 | $113,778 | | Operating loss | $(20,475) | $(31,115) | | Net loss | $(21,218) | $(27,118) | | Net loss per common share - Basic | $(0.78) | $(1.10) | | Shares - basic | 27,234 | 24,621 | [4. Revenue Recognition](index=75&type=section&id=4.%20Revenue%20Recognition) **AMSC** recognizes revenue using a **five-step model** (**ASC 606**), with **76%** of fiscal **2022 revenue** recognized at a point in time and the remainder over time, disaggregated by product line and region, and grant revenue recognized over time by analogy to **ASC 606**, with contract assets and liabilities primarily relating to timing differences between invoicing and **revenue recognition** - **Revenue recognition** follows a **five-step model** (**ASC 606**); **76%** of fiscal **2022 revenue** recognized at a point in time, **24%** over time (vs. **78%** point-in-time in fiscal **2021**)[360](index=360&type=chunk) - Grant revenue (non-exchange transactions) is recognized over time by analogy to **ASC 606**; **$1.1 million** in fiscal **2022** (vs. **$3.9 million** in fiscal **2021**)[362](index=362&type=chunk) Revenue by Product Line (in thousands) | Product Line | Year Ended March 31, 2022 (Grid) | Year Ended March 31, 2022 (Wind) | | :---------------------------- | :------------------------------- | :------------------------------- | | Equipment and systems | $91,704 | $6,169 | | Services and technology development | $7,172 | $3,390 | | **Total** | **$98,876** | **$9,559** | | Product Line | Year Ended March 31, 2021 (Grid) | Year Ended March 31, 2021 (Wind) | | :---------------------------- | :------------------------------- | :------------------------------- | | Equipment and systems | $65,930 | $14,362 | | Services and technology development | $4,598 | $2,235 | | **Total** | **$70,528** | **$16,597** | Revenue by Region (in thousands) | Region | Year Ended March 31, 2022 (Grid) | Year Ended March 31, 2022 (Wind) | | :----------- | :------------------------------- | :------------------------------- | | Americas | $73,955 | $145 | | Asia Pacific | $19,397 | $9,346 | | EMEA | $5,524 | $68 | | **Total** | **$98,876** | **$9,559** | | Region | Year Ended March 31, 2021 (Grid) | Year Ended March 31, 2021 (Wind) | | :----------- | :------------------------------- | :------------------------------- | | Americas | $54,168 | $87 | | Asia Pacific | $11,326 | $16,207 | | EMEA | $5,034 | $303 | | **Total** | **$70,528** | **$16,597** | - **38%** of fiscal **2022 revenues** (**41%** in fiscal **2021**) were from sales outside the United States[369](index=369&type=chunk) - Remaining performance obligations as of **March 31, 2022**: approximately **$78.4 million** to be recognized in the next twelve months, and **$6.6 million** over thirteen to sixty months[371](index=371&type=chunk) [5. Goodwill](index=78&type=section&id=5.%20Goodwill) **Goodwill** represents the excess of cost over net assets of acquired businesses and is not amortized but reviewed annually for impairment, with the balance at **$43.5 million** as of **March 31, 2022**, primarily from the **Neeltran** and **NEPSI acquisitions**, reported in the **Grid business segment**, and no impairment identified in the annual assessment - **Goodwill** relates to the **Neeltran Acquisition** (fiscal **2021**), **NEPSI Acquisition** (fiscal **2020**), and **Infinia Technology Corporation** (fiscal **2017**), all reported in the **Grid business segment**[375](index=375&type=chunk) Goodwill Balance Roll Forward (in thousands) | Date | Goodwill | | :----------------- | :----------- | | March 31, 2020 | $1,719 | | NEPSI Acquisition | $32,915 | | March 31, 2021 | $34,634 | | Neeltran Acquisition | $8,837 | | **March 31, 2022** | **$43,471** | - Annual assessment performed on **February 28, 2022**, found no triggering events or impairment to **goodwill**[376](index=376&type=chunk) [6. Fair Value Measurements](index=80&type=section&id=6.%20Fair%20Value%20Measurements) **AMSC** uses a **three-level valuation hierarchy** for **fair value measurements**: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than quoted prices), and **Level 3** (unobservable inputs), with cash equivalents and marketable securities classified as **Level 1**, and **contingent consideration** related to the **NEPSI acquisition earnout** classified as a **Level 3 derivative liability** and revalued using a **Monte Carlo simulation** - **Fair value hierarchy**: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs), **Level 3** (unobservable inputs)[378](index=378&type=chunk)[379](index=379&type=chunk) - Cash equivalents and marketable securities are classified as **Level 1**[381](index=381&type=chunk)[382](index=382&type=chunk) - **Contingent consideration** for the **NEPSI Acquisition earnout** is classified as a **Level 3 derivative liability**, revalued using a **Monte Carlo simulation**[384](index=384&type=chunk) Assets and Liabilities Carried at Fair Value (in thousands) | Metric | Total Carrying Value (2022) | Level 1 (2022) | Level 3 (2022) | | :------------------------- | :-------------------------- | :------------- | :------------- | | Cash equivalents | $17,641 | $17,641 | — | | Marketable securities | — | — | — | | Contingent Consideration | $1,200 | — | $1,200 | | Metric | Total Carrying Value (2021) | Level 1 (2021) | Level 3 (2021) | | :------------------------- | :-------------------------- | :------------- | :------------- | | Cash equivalents | $54,104 | $54,104 | — | | Marketable securities | $5,140 | $5,140 | — | | Contingent Consideration | $7,050 | — | $7,050 | - A **net gain** of **$5.9 million** was recorded in fiscal **2022** from the decrease in fair value of **contingent consideration** (vs. **$3.1 million loss** in fiscal **2021**)[388](index=388&type=chunk)[407](index=407&type=chunk) [7. Accounts Receivable](index=82&type=section&id=7.%20Accounts%20Receivable) **Accounts receivable** increased to **$20.3 million** at **March 31, 2022**, from **$13.3 million** at **March 31, 2021**, including both billed and unbilled amounts, with **Fuji Bridex PTE Ltd** accounting for approximately **31%** of the **accounts receivable balance** as of **March 31, 2022** Accounts Receivable (in thousands) | Type | March 31, 2022 | March 31, 2021 | | :------------------------- | :------------- | :------------- | | Accounts receivable (billed) | $13,788 | $7,502 | | Accounts receivable (unbilled) | $6,492 | $5,765 | | **Accounts receivable** | **$20,280** | **$13,267** | - **Fuji Bridex PTE Ltd** accounted for approximately **31%** of the **accounts receivable balance** as of **March 31, 2022**[293](index=293&type=chunk) [8. Inventory](index=82&type=section&id=8.%20Inventory) **Inventory**, net of reserves, increased to **$23.7 million** at **March 31, 2022**, from **$13.3 million** at **March 31, 2021**, primarily in raw materials and work-in-process, with the company recording **inventory reserves** of **$1.9 million** in fiscal **2022** and **$1.8 million** in fiscal **2021** for excess and obsolescence Inventory, Net of Reserves (in thousands) | Category | March 31, 2022 | March 31, 2021 | | :----------------------- | :------------- | :------------- | | Raw materials | $11,020 | $8,255 | | Work-in-process | $10,462 | $3,297 | | Finished goods | $1,326 | $777 | | Deferred program costs | $858 | $977 | | **Inventory** | **$23,666** | **$13,306** | - **Inventory reserves** of **$1.9 million** were recorded in fiscal **2022** (vs. **$1.8 million** in fiscal **2021**) for excess and obsolescence[392](index=392&type=chunk) [9. Property, Plant and Equipment](index=83&type=section&id=9.%20Property%2C%20Plant%20and%20Equipment) Net property, plant and equipment increased to **$13.7 million** at **March 31, 2022**, from **$9.0 million** at **March 31, 2021**, mainly due to land and buildings added as part of the **Neeltran Acquisition**, while **depreciation expense** decreased to **$2.7 million** in fiscal **2022** from **$3.7 million** in fiscal **2021** Property, Plant and Equipment, Net (in thousands) | Category | March 31, 2022 | March 31, 2021 | | :------------------------------------- | :------------- | :------------- | | Land | $980 | $270 | | Construction in progress - equipment | $573 | $220 | | Buildings | $5,270 | $1,630 | | Equipment and software | $43,668 | $41,652 | | Finance lease - right of use asset | $8 | — | | Furniture and fixtures | $1,379 | $1,333 | | Leasehold improvements | $6,634 | $6,308 | | Property, plant and equipment, gross | $58,512 | $51,413 | | Less accumulated depreciation | $(44,856) | $(42,416) | | **Property, plant and equipment, net** | **$13,656** | **$8,997** | - The increase in land and buildings relates to property added as part of the **Neeltran Acquisition**[396](index=396&type=chunk) - **Depreciation expense** was **$2.7 million** in fiscal **2022**, down from **$3.7 million** in fiscal **2021**[396](index=396&type=chunk) [10. Intangible Assets](index=84&type=section&id=10.%20Intan

American Superconductor Corporation (NASDAQ:AMSC) Q3 2021 Earnings Conference Call February 3, 2022 10:00 AM ET Company Participants John Heilshorn – LHA-Investor Relations Daniel McGahn – Chairman, President and Chief Executive Officer John Kosiba – Senior Vice President, Chief Financial Officer and Treasurer Conference Call Participants Philip Shen – ROTH Capital Partners Colin Rusch – Oppenheimer Chip Moore – EF Hutton Eric Stine – Craig Hallum Capital Group Operator Good day, and welcome to the American ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents American Superconductor Corporation's unaudited condensed consolidated financial statements for the periods ended December 31, 2021, along with significant accounting policies [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet as of December 31, 2021, shows an increase in total assets to **$175.3 million** and total liabilities to **$62.3 million**, resulting in a slight decrease in stockholders' equity Condensed Consolidated Balance Sheet Data (in thousands) | Account | December 31, 2021 | March 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $94,933 | $105,230 | | **Total assets** | **$175,296** | **$168,866** | | **Total current liabilities** | $51,827 | $40,738 | | **Total liabilities** | **$62,261** | **$52,274** | | **Total stockholders' equity** | **$113,035** | **$116,592** | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the three and nine months ended December 31, 2021, revenues increased while net loss improved, significantly aided by a positive change in the fair value of contingent consideration Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $26,799 | $23,632 | $80,126 | $65,961 | | **Gross Margin** | $3,572 | $3,956 | $10,201 | $14,517 | | **Operating Loss** | $(4,380) | $(9,258) | $(16,182) | $(15,681) | | **Net Loss** | **$(4,324)** | **$(7,933)** | **$(14,161)** | **$(15,062)** | | **Net Loss per Share (Basic & Diluted)** | $(0.16) | $(0.31) | $(0.52) | $(0.65) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended December 31, 2021, net cash used in operating and investing activities led to a **$23.0 million** decrease in cash, ending the period at **$52.6 million** Cash Flow Summary (Nine Months Ended Dec 31, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(15,925) | $(4,871) | | **Net cash used in investing activities** | $(7,056) | $(2,573) | | **Net cash provided by financing activities** | $49 | $50,649 | | **Net (decrease)/increase in cash** | $(22,983) | $43,278 | | **Cash, cash equivalents and restricted cash at end of period** | $52,556 | $74,142 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section details the company's accounting policies and financial results, including liquidity, acquisitions, revenue recognition, and fair value measurements - The company has a history of recurring operating losses and negative operating cash flows, with an accumulated deficit of **$1.015 billion** as of December 31, 2021[31](index=31&type=chunk) - On May 6, 2021, the company acquired Neeltran, Inc. for a total consideration of **$16.4 million**, adding **$8.8 million** to goodwill[33](index=33&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk) - On October 1, 2020, the company acquired NEPSI for a total consideration of **$42.4 million**, including **$4.0 million** in contingent consideration[48](index=48&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk) - As of December 31, 2021, the company had remaining performance obligations of approximately **$80.6 million** to be recognized as revenue in the next twelve months[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the third quarter and first nine months of fiscal 2021, analyzing revenue, gross margin, operating expenses, liquidity, and the impact of recent acquisitions [Executive Overview](index=40&type=section&id=Executive%20Overview) The company provides megawatt-scale resiliency solutions for the power grid and U.S. Navy, structured into Grid and Wind segments, with recent strategic acquisitions strengthening the Grid business - The company operates through two business units: **Gridtec™ Solutions** (power grid) and **Windtec™ Solutions** (wind power)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - The Resilient Electric Grid (REG) system for ComEd in Chicago became fully operational in August 2021[153](index=153&type=chunk) - Acquired NEPSI on October 1, 2020, and Neeltran on May 6, 2021, both operated by the Grid business segment[154](index=154&type=chunk)[155](index=155&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) For the nine months ended December 31, 2021, total revenues increased **21%** to **$80.1 million** driven by Grid segment growth, despite a decline in gross margin and a net loss of **$14.2 million** Revenue by Segment (Nine Months Ended Dec 31, in thousands) | Segment | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Grid | $73,169 | $51,149 | +43% | | Wind | $6,957 | $14,812 | -53% | | **Total** | **$80,126** | **$65,961** | **+21%** | - Gross margin for the nine months ended Dec 31, 2021, decreased to **13%** from **22%** year-over-year, attributed to unfavorable product mix, supply chain inflation, and purchase accounting adjustments from the Neeltran acquisition[165](index=165&type=chunk) - A gain of **$4.4 million** was recorded for the nine months ended Dec 31, 2021, from the change in fair value of contingent consideration related to the NEPSI acquisition, compared to a loss of **$2.7 million** in the prior year[172](index=172&type=chunk) GAAP to Non-GAAP Net Loss Reconciliation (Nine Months Ended Dec 31, in thousands) | Description | 2021 | 2020 | | :--- | :--- | :--- | | **Net loss (GAAP)** | **$(14,161)** | **$(15,062)** | | Stock-based compensation | $3,513 | $2,597 | | Amortization of acquisition-related intangibles | $1,979 | $886 | | Acquisition costs | $681 | $313 | | Change in fair value of contingent consideration | $(4,440) | $2,740 | | **Non-GAAP net loss** | **$(12,428)** | **$(8,526)** | [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, total cash and equivalents decreased to **$52.6 million** due to significant cash usage in operating and investing activities, though management believes current liquidity is sufficient for the next twelve months - Total cash, cash equivalents, marketable securities, and restricted cash was **$52.6 million** at December 31, 2021[187](index=187&type=chunk)[188](index=188&type=chunk) - Net cash used in operating activities for the nine months ended Dec 31, 2021, was **$15.9 million**, compared to **$4.9 million** in the prior year period[188](index=188&type=chunk) - The company has a shelf registration statement on Form S-3, allowing it to offer and sell up to **$250 million** of securities to fund future capital needs[184](index=184&type=chunk) - Management believes current liquidity is sufficient to fund operations and capital expenditures for the next twelve months[191](index=191&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is marked as 'Not Applicable', indicating no new or material changes to the company's market risk disclosures from the last annual report - The company states this item is 'Not Applicable'[199](index=199&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[200](index=200&type=chunk) - No changes were made to the internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[201](index=201&type=chunk) [PART II—OTHER INFORMATION](index=51&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no new legal proceedings to disclose for the period - The company reports 'None' for this item[203](index=203&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) The company highlights a new risk factor concerning its dependency on attracting and retaining qualified personnel, exacerbated by the federal vaccine mandate for government contractors - A new risk factor is disclosed regarding the challenge of attracting and retaining qualified personnel[203](index=203&type=chunk)[204](index=204&type=chunk) - The implementation of the U.S. federal government contractor vaccine mandate may result in employee attrition and difficulty securing future labor, which could materially adversely affect the business[205](index=205&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no repurchase of its common stock during the three months ended December 31, 2021 - The company did not repurchase any shares of its common stock during the three months ended December 31, 2021[206](index=206&type=chunk)[207](index=207&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial documents - Filed exhibits include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906[211](index=211&type=chunk) - The financial statements and notes are provided in Inline XBRL format as part of the filing[211](index=211&type=chunk)[212](index=212&type=chunk)

American Superconductor Corporation (NASDAQ:AMSC) Q2 2021 Earnings Conference Call November 9, 2021 10:00 AM ET Company Participants John Heilshorn - LHA, IR Daniel McGahn - Chairman, President and CEO John Kosiba - SVP, CFO and Treasurer Conference Call Participants Philip Shen - Roth Capital Partners Joe Beninati - Oppenheimer Chip Moore - EF Hutton Aaron Spychalla - Craig-Hallum Operator Good day, and welcome to the American Superconductor Second Quarter Fiscal 2021 Earnings Conference Call. Today's conf ...