American Superconductor (AMSC) - 2020 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The company reported a net loss of $11.2 million for the nine months ended Dec 31, 2019, a reversal from the prior year's $35.1 million net income Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,481 | $77,483 | | Marketable securities | $35,047 | $0 | | Total current assets | $89,267 | $103,398 | | Total assets | $123,491 | $119,330 | | Total current liabilities | $35,035 | $28,384 | | Total liabilities | $46,303 | $38,137 | | Total stockholders' equity | $77,188 | $81,193 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Revenues | $45,697 | $41,618 | | Gross margin | $6,927 | $11,254 | | Operating (loss) income | $(16,974) | $40,366 | | Net (loss) income | $(11,209) | $35,114 | | Diluted (loss) income per share | $(0.75) | $1.71 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | $(17,779) | $47,786 | | Net cash used in investing activities | $(34,888) | $(650) | | Net cash provided by/(used in) financing activities | $5,674 | $(385) | | Net (decrease)/increase in cash, cash equivalents and restricted cash | $(46,963) | $45,959 | Note 1. Nature of the Business and Operations and Liquidity The company faces liquidity challenges with a history of losses, despite management's confidence in its current cash position - The company is a system provider of megawatt-scale power solutions for the power grid and wind power industries, leveraging proprietary materials and software[16] - As of December 31, 2019, the company had an accumulated deficit of $972.7 million and experienced recurring operating losses[18] - Customer Inox Wind is delinquent on its obligation to post letters of credit for forecasted purchases of electrical control systems (ECS), which could impact the company's revenues and liquidity[22] - Management believes it has sufficient liquidity to fund operations for the next twelve months, based on its current cash position and operational plans[24] Note 2. Revenue Recognition Grid segment revenue grew significantly, offsetting a decline in the Wind segment, with a corresponding geographic shift to the Americas Revenue by Segment (in thousands) | Segment | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Grid | $36,577 | $23,325 | | Wind | $9,120 | $18,293 | | Total | $45,697 | $41,618 | Revenue by Region (in thousands) | Region | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Americas | $28,712 | $16,401 | | Asia Pacific | $11,518 | $24,066 | | EMEA | $5,468 | $1,151 | | Total | $45,697 | $41,618 | Customers Representing 10% or More of Total Revenues | Customer | Segment | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Inox Wind Limited | Wind | <10% | 47% | 11% | 40% | | Dept. of Homeland Security | Grid | 22% | <10% | 12% | <10% | | Vestas | Grid | 25% | <10% | 10% | 15% | - As of December 31, 2019, the company had approximately $76.2 million in outstanding performance obligations expected to be recognized as revenue in the next twelve months[40] Note 17. Business Segments The Grid segment's revenue grew while its operating loss widened, whereas the Wind segment's revenue and operating income both fell sharply Segment Revenues (in thousands) | Segment | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Grid | $36,577 | $23,325 | | Wind | $9,120 | $18,293 | | Total | $45,697 | $41,618 | Segment Operating (Loss) Income (in thousands) | Segment | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Grid | $(9,723) | $(8,202) | | Wind | $(6,015) | $51,419 | | Unallocated corporate expenses | $(1,236) | $(2,851) | | Total | $(16,974) | $40,366 | Segment Assets (in thousands) | Segment | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | Grid | $43,638 | $31,075 | | Wind | $11,772 | $8,167 | | Corporate assets | $68,081 | $80,088 | | Total | $123,491 | $119,330 | Management's Discussion and Analysis of Financial Condition and Results of Operations Strong Grid segment growth drove a Q3 revenue increase, but lower gross margins and the absence of a prior-year settlement gain led to a net loss Executive Overview The company provides power solutions through its Gridtec™ and Windtec™ units, with recent key events including a major settlement and a new REG project - The company operates through two business units: Grid (Gridtec Solutions™) and Wind (Windtec Solutions™), providing power electronics, control systems, and superconductor-based systems[116][117][118] - A settlement with Sinovel in July 2018 resulted in an aggregate cash payment of $57.5 million to the company[120] - The company entered into a subcontract agreement with Commonwealth Edison (ComEd) to manufacture and install its REG system in Chicago, with the project expected to be operational in 2021[122] Results of Operations Q3 2019 revenue rose 27% due to a 123% surge in Grid revenues, but gross margin fell to 9% and the company reported a $6.8 million net loss - Grid business unit revenues increased 123% to $15.2 million in Q3 2019, primarily driven by growth in D-VAR, SPS, and REG revenue[125] - Wind business unit revenues decreased 63% to $2.7 million in Q3 2019, primarily due to decreased shipments of Electrical Control Systems (ECS) to Inox[126] - Gross margin for Q3 2019 was 9%, down from 26% in the prior-year period, mainly due to increased revenue from cost-share projects with DHS and a less favorable product mix[127] - The company recorded a gain of $25.0 million from the Sinovel settlement in Q3 2018, which was absent in Q3 2019, significantly impacting the year-over-year comparison of operating and net income[130] Non-GAAP Financial Measure - Non-GAAP Net Loss Excluding special items, the non-GAAP net loss widened to $6.7 million in Q3 2019 from $2.3 million in the prior-year period Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Loss (in thousands) | Description | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net (loss) income (GAAP) | $(6,845) | $17,293 | | Stock-based compensation | $590 | $792 | | (Gain) on Sinovel settlement, net | — | $(24,978) | | Amortization of acquisition-related intangibles | $85 | $85 | | Changes in fair value of warrants | $(556) | $2,475 | | Tax effect of adjustments | — | $2,163 | | Non-GAAP net loss | $(6,726) | $(2,297) | - The non-GAAP net loss increased to $6.7 million in Q3 2019 from $2.3 million in Q3 2018, primarily due to a more favorable product mix in the prior year period[145] Liquidity and Capital Resources Total liquidity decreased to $66.3 million, driven by cash used in operations and investing, though management deems it sufficient for the next year Cash, Marketable Securities, and Restricted Cash (in thousands) | Category | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,481 | $77,483 | | Marketable securities | $35,047 | $0 | | Restricted cash | $5,754 | $715 | | Total | $66,283 | $78,198 | - For the nine months ended Dec 31, 2019, net cash used in operating activities was $17.8 million, a significant change from the $47.8 million provided by operations in the prior-year period, which included the Sinovel settlement proceeds[149] - Management believes it has sufficient liquidity to fund operations and capital expenditures for the next twelve months but notes this is highly dependent on increasing revenues and controlling costs[153] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable for the reporting period - This item is marked as 'Not Applicable' in the report[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of Dec 31, 2019, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2019, the company's disclosure controls and procedures were effective at the reasonable assurance level[171] - No changes to internal controls over financial reporting occurred during the quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[172] PART II—OTHER INFORMATION Legal Proceedings The company reported no legal proceedings for this period - The company reported 'None' for this item[174] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019[174] Unregistered Sales of Equity Securities and Use of Proceeds The company received $6.1 million from a warrant exercise and repurchased a small number of shares for employee tax withholding purposes - On November 13, 2019, Hudson Bay Capital exercised warrants for 786,000 shares of common stock at an exercise price of $7.81 per share, resulting in aggregate proceeds of $6.1 million for the company[175] - During the three months ended December 31, 2019, the company purchased 7,378 shares tendered by employees for payment of statutory tax withholdings related to stock-based compensation[176] Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported 'None' for this item[177] Mine Safety Disclosures This item is not applicable to the company - This item is marked as 'Not Applicable' in the report[177] Other Information The company reported no other information - The company reported 'None' for this item[177] Exhibits This section lists the exhibits filed with the report, including required CEO/CFO certifications and financial data in XBRL format - The report includes CEO and CFO certifications as required by the Sarbanes-Oxley Act[179] - Financial statements and notes are provided in XBRL format as exhibits[179]