American Superconductor (AMSC) - 2022 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements 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 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 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 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 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] - On May 6, 2021, the company acquired Neeltran, Inc. for a total consideration of $16.4 million, adding $8.8 million to goodwill[33][39][41] - On October 1, 2020, the company acquired NEPSI for a total consideration of $42.4 million, including $4.0 million in contingent consideration[48][49][51] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][150][151] - The Resilient Electric Grid (REG) system for ComEd in Chicago became fully operational in August 2021[153] - Acquired NEPSI on October 1, 2020, and Neeltran on May 6, 2021, both operated by the Grid business segment[154][155] Results of Operations 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] - 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] 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 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][188] - 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] - 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] - Management believes current liquidity is sufficient to fund operations and capital expenditures for the next twelve months[191] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II—OTHER INFORMATION Legal Proceedings The company reports no new legal proceedings to disclose for the period - The company reports 'None' for this item[203] Risk Factors 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][204] - 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] Unregistered Sales of Equity Securities and Use of Proceeds 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][207] Exhibits 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] - The financial statements and notes are provided in Inline XBRL format as part of the filing[211][212]