UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
| | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _____ to _____.
Commission File Number:
American Superconductor Corporation
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|
|
|
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|
| | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company |
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Shares outstanding of the Registrant’s common stock:
| Common Stock, par value $0.01 per share |
| |
| Class |
| Outstanding as of January 19, 2024 |
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
|
|
|
Page No. |
|
|
||
|
|
|
|
| Item 1. |
||
|
|
|
|
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
| Item 3. |
||
|
|
|
|
| Item 4. |
||
|
|
|
|
|
|
||
|
|
|
|
| Item 1. |
||
|
|
|
|
| Item 1A. |
||
|
|
|
|
| Item 2. |
||
|
|
|
|
| Item 3. |
||
|
|
|
|
| Item 4. |
||
|
|
|
|
| Item 5. |
||
|
|
|
|
| Item 6. |
||
|
|
|
|
|
|
||
AMERICAN SUPERCONDUCTOR CORPORATION
PART I — FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, 2023 | March 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Restricted cash | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Restricted cash | ||||||||
| Deferred tax assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Lease liability, current portion | ||||||||
| Debt, current portion | ||||||||
| Contingent consideration | ||||||||
| Deferred revenue, current portion | ||||||||
| Total current liabilities | $ | $ | ||||||
| Deferred revenue, long-term portion | ||||||||
| Lease liability, long-term portion | ||||||||
| Deferred tax liabilities | ||||||||
| Debt, long-term portion | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 16) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Amortization of acquisition-related intangibles | ||||||||||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||||||||||
| Restructuring | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income, net | ||||||||||||||||
| China dissolution | ( | ) | ||||||||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive (loss) gain, net of tax: | ||||||||||||||||
| China dissolution | ||||||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other comprehensive (loss) gain, net of tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE Three and Nine Months Ended December 31, 2023 AND 2022
(In thousands)
| Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Par Value | Paid-in Capital | Treasury Stock | Comprehensive Income (Loss) | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock – restricted shares | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock – ESPP | ||||||||||||||||||||||||||||
| Issuance of common stock - restricted shares | ||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Issuance of common stock for contingent consideration | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Par Value | Paid-in Capital | Treasury Stock | Comprehensive Income (Loss) | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Issuance of common stock – restricted shares, net of forfeited shares | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | — | — | — | |||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Issuance of common stock – ESPP | ||||||||||||||||||||||||||||
| Issuance of common stock – restricted shares | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock – restricted shares | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||
| Issuance of common stock for 401(k) match | ||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Nine Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Provision for excess and obsolete inventory | ||||||||
| Deferred income taxes | ||||||||
| Change in fair value of contingent consideration | ( | ) | ||||||
| China dissolution | ||||||||
| Other non-cash items | ||||||||
| Unrealized foreign exchange loss on cash and cash equivalents | ( | ) | ( | ) | ||||
| Changes in operating asset and liability accounts: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Deferred revenue | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Change in other assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Proceeds from exercise of employee stock options and ESPP | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental schedule of cash flow information: | ||||||||
| Cash paid for income taxes, net of refunds | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Issuance of common stock to settle contingent consideration | $ | $ | ||||||
| Issuance of common stock to settle liabilities | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business and Operations and Liquidity
Nature of the Business and Operations
American Superconductor Corporation (together with its subsidiaries, “AMSC®” or the “Company”) was founded on April 9, 1987. The Company is a leading system provider of megawatt-scale power resiliency solutions that orchestrate the rhythm and harmony of power on the grid™ and that protect and expand the capability of the Navy’s fleet. The Company’s system level products leverage its proprietary “smart materials” and “smart software and controls” to provide enhanced resiliency and improved performance of megawatt-scale power flow.
These unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q. Certain prior period amounts were reclassified to conform to the presentation in the current period. The going concern basis of presentation assumes that the Company will continue operations and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those instructions. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods ended December 31, 2023 and 2022 and the financial position at December 31, 2023; however, these results are not necessarily indicative of results which may be expected for the full year. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2023, and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the SEC on May 31, 2023.
Liquidity
The Company has historically experienced recurring operating losses and as of December 31, 2023, the Company had an accumulated deficit of $
In February 2021, the Company filed a shelf registration statement on Form S-3 that will expire in February 2024 (the “Form S-3”). The Form S-3 allows the Company to offer and sell from time-to-time up to million of common stock, debt securities, warrants or units comprised of any combination of these securities. The Form S-3 is intended to provide the Company flexibility to conduct registered sales of the Company's securities, subject to market conditions, in order to fund the Company's future capital needs. The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
In recent periods, the Company has experienced inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company’s cost of revenues and decreased gross margin. While the impact of inflation has been challenging, the Company has taken actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, inflation, COVID-19, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions, could have a material adverse effect on the Company’s business, financial condition and results of operation.
From time-to-time the Company may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately
The Company believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the unaudited condensed consolidated financial statements for the nine months ended December 31, 2023. The Company’s liquidity is highly dependent on its ability to increase revenues, its ability to control its operating costs, and its ability to raise additional capital, if necessary. The impact of COVID-19 and other sources of instability, including the wars between Russia and Ukraine and Israel and Hamas, on the global financing markets may reduce the Company's ability to raise additional capital, if necessary, which could negatively impact the Company's liquidity. There can be no assurance that the Company will be able to continue to raise additional capital, on favorable terms or at all, from other sources or execute on any other means of improving liquidity described above.
2. Revenue Recognition
The Company’s revenues in its Grid business segment are derived primarily through enabling the transmission and distribution of power, providing planning services that allow it to identify power grid needs and risks, and developing ship protection systems for the U.S. Navy. The Company’s revenues in its Wind business segment are derived primarily through supplying advanced power electronics and control systems, licensing its highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606. For its customer contracts, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) control of goods or services is transferred to the customer. In the three and nine months ended December 31, 2023,
In the Company's equipment and system product line, each contract with a customer summarizes each product sold to a customer, which typically represents distinct performance obligations. A contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s product sales transfer control to the customer in line with the contracted delivery terms and revenue is recorded at the point in time when title and risk transfer to the customer, which is primarily upon delivery, as the Company has determined that this is the point in time that control transfers to the customer.
In the Company's service and technology development product line, there are several different types of transactions, and each begins with a contract with a customer that summarizes each product sold to a customer, which typically represents distinct performance obligations. The technology development transactions are primarily for activities that have no alternative use and for which a profit can be expected throughout the life of the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract then the revenue is recognized at a point in time. Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach. The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts. The transaction prices on these contracts are allocated based on an adjusted market approach which is re-assessed annually for reasonableness. The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are not deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists. The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts. The transaction prices of these agreements are calculated based on an adjusted market approach as specified in the contract. The Company reports royalty revenue for usage-based royalties when the sales have occurred. In circumstances when collectability is not assured and a contract does not exist under ASC 606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are no further remaining performance obligations.
The Company's service contracts can include a purchase order from a customer for specific goods in which each item is a distinct performance obligation satisfied at a point in time at which control of the goods is transferred to the customer. This transfer occurs based on the contracted delivery terms or when the requested service work has been completed. The transaction price for these goods is allocated based on the adjusted market approach considering similar transactions under similar circumstances. Service contracts are also derived from ongoing maintenance contracts and extended service-type warranty contracts. In these transactions, the Company is contracted to provide an ongoing service over a specified period of time. As the customer is consuming the benefits as the service is being provided, the revenue is recognized over time ratably.
The Company’s policy is not to accept volume discounts, product returns, or rebates and allowances within its contracts. In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.
The Company provides assurance-type warranties on all product sales for a term of typically to years, and extended service-type warranties are available for purchase at the customer's option for an additional term ranging up to additional years. The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure. For all extended service-type warranties, the Company recognizes the revenue ratably over time during the effective period of the services.
The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with revenue-producing activities. The Company has elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized. The Company has elected to recognize incremental costs of obtaining a contract as expense when incurred except in contracts where the amortization period would exceed twelve months; in such cases the long-term amount will be assessed for materiality. The Company has elected not to adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is twelve months or less. The Company has elected to recognize revenue based on the As invoiced practical expedient if there is a right to consideration from a customer in an amount that corresponds directly with the value of the Company's performance.
The Company monitors costs to meet its obligations on its customer contracts. When it is evident that there is a loss expected on a contract, a contract loss is accrued in the period. Several long-term contracts that were acquired from Neeltran, Inc. (“Neeltran”) were impacted by higher than planned costs due to required design changes and inflation on material costs, resulting in an increase to the contract loss accrual of $
The Company’s contracts with customers do not typically include extended payment terms and may include milestone billing over the life of the contract. Payment terms vary by contract type and type of customer and generally range from to days from delivery.
The following tables disaggregate the Company’s revenue by product line and by shipment destination (in thousands):
| Three Months Ended December 31, 2023 | Nine Months Ended December 31, 2023 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | $ | ||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended December 31, 2022 | Nine Months Ended December 31, 2022 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | $ | ||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of December 31, 2023, and 2022, the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations. The Company's accounts receivable balance is made up entirely of customer contract related balances. Changes in the Company’s contract assets, which are included in “Unbilled accounts receivable” and “Deferred program costs” (see Note 7, “Accounts Receivable” and Note 8, “Inventory” for a reconciliation to the condensed consolidated balance sheets) and "Contract liabilities", which are included in the current portion and long-term portion of "Deferred revenue" in the Company’s condensed consolidated balance sheets, are as follows (in thousands):
| Unbilled Accounts Receivable | Deferred Program Costs | Contract Liabilities | ||||||||||
| Beginning balance as of March 31, 2023 | $ | $ | $ | |||||||||
| Increases for costs incurred to fulfill performance obligations | — | — | ||||||||||
| Increase (decrease) due to customer billings | ( | ) | — | |||||||||
| Decrease due to cost recognition on completed performance obligations | — | ( | ) | — | ||||||||
| Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | — | ( | ) | |||||||||
| Other changes and FX impact | ||||||||||||
| Ending balance as of December 31, 2023 | $ | $ | $ | |||||||||
| Unbilled Accounts Receivable | Deferred Program Costs | Contract Liabilities | ||||||||||
| Beginning balance as of March 31, 2022 | $ | $ | $ | |||||||||
| Increases for costs incurred to fulfill performance obligations | — | — | ||||||||||
| Increase (decrease) due to customer billings | ( | ) | — | |||||||||
| Decrease due to cost recognition on completed performance obligations | — | ( | ) | — | ||||||||
| Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | — | ( | ) | |||||||||
| Other changes and FX impact | ( | ) | ( | ) | ||||||||
| Ending balance as of December 31, 2022 | $ | $ | $ | |||||||||
The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations may vary significantly each reporting period based on the timing of major new contractual commitments. As of December 31, 2023, the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next months of approximately $
The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three and nine months ended December 31, 2023 and 2022:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| Reportable | December 31, | December 31, | |||||||||||||||
| Segment | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Inox Wind Limited | Wind | % | 11 | % | % | <10% | |||||||||||
| Fuji Bridex Pte Ltd | Grid | <10% | <10% | <10% | % | ||||||||||||
3. Stock-Based Compensation
The Company accounts for its stock-based compensation at fair value. The following table summarizes stock-based compensation expense by financial statement line item for the three and nine months ended December 31, 2023 and 2022 (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Cost of revenues | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company issued
The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested stock options was less than $
The Company granted
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected life (years) | ||||
| Dividend yield | None | |||
4. Computation of Net Loss per Common Share
Basic net loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Where applicable, diluted EPS is computed by dividing the net loss by the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period, calculated using the treasury stock method. Common equivalent shares include the effect of restricted stock, exercise of stock options and warrants and contingently issuable shares. Stock options and warrants that are out-of-the-money with exercise prices greater than the average market price of the underlying common shares and shares of performance-based restricted stock where the contingency was not met are excluded from the computation of diluted EPS as the effect of their inclusion would be anti-dilutive. For each of the three and nine months ended December 31, 2023,
The following table reconciles the numerators and denominators of the earnings per share calculation for the three and nine months ended December 31, 2023 and 2022 (in thousands, except per share data):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted-average shares of common stock outstanding | ||||||||||||||||
| Weighted-average shares subject to repurchase | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Shares used in per-share calculation ― basic | ||||||||||||||||
| Shares used in per-share calculation ― diluted | ||||||||||||||||
| Net loss per share ― basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share ― diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
5. Goodwill and Other Intangibles
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized but reviewed for impairment. Goodwill is reviewed annually on February 28th and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.
There were no changes to goodwill during the nine months ended December 31, 2023 or year ended March 31, 2023.
The Company did identify any triggering events in the three and nine months ended December 31, 2023 that would require interim impairment testing of goodwill.
Other Intangibles
Intangible assets at December 31, 2023 and March 31, 2023 consisted of the following (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Book Value | Gross Amount | Accumulated Amortization | Net Book Value | Estimated Useful Life | ||||||||||||||||||||||
| Backlog | ( | ) | ( | ) | $ | |||||||||||||||||||||||
| Trade name and trademarks | — | — | Indefinite | |||||||||||||||||||||||||
| Customer relationships | ( | ) | ( | ) | ||||||||||||||||||||||||
| Core technology and know-how | ( | ) | ( | ) | ||||||||||||||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $
Expected future amortization expense related to intangible assets is as follows (in thousands):
| Years ending March 31, | Total | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
The Company's intangible assets relate entirely to the Grid business segment operations in the United States.
6. Fair Value Measurements
A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:
| Level 1 | - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|
|
|
|
| Level 2 | - | Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
|
|
|
|
| Level 3 | - | Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data. |
The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments. The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the nine months ended December 31, 2023.
A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Valuation Techniques
Cash Equivalents
Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments, are measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificates of deposits and money market accounts.
Contingent Consideration
Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of Northeast Power Systems, Inc ("NEPSI") that provides that the selling stockholders may receive up to an additional
The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of December 31, 2023 and March 31, 2023 (in thousands):
| Total Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| December 31, 2023: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities: | ||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
| Total Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| March 31, 2023: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities: | ||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
The table below reflects the activity for the Company’s contingent consideration derivative liability measured at fair value on a recurring basis (in thousands):
| Acquisition Contingent Consideration | ||||
| Balance at March 31, 2022 | $ | |||
| Change in fair value | ||||
| Balance at March 31, 2023 | ||||
| Settlement of contingent consideration | ( | ) | ||
| Change in fair value | ||||
| Balance at December 31, 2023 | $ | |||
7. Accounts Receivable
Accounts receivable at December 31, 2023 and March 31, 2023 consisted of the following (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Accounts receivable (billed) | $ | $ | ||||||
| Accounts receivable (unbilled) | ||||||||
| Accounts receivable, net | $ | $ | ||||||
8. Inventory
Inventory, net of reserves, at December 31, 2023 and March 31, 2023 consisted of the following (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Deferred program costs | ||||||||
| Net inventory | $ | $ | ||||||
The Company recorded inventory write-downs of $
Deferred program costs as of December 31, 2023 and March 31, 2023, primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.
9. Prepaid and Other Current Assets
During fiscal 2022, the Company conducted an analysis as to whether it was entitled to employee retention credits (“ERC”) under the CARES Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021. Based on the analysis, the Company determined that it was entitled to an ERC of approximately $
As accounting for payroll tax credits are not within the scope of ASC 740, Income Taxes, the Company has chosen to account for the ERCs by analogizing to the International Accounting Standards Board IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, an entity recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received. The Company evaluated its eligibility for the ERC and determined that it met all the criteria to claim a refundable tax credit against the employer portion of Social Security taxes for up to
The Company recorded a $
10. Property, Plant and Equipment
The cost and accumulated depreciation of property, plant and equipment at December 31, 2023 and March 31, 2023 are as follows (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Land | $ | $ | ||||||
| Construction in progress - equipment | ||||||||
| Buildings | ||||||||
| Equipment and software | ||||||||
| Finance lease - right of use asset | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Property, plant and equipment, gross | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation expense was $
11. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2023 and March 31, 2023 consisted of the following (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued inventories in-transit | ||||||||
| Accrued other miscellaneous expenses | ||||||||
| Accrued contract loss | ||||||||
| Advanced deposits | ||||||||
| Accrued compensation | ||||||||
| Income taxes payable | ||||||||
| Accrued product warranty | ||||||||
| Accrued restructuring | ||||||||
| Total | $ | $ | ||||||
The Company generally provides a to year warranty on its products, commencing upon delivery or installation where applicable. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience.
Product warranty activity was as follows (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||||
| Provisions for warranties during the period | ||||||||||||||||
| Settlements during the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||||
12. Income Taxes
The Company recorded income tax expense of $
Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did identify any uncertain tax positions in the nine months ended December 31, 2023 and did have any gross unrecognized tax benefits as of December 31, 2023.
13. Contingent Consideration
On October 1, 2020 (the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein. Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding (i) shares of capital stock of NEPSI, and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI's headquarters (the "NEPSI Acquisition"). NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems. NEPSI is a wholly-owned subsidiary of the Company and is operated by its Grid business unit. The purchase price was $
The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which is expected to require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815, Derivatives and Hedging. As a result, for each period, the fair value of the contingent consideration will be remeasured and the resulting gain or loss will be recognized in operating expenses until the share amount is fixed.
Following is a summary of the key assumptions used in a Monte Carlo simulation to calculate the fair value of the contingent consideration related to the NEPSI Acquisition:
| December 31, | September 30, | June 30, | ||||||||||||||||||
| Fiscal Year 2023 | 2023 | 2023 | 2023 | |||||||||||||||||
| Revenue risk premium | % | % | % | |||||||||||||||||
| Revenue volatility | % | % | % | |||||||||||||||||
| Stock Price | $ | $ | $ | |||||||||||||||||
| Payment delay (days) | ||||||||||||||||||||
| Fair value (millions) | $ | $ | $ | |||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| Fiscal Year 2022 | 2023 | 2022 | 2022 | 2022 | 2022 | |||||||||||||||
| Revenue risk premium | % | % | % | % | % | |||||||||||||||
| Revenue volatility | % | % | % | % | % | |||||||||||||||
| Stock Price | $ | $ | $ | $ | $ | |||||||||||||||
| Payment delay (days) | ||||||||||||||||||||
| Fair value (millions) | $ | $ | $ | $ | $ | |||||||||||||||
During the three and nine months ended December 31, 2023 the Company issued
14. Debt
As part of the acquisition of Neeltran, the Company identified equipment financing agreements that Neeltran had entered into prior to the acquisition of Neeltran on May 6, 2021. The current debt balance is less than $
15. Leases
The Company determines whether a contract is or contains a lease at inception of a contract. The Company defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means that the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
The discount rate was calculated using an incremental borrowing rate based on an assessment prepared by the Company through the use of Company credit ratings, consideration of its lease populations potential risk to its total capital structure, and a market rate for a collateralized loan for its risk profile, calculated by a third party.
Operating Leases
All significant lease arrangements are recognized at lease commencement. Operating lease right–of-use assets and lease liabilities are recognized at commencement. The operating lease right-of-use asset includes any lease payments related to initial direct cost and prepayments and excludes any lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company enters into a variety of operating lease agreements through the normal course of its business, but primarily real estate leases to support its operations. The real estate lease agreements generally provide for fixed minimum rental payments and the payment of real estate taxes and insurance. Many of these real estate leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for varying periods up to years or to terminate the lease. Only renewal options or termination rights that the Company believed were likely to be exercised were included in the lease calculations.
The Company also enters into leases for vehicles, IT equipment and service agreements, and other leases related to its manufacturing operations that are also included in the right-of-use assets and lease liability accounts if they are for a term of longer than twelve months. However, many of these leases are either short-term in nature or immaterial. The Company has made the policy election to exclude short-term leases from the condensed consolidated balance sheet.
Finance Leases
As of December 31, 2023, the right-of-use asset related to the finance lease, net of accumulated amortization is $
Finance lease right-of-use assets and lease liabilities are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease right-of-use assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease right-of-use assets and interest accretion on finance lease liabilities are recorded to depreciation expense and interest expense, respectively in the Company's condensed consolidated statement of operations.
Supplemental balance sheet information related to leases at December 31, 2023, and March 31, 2023 are as follows (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Leases: | ||||||||
| Right-of-use assets - Financing | $ | |||||||
| Right-of-use assets - Operating | ||||||||
| Total right-of-use assets | ||||||||
| Lease liabilities - ST Financing | $ | |||||||
| Lease liabilities - ST Operating | ||||||||
| Lease liabilities - LT Operating | ||||||||
| Total lease liabilities | $ | |||||||
| Weighted-average remaining lease term | ||||||||
| Weighted-average discount rate | % | % | ||||||
The costs related to the Company's finance lease are not material. The costs related to the Company's operating leases for the three and nine months ended December 31, 2023 and 2022 are as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||
| December 31, 2023 | December 31, 2023 | |||||||
| Operating Leases: | ||||||||
| Operating lease costs - fixed | $ | $ | ||||||
| Operating lease costs - variable | ||||||||
| Short-term lease costs | ||||||||
| Total lease costs | $ | $ | ||||||
| Three Months Ended | Nine Months Ended | |||||||
| December 31, 2022 | December 31, 2022 | |||||||
| Operating Leases: | ||||||||
| Operating lease costs - fixed | $ | $ | ||||||
| Operating lease costs - variable | ||||||||
| Short-term lease costs | ||||||||
| Total lease costs | $ | $ | ||||||
The Company’s estimated minimum future lease obligations under the Company's leases are as follows (in thousands):
| Leases | ||||
| Year ending March 31, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | ||||
16. Commitments and Contingencies
Legal Contingencies
From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the condensed consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.
Other
The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds. The Company is required to deposit an amount equivalent to some or all the face amount of the performance bonds into an escrow account until the termination of the bond. When the performance conditions are met, amounts deposited as collateral for the performance bonds are returned to the Company. In addition, the Company has various contractual arrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis.
As of December 31, 2023, the Company had $
17. Restructuring
The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”) and ASC Topic 712, Compensation—Nonretirement Postemployment Benefits (“ASC 712”). In accounting for these obligations, the Company is required to make assumptions related to the amounts of employee severance, benefits, and related costs and the time period over which leased facilities will remain vacant, sublease terms, sublease rates and discount rates. Estimates and assumptions are based on the best information available at the time the obligation arises. These estimates are reviewed and revised as facts and circumstances dictate; changes in these estimates could have a material effect on the amount accrued on the condensed consolidated balance sheet.
On January 24, 2023, the Company approved a plan to reduce its global workforce by approximately
The following table presents restructuring charges and cash payments during the nine months ended December 31, 2023 and year ended March 31, 2023 (in thousands):
| Severance pay | ||||
| and benefits | ||||
| Accrued restructuring balance at April 1, 2023 | $ | |||
| Charges to operations | ( | ) | ||
| Cash payments | ( | ) | ||
| Accrued restructuring balance at December 31, 2023 | $ | |||
| Severance pay | ||||
| and benefits | ||||
| Accrued restructuring balance at April 1, 2022 | $ | |||
| Charges to operations | ||||
| Cash payments | ( | ) | ||
| Accrued restructuring balance at March 31, 2023 | $ | |||
All restructuring charges discussed above are included within restructuring in the Company’s condensed consolidated statements of operations. The Company includes accrued restructuring within accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company's restructuring charges relate primarily to the Grid business segment operations in the United States.
18. Business Segments
The Company reports its financial results in reportable business segments: Grid and Wind. In accordance with ASC 280, Segment Reporting, we aggregate operating segments into one reporting segment for financial reporting purposes due to their similar operating and financial characteristics. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources.
Through the Company’s power grid offerings, the Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through its transmission planning services, power electronics, and superconductor-based systems. The sales process is enabled by transmission planning services that allow it to identify power grid congestion, poor power quality and other risks, which helps the Company determine how its solutions can improve network performance. These services often lead to sales of grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems. The Company also sells ship protection products to the U.S. Navy through its Grid business segment.
Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field highly competitive wind turbines through its advanced power electronics and control system products, engineered designs, and support services. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of 2 megawatts ("MWs") and higher. The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.
The operating results for the two business segments are as follows (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues: | ||||||||||||||||
| Grid | $ | $ | $ | $ | ||||||||||||
| Wind | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating income (loss): | ||||||||||||||||
| Grid | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Wind | ( | ) | ( | ) | ( | ) | ||||||||||
| Unallocated corporate expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accounting policies of the business segments are the same as those for the consolidated Company. The Company’s business segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment revenues and segment operating loss. The disaggregated financial results of the segments reflect allocation of certain functional expense categories consistent with the basis and manner in which Company management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. In addition, certain corporate expenses which the Company does not believe are specifically attributable or allocable to either of the two business segments have been excluded from the segment operating loss.
Unallocated corporate expenses consisted of net losses of $
Total assets for the two business segments as of December 31, 2023 and March 31, 2023, are as follows (in thousands):
| December 31, 2023 | March 31, 2023 | |||||||
| Grid | $ | $ | ||||||
| Wind | ||||||||
| Corporate assets | ||||||||
| Total | $ | $ | ||||||
19. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the release of ASU 2019-10 in November 2019, the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, the Company has adopted ASU 2016-13 and noted no material impact on its condensed consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. Following the release of ASU 2021-08 in October 2021, the effective date was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, the Company has adopted ASU 2021-08 and noted no material impact on its condensed consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.
20. Subsequent Events
The Company has performed an evaluation of subsequent events through the time of filing this Quarterly Report on Form 10-Q with the SEC and has determined that there are no such events to report.
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
American Superconductor®, Amperium®, AMSC®, D-VAR®, PowerModule™, D-VAR VVO®, PQ-IVR®, SeaTitan®, Gridtec™ Solutions, Windtec™ Solutions, Smarter, Cleaner...Better Energy™, Orchestrate the Rhythm and Harmony of Power on the Grid™, actiVAR®, armorVAR™, NEPSI™ and Neeltran™ and SafetyLOCK™ are trademarks or registered trademarks of American Superconductor Corporation or our subsidiaries. We reserve all of our rights with respect to our trademarks or registered trademarks regardless of whether they are so designated in this Quarterly Report on Form 10-Q by an ® or ™ symbol. All other brand names, product names, trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.
Executive Overview
We are a leading system provider of megawatt-scale power resiliency solutions that Orchestrate the Rhythm and Harmony of Power on the Grid™, and protect and expand the capability of our Navy's fleet. Our solutions enhance the performance of the power grid, protect our Navy’s fleet, and lower the cost of wind power. In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems. In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics and control system products, engineering, and support services. Our power grid and wind products and services provide exceptional reliability, security, efficiency and affordability to our customers.
Our power system solutions help to improve energy efficiency, alleviate power grid capacity constraints, improve system resiliency, and increase the adoption of renewable energy generation. Demand for our solutions is driven by the growing needs for modernized smart grids that improve power reliability, security and quality, the U.S. Navy's effort to upgrade in-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy. Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state, and national levels, including renewable portfolio standards, tax incentives and international treaties.
We manufacture products using two proprietary core technologies: PowerModule™ programmable power electronic converters and our Amperium® high temperature superconductor (“HTS”) wires. These technologies and our system-level solutions are protected by a broad and deep intellectual property portfolio consisting of hundreds of patents and licenses worldwide.
We operate our business under two market-facing business units: Grid and Wind. We believe this market-centric structure enables us to more effectively anticipate and meet the needs of power generation project developers, the Navy's ship protection systems, electric utilities and wind turbine manufacturers.
| • |
Grid. Through our Gridtec™ Solutions, our Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability. We provide transmission planning services that allow us to identify power grid congestion, poor power quality, and other risks, which help us determine how our solutions can improve network performance. These services often lead to sales of our grid interconnection solutions for wind farms and solar power plants, power quality systems and transmission and distribution cable systems. We also sell ship protection products to the U.S. Navy through our Grid business segment. |
| • |
Wind. Through our Windtec™ Solutions, our Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. We supply advanced power electronics and control systems, license our highly engineered wind turbine designs, and provide extensive customer support services to wind turbine manufacturers. Our design portfolio includes a broad range of drivetrains and power ratings of 2 megawatts ("MWs") and higher. We provide a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility. |
Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are referring to the fiscal year that began on April 1 of that same year. For example, fiscal 2023 refers to the fiscal year that began on April 1, 2023. Other fiscal years follow similarly.
We continue to experience some inflationary pressure in our supply chain and some delays in sourcing materials needed for our products, resulting in some production disruption, both of which have increased our cost of revenues and decreased gross margin. While the impact of inflation has been challenging, we continue to take actions to limit this pressure including adjusting the pricing of our products and services. Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, inflation, COVID-19, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions, could have a material adverse effect on the Company’s business, financial condition and results of operation.
From time-to-time we may undertake restructuring activities in order to align our global organization in a manner that we believe will better position us to achieve our long-term goals. In January 2023, we undertook a reduction in force that involved approximately 5% of our global workforce. This restructuring is expected to incur $1.0 million of cash expenses, of which $0.9 million has been paid as of December 31, 2023 and the remaining $0.1 million is expected to be paid by March 31, 2024, and to result in annualized cost savings of approximately $5.0 million, beginning in fiscal 2023.
In February 2023, we completed the process of determining and verifying our eligibility and amount of payroll tax credits known as the Employee Retention Credit (“ERC”) under the CARES Act which Congress enacted as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. This resulted in filing certain amended payroll tax forms for eligible quarters in 2020 and 2021, which, in the aggregate, totaled $3.3 million. We recognized a receivable in prepaid expenses and other current assets and a benefit to cost of revenues and operating expenses in the quarter ended March 31, 2023. During the nine months ended December 31, 2023, we received $3.0 million in payments for the initial claims that were processed. The remaining balance is expected to be paid during the remainder of fiscal 2023.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ under different assumptions or conditions. Certain prior period amounts were reclassified to conform to the presentation in the current period. There were no significant changes in the critical accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
Results of Operations
Three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022
Revenues
Total revenues increased 65% to $39.4 million for the three months ended December 31, 2023 and total revenues increased 40% to $103.6 million for the nine months ended December 31, 2023, compared to $23.9 million and $74.2 million for the three and nine months ended December 31, 2022, respectively. Our revenues are summarized as follows (in thousands):
| Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Grid |
$ | 33,603 | $ | 20,809 | $ | 87,854 | $ | 66,337 | ||||||||
| Wind |
5,750 | 3,072 | 15,757 | 7,904 | ||||||||||||
| Total |
$ | 39,353 | $ | 23,881 | $ | 103,611 | $ | 74,241 | ||||||||
Our Grid business unit accounted for 85% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 87% and 89% for the three and nine months ended December 31, 2022, respectively. Our Grid business unit revenues increased 61% to $33.6 million in the three months ended December 31, 2023, from $20.8 million in the three months ended December 31, 2022. Our Grid business unit revenues increased 32% to $87.9 million in the nine months ended December 31, 2023, from $66.3 million in the nine months ended December 31, 2022. The increase in the Grid business unit revenues in the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022 was primarily driven by increased shipments of new energy power systems and increased ship protection systems revenues than in the prior year periods.
Our Wind business unit accounted for 15% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 13% and 11% for the three and nine months ended December 31, 2022, respectively. Revenues in the Wind business unit increased 87% and 99% to $5.8 million and $15.8 million in the three and nine months ended December 31, 2023, from $3.1 million and $7.9 million in the three and nine months ended December 31, 2022, respectively. The increase during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by additional shipments of electrical control systems ("ECS") at increased prices.
Cost of Revenues and Gross Margin
Cost of revenues increased by 26% to $29.4 million for the three months ended December 31, 2023, compared to $23.4 million for the three months ended December 31, 2022. Cost of revenues increased by 13% to $78.8 million for the nine months ended December 31, 2023, compared to $69.5 million for the nine months ended December 31, 2022. Gross margin was 25% and 24% for the three and nine months ended December 31, 2023, respectively, compared to 2% and 6% for the three and nine months ended December 31, 2022, respectively. The increase in gross margin in the three and nine months ended December 31, 2023 was due to higher revenues, a more favorable product mix and favorable impacts across the business due to pricing increases across our product lines.
Operating Expenses
Research and development
Research and development ("R&D") expenses increased 6% in the three months ended December 31, 2023 to $2.2 million from $2.1 million in the three months ended December 31, 2022. The increase was driven primarily by lower cost share revenue. R&D expense decreased 20% in the nine months ended December 31, 2023 to $5.7 million from $7.1 million in the nine months ended December 31, 2022. The decrease was driven primarily by decreased compensation, materials and supplies expenses.
Selling, general, and administrative
Selling, general and administrative ("SG&A") expenses increased 9% in the three months ended December 31, 2023 to $7.8 million from $7.2 million in the three months ended December 31, 2022. SG&A expenses increased 7% to $23.6 million in the nine months ended December 31, 2023, compared to $22.1 million in the nine months ended December 31, 2022. The increase in SG&A expense in the three and nine months ended December 31, 2023, was due to higher overall compensation expense than in each of the prior year periods.
Amortization of acquisition related intangibles
We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $0.5 million and $1.6 million in the three and nine months ended December 31, 2023, respectively, and $0.7 million and $2.1 million in the three and nine months ended December 31, 2022, respectively. The decrease in amortization expense in both periods is a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets from Northeast Power Systems, Inc ("NEPSI") and Neeltran.
Change in fair value of contingent consideration
The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in losses of $0.9 million and $3.1 million resulting from the increase in the fair value of the contingent consideration in the three and nine months ended December 31, 2023, respectively. During the three and nine months ended December 31, 2023 we issued 399,999 shares and cash in lieu of a fractional share of common stock related to the achievement of specified revenue objectives in connection with the acquisition of NEPSI at a fair value of $3.1 million. One specified revenue objective, which would have earned the selling stockholders 300,000 shares of our common stock, was not achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by September 30, 2024. We recorded the above noted losses, compared to a gain of $0.2 million and $0.3 million in the three and nine months ended December 31, 2022, respectively. The change in the fair value was driven by an increased likelihood of achieving certain revenue targets and an increase in our stock price.
Operating income (loss)
Our operating income (loss) is summarized as follows (in thousands):
| Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Operating income (loss): |
||||||||||||||||
| Grid |
$ | 268 | $ | (7,064 | ) | $ | (2,383 | ) | $ | (20,840 | ) | |||||
| Wind |
286 | (924 | ) | (112 | ) | (2,178 | ) | |||||||||
| Unallocated corporate expenses |
(1,992 | ) | (1,221 | ) | (6,646 | ) | (3,152 | ) | ||||||||
| Total |
$ | (1,438 | ) | $ | (9,209 | ) | $ | (9,141 | ) | $ | (26,170 | ) | ||||
Our Grid business segment generated operating income of $0.3 million and operating loss of $2.4 million in the three and nine months ended December 31, 2023, respectively, compared to operating losses of $7.1 million and $20.9 million in the three and nine months ended December 31, 2022, respectively. The increase in the Grid business unit operating income in the three and nine months ended December 31, 2023 was due to higher revenues and gross margins due to a favorable product mix as well as the reduction of the remaining acquired Neeltran backlog.
Our Wind business segment generated operating income of $0.3 million and operating loss of $0.1 million in the three and nine months ended December 31, 2023, respectively, compared to operating losses of $0.9 million and $2.2 million in the three and nine months ended December 31, 2022, respectively. The improvement in the Wind business unit operating income in the three and nine months ended December 31, 2023 was due to higher revenues and gross margins from increased sales of ECS units.
Unallocated corporate expenses included net losses of $0.9 million and $3.1 million resulting from the increases in the fair value of the NEPSI contingent consideration in the three and nine months ended December 31, 2023, respectively. Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $1.1 million and $3.6 million in the three and nine months ended December 31, 2023, respectively, and $1.4 million and $3.5 million in the three and nine months ended December 31, 2022, respectively.
Interest income, net, was $0.2 million and $0.5 million in the three and nine months ended December 31, 2023, respectively, compared to less than $0.1 million and $0.1 million in the three and nine months ended December 31, 2022, respectively, due to higher earned interest at increased interest rates in the fiscal year 2023 periods.
China dissolution
China dissolution expense was $1.9 million in the nine months ended December 31, 2022, and there was no similar transaction in the three and nine months ended December 31, 2023, or the three months ended December 31, 2022. The impact of the China dissolution expense during the nine months ended December 31, 2022 was driven by the liquidation of our China entity, resulting in a foreign currency loss from the cumulative translation release of $1.9 million.
Other income (expense), net
Other expense, net, was $0.3 million and $0.6 million in the three and nine months ended December 31, 2023, respectively, compared to other expense, net, of $0.3 million and less than $0.1 million in the three and nine months ended December 31, 2022, respectively. The increase in other expense, net, during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by the impacts of unfavorable fluctuations in foreign currencies during the periods.
Income Taxes
Income tax expense was $0.1 million and $0.3 million in the three and nine months ended December 31, 2023, respectively. Income tax expense was $0.1 million in each of the three and nine months ended December 31, 2022.
Net loss
Net loss was $1.6 million and $9.5 million in the three and nine months ended December 31, 2023, respectively, compared to $9.6 million and $28.2 million in the three and nine months ended December 31, 2022, respectively. The decrease in net loss in both periods was driven primarily by the increased revenues and gross margins.
Non-GAAP Financial Measure - Non-GAAP Net Income (Loss)
Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this Quarterly Report on Form 10-Q, however, should be considered in addition to, and not as a substitute for or superior to the comparable measures prepared in accordance with GAAP.
We define non-GAAP net income (loss) as net loss before China dissolution, stock-based compensation, amortization of acquisition-related intangibles, change in fair value of contingent consideration, and other non-cash or unusual charges. We believe non-GAAP net income (loss) assists management and investors in comparing our performance across reporting periods on a consistent basis by excluding these non-cash charges and other items that we do not believe are indicative of our core operating performance. In addition, we use non-GAAP net income (loss) as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net income (loss) is set forth in the table below (in thousands, except per share data):
| Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | (1,649 | ) | $ | (9,581 | ) | $ | (9,532 | ) | $ | (28,171 | ) | ||||
| China dissolution |
— | — | — | 1,921 | ||||||||||||
| Stock-based compensation |
1,140 | 1,440 | 3,608 | 3,492 | ||||||||||||
| Amortization of acquisition-related intangibles |
538 | 696 | 1,620 | 2,096 | ||||||||||||
| Change in fair value of contingent consideration |
852 | (220 | ) | 3,052 | (340 | ) | ||||||||||
| Non-GAAP net income (loss) |
$ | 881 | $ | (7,665 | ) | $ | (1,252 | ) | $ | (21,002 | ) | |||||
| Non-GAAP net income (loss) per share - basic |
$ | 0.03 | $ | (0.27 | ) | $ | (0.04 | ) | $ | (0.76 | ) | |||||
| Weighted average shares outstanding - basic |
29,092 | 27,954 | 28,728 | 27,794 | ||||||||||||
We incurred non-GAAP net income of $0.9 million and a non-GAAP net loss of $1.3 million, or $0.03 and $(0.04) per share, for the three and nine months ended December 31, 2023, respectively, compared to non-GAAP net losses of $7.7 million and $21.0 million, or $(0.27) and $(0.76) per share, for the three and nine months ended December 31, 2022, respectively. The improvement in the non-GAAP net income (loss) for the three and nine months ended December 31, 2023 was due to a lower operating loss driven by higher revenues and gross margins.
Liquidity and Capital Resources
We have experienced recurring operating losses and, as of December 31, 2023, had an accumulated deficit of $1,065.1 million.
Our cash requirements depend on numerous factors, including the successful completion of our product development activities, our ability to commercialize our Resilient Electric Grid and ship protection system solutions, the rate of customer and market adoption of our products, collecting receivables according to established terms, the continued availability of U.S. government funding during the product development phase of our superconductor-based products and whether Inox is successful in executing on Solar Energy Corporation of India Limited orders or in obtaining additional orders under the new central and state auction regime. We continue to closely monitor our expenses and, if required, expect to reduce our operating and capital spending to enhance liquidity.
In February 2021, we filed a shelf registration statement on Form S-3 that will expire in February 2024 (the “Form S-3”). The Form S-3 allows us to offer and sell from time-to-time up to $250 million of common stock, debt securities, warrants or units comprised of any combination of these securities. The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund our future capital needs. The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
As of December 31, 2023, we had cash, cash equivalents and restricted cash of $25.0 million, compared to $25.7 million as of March 31, 2023, a decrease of $0.7 million. As of December 31, 2023, we had $2.4 million in cash, cash equivalents, and restricted cash in foreign bank accounts. Our cash, cash equivalents, and restricted cash are summarized as follows (in thousands):
| December 31, 2023 |
March 31, 2023 |
|||||||
| Cash and cash equivalents |
$ | 23,979 | $ | 23,360 | ||||
| Restricted cash |
1,046 | 2,315 | ||||||
| Total cash, cash equivalents, and restricted cash |
$ | 25,025 | $ | 25,675 | ||||
For the nine months ended December 31, 2023, net cash used in operating activities was $0.1 million, compared to $17.1 million for the nine months ended December 31, 2022. The decrease in net cash used in operations was due primarily to decreases in net loss and in prepaid expenses and other current assets in the nine months ended December 31, 2023 as compared to December 31, 2022. Cash flows from operating activities in the nine months ended December 31, 2023 included a reimbursement of $3.0 million for the ERC receivable included in prepaid expenses and other current assets at March 31, 2023.
For the nine months ended December 31, 2023, net cash used in investing activities was $0.6 million, compared to $1.2 million for the nine months ended December 31, 2022. The decrease in net cash used in investing activities was primarily due to a decrease in purchases of property, plant and equipment.
For the nine months ended December 31, 2023, net cash provided by financing activities was $0.1 million. For the nine months ended December 31, 2022, net cash provided by financing activities was less than $0.1 million.
As of December 31, 2023, we had $0.4 million of restricted cash included in long-term assets and $0.7 million of restricted cash included in current assets. At March 31, 2023, we had $0.6 million of restricted cash included in long-term assets and $1.7 million of restricted cash in current assets. These amounts included in restricted cash primarily represent collateral deposits to secure surety bonds and letters of credit for various customer contracts. These deposits are held in interest bearing accounts.
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2023, while others are considered future commitments. We have various contractual arrangements, under which we have committed to purchase certain minimum quantities of goods or services on an annual basis. For information regarding our other contractual obligations, refer to Note 13, "Contingent Consideration," Note 14, "Debt," Note 15, "Leases" and Note 16, "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. In addition, we may seek to raise additional capital, which could be in the form of loans, convertible debt or equity, to fund our operating requirements and capital expenditures. Our liquidity is highly dependent on our ability to increase revenues, control our operating costs, and raise additional capital, if necessary. There can be no assurance that we will be able to raise additional capital on favorable terms or at all or execute on any other means of improving our liquidity as described above. Additionally, the impact of COVID-19 or other sources of instability, including the ongoing wars between Russia and Ukraine or Israel and Hamas, instability of financial institutions and political instability in the United States, on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity. We also continue to closely monitor our expenses and, if required, we intend to reduce our operating and capital spending to enhance liquidity.
Legal Proceedings
From time to time, we are involved in legal and administrative proceedings and claims of various types. We record a liability in our condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate. If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, we estimate and disclose the possible loss or range of loss to the extent necessary to make the condensed consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our condensed consolidated financial statements.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the release of ASU 2019-10 in November 2019, the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, we have adopted ASU 2016-13 and noted no material impact on our condensed consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. Following the release of ASU 2021-08 in October 2021, the effective date was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, we have adopted ASU 2021-08 and noted no material impact on our condensed consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.
We do not believe that, outside of those disclosed here, there are any other recently issued accounting pronouncements that will have a material impact on our condensed consolidated financial statements.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| LEGAL PROCEEDINGS |
None
| RISK FACTORS |
There have been no material changes to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on May 31, 2023.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The Company’s stock repurchase activity during the three months ended December 31, 2023 was as follows:
| Month |
Total Number |
Average |
Total Number of |
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in millions) |
||||||||||||
| October 1, 2023 - October 31, 2023 | — | — | — | |||||||||||||
| November 1, 2023 - November 30, 2023 | — | — | — | |||||||||||||
| December 1, 2023 - December 31, 2023 | — | — | — | |||||||||||||
| Total |
— | — | — | |||||||||||||
(a) During the three months ended December 31, 2023, we did not repurchase shares in connection with our stock-based compensation plans.
| DEFAULTS UPON SENIOR SECURITIES |
None
| MINE SAFETY DISCLOSURES |
Not Applicable
| OTHER INFORMATION |
On
On
| ITEM 6. |
EXHIBITS |
EXHIBIT INDEX
| Incorporated by Reference | ||||||||||||
| Exhibit Number |
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed/Furnished Herewith |
| 31.1 |
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31.2 |
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32.1 |
|
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32.2 |
|
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.CAL |
|
Inline XBRL Taxonomy Calculation Linkbase Document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.DEF |
|
Inline XBRL Definition Linkbase Document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.LAB |
|
Inline XBRL Taxonomy Label Linkbase Document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101.PRE |
|
Inline XBRL Taxonomy Presentation Linkbase Document. |
|
|
|
|
|
|
|
|
|
* |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||
_________________________
| * |
Filed herewith |
| ** |
Furnished herewith |
Attached as Exhibits 101 to this report are the following formatted in inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 (ii) Condensed Statements of Operations for the three and nine months ended December 31, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended December 31, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2023 and 2022, and (v) Notes to Condensed Consolidated Financial Statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
AMERICAN SUPERCONDUCTOR CORPORATION |
|
|
|
|
|
|
|
|
|
By: |
/s/ John W. Kosiba, Jr. |
| Date: |
January 24, 2024 |
|
John W. Kosiba, Jr. |
|
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
Exhibit 31.1
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATIONS
I, Daniel P. McGahn, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: |
January 24, 2024 |
By: |
/s/ Daniel P. McGahn |
|
|
Daniel P. McGahn | ||
|
|
Chief Executive Officer |
Exhibit 31.2
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATIONS
I, John W. Kosiba, Jr., certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: |
January 24, 2024 |
By: |
/s/ John W. Kosiba, Jr. |
|
|
John W. Kosiba, Jr. |
||
|
|
Chief Financial Officer |
Exhibit 32.1
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Daniel P. McGahn, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
Date: |
January 24, 2024 |
By: |
/s/ Daniel P. McGahn |
|
|
|
|
Daniel P. McGahn |
|
|
|
|
Chief Executive Officer |
Exhibit 32.2
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John W. Kosiba, Jr., Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
Date: |
January 24, 2024 |
By: |
/s/ John W. Kosiba, Jr. |
|
|
|
|
John W. Kosiba, Jr. |
|
|
|
|
Chief Financial Officer |