AMERICAN SUPERCONDUCTOR CORP /DE/ 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that relate to future events or conditions, including without limitation, the statements in Part II, “Item 1A. Risk Factors” and in Part I under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, our prospective results of operations or financial position, the benefits from our acquisition of Megatran Industries, Inc. ("Megatran") together with its wholly-owned subsidiaries and affiliates , changes in macroeconomic and market conditions, anticipated payment of ERC's (as defined herein), and adoption of accounting changes may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of our common stock or cause actual results to differ materially from those indicated by such forward-looking statements. These important factors include, but are not limited to: We have a history of operating losses, which may continue in the future. Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter; We have a history of negative operating cash flows, and we may require additional financing in the future, which may not be available to us; Our technology and products could infringe intellectual property rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages and disrupt our business; Changes in exchange rates could adversely affect our results of operations; We may be required to issue performance bonds or provide letters of credit, which restricts our ability to access any cash used as collateral for the bonds or letters of credit; If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and may lead investors and other users to lose confidence in our financial data; We may not realize all of the sales expected from our backlog of orders and contracts; Our contracts with the U.S. government are subject to audit, modification or termination by the U.S. government and include certain other provisions in favor of the government. The continued funding of such contracts remains subject to annual congressional appropriation, which, if not approved, could reduce our revenue and lower or eliminate our profit; Changes in U.S. government defense spending could negatively impact our financial position, results of operations, liquidity and overall business; Pandemics, epidemics or other public health crises may adversely impact our business, financial condition and results of operations; We rely upon third-party suppliers for the components and subassemblies of many of our Grid and Wind products, making us vulnerable to supply shortages and price fluctuations, which could harm our business; Uncertainty surrounding our prospects and financial condition may have an adverse effect on our customer and supplier relationship; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; A significant portion of our Wind business segment revenues are derived from a single customer. If this customer’s business is negatively affected, it could adversely impact our business; Our success in addressing the wind energy market is dependent on the manufacturers that license our designs; Our business and operations would be adversely impacted in the event of a failure or security breach of our or any critical third parties' information technology infrastructure and networks; We may acquire additional complementary businesses or technologies, which may require us to incur substantial costs for which we may never realize the anticipated benefits; Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data, may adversely impact our business and financial results; Many of our revenue opportunities are dependent upon subcontractors and other business collaborators; If we fail to implement our business strategy successfully, our financial performance could be harmed; Problems with product quality or product performance may cause us to incur warranty expenses and may damage our market reputation and prevent us from achieving increased sales and market share; Many of our customers outside of the United States may be either directly or indirectly related to governmental entities, and we could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws outside the United States; We have had limited success marketing and selling our superconductor products and system-level solutions, and our failure to more broadly market and sell our products and solutions could lower our revenue and cash flow; We or third parties on whom we depend may be adversely affected by natural disasters, including events resulting from climate change, and our business continuity and disaster recovery plans may not adequately protect us or our value chain from such events; Adverse changes in domestic and global economic conditions could adversely affect our operating results; Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Our products face competition, which could limit our ability to acquire or retain customers; We have operations in, and depend on sales in, emerging markets, including India, and global conditions could negatively affect our operating results or limit our ability to expand our operations outside of these markets. Changes in India’s political, social, regulatory and economic environment may affect our financial performance; Our success depends upon the commercial adoption of the REG system, which is currently limited, and a widespread commercial market for our products may not develop; Industry consolidation could result in more powerful competitors and fewer customers; Increasing focus and scrutiny on environmental sustainability and social initiatives could increase our costs, and inaction could harm our reputation and adversely impact our financial results; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy: Lower prices for other energy sources may reduce the demand for wind energy development, which could have a material adverse effect on our ability to grow our Wind business; We may be unable to adequately prevent disclosure of trade secrets and other proprietary information; Our patents may not provide meaningful or long-term protection for our technology, which could result in us losing some or all of our market position; There are a number of technological challenges that must be successfully addressed before our superconductor products can gain widespread commercial acceptance, and our inability to address such technological challenges could adversely affect our ability to acquire customers for our products; Third parties have or may acquire patents that cover the materials, processes and technologies we use or may use in the future to manufacture our Amperium products, and our success depends on our ability to license such patents or other proprietary rights; Our common stock has experienced, and may continue to experience, market price and volume fluctuations, which may prevent our stockholders from selling our common stock at a profit and could lead to costly litigation against us that could divert our management’s attention; Unfavorable results of legal proceedings could have a material adverse effect on our business, operating results and financial condition; and the other important factors discussed under the caption "Risk Factors" in Part 1. Item 1A of our Form 10-K for the fiscal year ended March 31, 2024, and our other reports filed with the SEC. These important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Any such forward-looking statements represent management's estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q. 27 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 onboard power systems to support fleet electrification, and the needs 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 robust intellectual property portfolio consisting of patents and patent applications worldwide and rights through exclusive and non-exclusive licenses. We operate our business under two market-facing business segments: 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 2024 refers to the fiscal year that began on April 1, 2024. Other fiscal years follow similarly. 28 Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, labor force availability, sourcing, material delays and global supply chain disruptions, could have a material adverse effect on our business, financial condition and results of operations. 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. In the year ended March 31, 2024, we received $3.0 million in payments for the initial claims that were processed. The remaining balance is expected to be received during fiscal 2025. On February 2, 2024, we completed an offering of 6,210,000 shares of our common stock at a public offering price of $11.25 per share under our then-existing Registration Statement on Form S-3. We received net proceeds of approximately $65.2 million after deducting underwriting discounts and commissions and offering expenses. See Note 1, “Nature of the Business and Operations and Liquidity,” for further information about this offering. On August 1, 2024, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the selling stockholders named therein. Pursuant to the terms of the Stock Purchase Agreement and concurrently with entering into such agreement, we acquired all of the issued and outstanding shares of Megatran, for aggregate consideration in an amount equal to $61.4 million, as may be adjusted pursuant to the Stock Purchase Agreement (the “Purchase Price”), including a cash payment after closing of $5.0 million, as adjusted pursuant to Sections 5.6(c), (d), and (f) of the Stock Purchase Agreement (the “Additional Cash Purchase Price”). At closing, we paid to Megatran's selling stockholders $25.0 million in cash on hand, and 1,297,600 restricted shares of our common stock. On September 23, 2024, we paid the Additional Cash Purchase Price to the selling stockholders, which was calculated based on the agreed upon formula set forth in the Stock Purchase Agreement, in the amount of $8.3 million which includes the Additional Cash Purchase Price and the make whole payment. Megatran's wholly-owned subsidiary, NWL, Inc. ("NWL"), is a U.S.-based global provider of engineered power conversion solutions for demanding industrial and military applications. As a result of this transaction, Megatran became a wholly-owned subsidiary and is operated by our Grid business segment. 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. Equity Method Investments We treat the equity investment in the condensed consolidated financial statements under the equity method. Equity method investments are equity securities in entities we do not control but over which we have the ability to exercise significant influence. These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures . Equity method investments are measured at cost minus impairment, if any, plus or minus the Company’s share of an investee’s income or loss, less distributions received. Other than those noted here, 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, 2024. Results of Operations Three and nine months ended December 31, 2024 , compared to the three and nine months ended December 31, 2023 Revenues Total revenues increased 56% to $61.4 million for the three months ended December 31, 2024 and total revenues increased 51% to $156.2 million for the nine months ended December 31, 2024, compared to $39.4 million and $103.6 million for the three and nine months ended December 31, 2023, respectively. Our revenues are summarized as follows (in thousands): Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Revenues: Grid $ 52,306 $ 33,603 $ 131,578 $ 87,854 Wind 9,097 5,750 24,585 15,757 Total $ 61,403 $ 39,353 $ 156,163 $ 103,611 Our Grid business segment accounted for 85% and 84% of total revenues for the three and nine months ended December 31, 2024, respectively, compared to 85% for each of the three and nine months ended December 31, 2023. Our Grid business segment revenues increased 56% to $52.3 million in the three months ended December 31, 2024, from $33.6 million in the three months ended December 31, 2023. Our Grid business segment revenues increased 50% to $131.6 million in the nine months ended December 31, 2024, from $87.9 million in the nine months ended December 31, 2023. The increase in the Grid business segment revenues in the three and nine months ended December 31, 2024, compared to the three and nine months ended December 31, 2023 was primarily driven by the acquisition of Megatran and increased shipments of new energy power systems than in the prior year periods. 29 Our Wind business segment accounted for 15% and 16% of total revenues for the three and nine months ended December 31, 2024, respectively, compared to 15% for each of the three and nine months ended December 31, 2023. Revenues in the Wind business segment increased 58% and 56% to $9.1 million and $24.6 million in the three and nine months ended December 31, 2024, respectively, from $5.8 million and $15.8 million in the three and nine months ended December 31, 2023, respectively. The increase during the three and nine months ended December 31, 2024, compared to the three and nine months ended December 31, 2023, was driven by additional shipments of electrical control systems ("ECS") at increased prices. Cost of Revenues and Gross Margin Cost of revenues increased by 53% to $45.1 millio n for the three months ended December 31, 2024 , compared to $29.4 million for the three months ended December 31, 2023. Cost of revenues increased by 42% to $112.0 millio n for the nine months ended December 31, 2024 , compared to $78.8 million for the nine months ended December 31, 2023. Gross margin was 27% and 28% for the three and nine months ended December 31, 2024, respectively, compared to 25% and 24% for the three and nine months ended December 31, 2023, respectively. Cost of revenues includes total amortization expense of $0.3 million and $0.4 million in the three and nine months ended December 31, 2024, as a result of the Megatran acquired backlog intangible assets. In addition, a charge of $0.4 million and $0.7 million related to a fair value adjustment of approximately for the step-up basis assigned to acquired inventory to properly reflect the fair value in purchase accounting was charged to cost of revenues in the three and nine months ended December 31, 2024, when the inventory sold. The increase in gross margin in the three and nine months ended December 31, 2024 was due to higher revenues, a 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 36% and 39% in the three and nine months ended December 31, 2024 , respectively, to $3.0 million and $7.9 million from $2.2 million and $5.7 million in the three and nine months ended December 31, 2023, respectively. The increase in the three and nine months ended December 31, 2024 was driven primarily by the addition of Megatran R&D expenses, higher overall compensation expense and additional stock-based compensation expense. Selling, general, and administrative Selling, general and administrative ("SG&A") expenses increased 48% and 31% in the three and nine months ended December 31, 2024, respectively, to $ 11.6 million and $31.0 million from $7.8 million and $23.6 million in the three and nine months ended December 31, 2023, respectively. The increase in SG&A expense in the three months ended December 31, 2024 was driven primarily by the addition of Megatran SG&A expenses, higher overall compensation expense and additional stock-based compensation expense. The increase in the nine months ended December 31, 2024 was due to the addition of Megatran SG&A expenses, higher overall compensation expense, additional stock-based compensation expense, and higher acquisition costs. Amortization of acquisition related intangibles We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $ 0.4 million and $1.3 million in the three and nine months ended December 31, 2024 , respectively, and $0.5 million and $1.6 million in the three and nine months ended December 31, 2023, respectively. The decrease in amortization expense 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 a loss of $3.4 million resulting from an increase in fair value in the nine months ended December 31, 2024. During the three months ended September 30, 2024, we issued 300,000 shares of common stock of the Company to the selling stockholders following certification of the achievement of specified earnout revenue objectives. We recorded the above noted changes, compared to losses of $0.9 million and $3.1 million in the three and nine months ended December 31, 2023, respectively. We also recorded a $3.3 million payment relating to the Megatran acquisition, as a payment to settle the remaining obligations after the acquisition. The value of this contingent consideration was de minimis at the Acquisition Date and the resulting change in fair value was recorded in September during the nine months ended December 31, 2024. 30 Operating income (loss) Our operating income (loss) is summarized as follows (in thousands): Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Operating income (loss): Grid $ 2,819 $ 268 $ 6,014 $ (2,383 ) Wind 1,362 286 2,877 (112 ) Unallocated corporate expenses (2,866 ) (1,992 ) (11,621 ) (6,646 ) Total $ 1,315 $ (1,438 ) $ (2,730 ) $ (9,141 ) Ou r Grid business segment generated operating income of $ 2.8 million and $6.0 million in the three and nine months ended December 31, 2024 , respectively, compared to operating income of $0.3 million and operating loss of $2.4 million in the three and nine months ended December 31, 2023 , respectively. The increase in the Grid business segment operating income in the three and nine months ended December 31, 2024 was due to higher revenues and gross margins in part due to a favorable product mix. Our Wind business segment generated operating income of $ 1.4 million and $2.9 million in the three and nine months ended December 31, 2024 , respectively, compared to operating income of $0.3 million and operating loss of $0.1 million in the three and nine months ended December 31, 2023 , respectively. The improvement in the Wind business segment operating income in the three and nine months ended December 31, 2024 was due to higher revenues and gross margins from increased sales of ECS units. Unallocated corporate expenses included net losses on contingent consideration of $6.7 million in the nine months ended December 31, 2024, and net losses on contingent consideration of $0.9 million and $3.1 million in the three and nine months ended December 31, 2023, respectively. Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $2.9 million and $4.9 million in the three and nine months ended December 31, 2024, respectively, and $1.1 million and $3.6 million in the three and nine months ended December 31, 2023, respectively. Interest income, net Interest income, net, was $0.8 million and $2.9 million in the three and nine months ended December 31, 2024, respectively, compared to $0.2 million and $0.5 million in the three and nine months ended December 31, 2023 , respectively. The increase in interest income, net, in the three and nine months ended December 31, 2024 was due to higher cash balances. Other income (expense), net Other income, net, was $0.3 million and other expense, net was $0.2 million in the three and nine months ended December 31, 2024 , respectively, compared to other expense, net of $0.3 million and $0.6 million in the three and nine months ended December 31, 2023 , respectively. The decrease in other expense, net, during the three and nine months ended December 31, 2024, compared to the three and nine months ended December 31, 2023, was driven by the impacts of favorable fluctuations in foreign currencies and gain on earnings from NWL Pacific during the periods. Income Taxes Income tax benefit was $0.1 million and $4.9 million in the three and nine months ended December 31, 2024 , respectively. Income tax expense was $0.1 million and $0.3 million in the three and nine months ended December 31, 2023 , respectively. The net improvement to income tax benefit for the three and nine months ended December 31, 2024 was a result of the release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of Megatran. 31 Net income (loss) Net income was $ 2.5 million and $4.8 million in the three and nine months ended December 31, 2024 , respectively, compared to net losses of $1.6 million and $9.5 million in the three and nine months ended December 31, 2023, respectively. The improvement in net income was driven primarily by increased revenues and gross margins as well as the release of a partial valuation allowance against the deferred tax liability recorded as a result of the Megatran acquisition . 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 income (loss) before stock-based compensation, acquisition costs, 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, 2024 2023 2024 2023 Net income (loss) $ 2,465 $ (1,649 ) $ 4,828 $ (9,532 ) Stock-based compensation 2,861 1,140 4,933 3,608 Acquisition costs 15 — 1,095 — Amortization of acquisition-related intangibles 706 538 1,727 1,620 Change in fair value of contingent consideration — 852 6,682 3,052 Non-GAAP net income (loss) $ 6,047 $ 881 $ 19,265 $ (1,252 ) Non-GAAP net income (loss) per share - basic $ 0.16 $ 0.03 $ 0.52 $ (0.04 ) Non-GAAP net income (loss) per share - diluted $ 0.16 $ 0.03 $ 0.51 $ (0.04 ) Weighted average shares outstanding - basic 37,661 29,092 36,766 28,728 Weighted average shares outstanding - diluted 38,463 29,428 37,457 28,728 We incurred non-GAAP net income of $6.0 million and $19.3 million, or $ 0.16 and $0.52 per share, for the three and nine months ended December 31, 2024 , respectively, compared to a 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. The improvement in the non-GAAP net income (loss) for the three and nine months ended December 31, 2024 was due to higher revenues and gross margins. 32 Liquidity and Capital Resources We have experienced recurring operating losses and, as of December 31, 2024 , had an accumulated deficit of $1,061.8 millio n. 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 January 2024, we filed a shelf registration statement on Form S-3 that will expire three years from the date on which it was declared effective, March 15, 2027 (the “First Form S-3”). The First 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 First 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 First 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. On February 14, 2024, we completed a public offering of 6,210,000 shares of our common stock at a price of $11.25 per share under our then-existing Registration Statement on Form S-3. We received net proceeds of approximately $65.2 million after deducting underwriting discounts and commissions and offering expenses. As described above, on August 1, 2024, we acquired all of the issued and outstanding shares of Megatran, for aggregate consideration in an amount equal to $61.4 million (the “Purchase Price”), which consideration amount was subject to various adjustments set forth in the Stock Purchase Agreement (including those described below) and consisted of: (a) (i) $25.0 million, minus (ii) the Indebtedness (as defined in the Stock Purchase Agreement) outstanding as of immediately prior to the closing, minus (iii) Company Expenses (as defined in the Stock Purchase Agreement) (collectively, the “Cash Purchase Price”); (b) a number of restricted shares (rounded up or down to the nearest whole share, as applicable) (the “Company Shares”) of our common stock equal to the quotient obtained by dividing (x) $31.4 million by (y) the closing price per share of Common Stock on the Nasdaq Global Select Market on the last trading day immediately preceding August 1, 2024; and (c) an additional cash payment equal to $5.0 million, as adjusted pursuant to Sections 5.6(c), (d), and (f) of the Stock Purchase Agreement. Megatran is now a wholly-owned subsidiary of the Company and, together with its wholly-owned subsidiaries and affiliates, is operated and reported as a component of its Grid business segment. On September 23, 2024, the Company paid the Additional Cash Purchase Price to the selling stockholders, which was calculated based on the agreed upon formula, in the amount of $8.3 million. In August 2024, we filed an automatically-effective shelf registration statement on Form S-3 that will expire no later than August 12, 2027 (the “Second Form S-3”). The Second Form S-3 allows us to offer and sell from time-to-time common stock, debt securities, warrants or units comprised of any combination of these securities and allows certain selling stockholders to offer and sell from time-to-time common stock. The Second Form S-3 assisted the Megatran selling stockholders in the resale of their common stock and 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 Second 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, 2024 , we had cash, cash equivalents and restricted cash of $80.0 million, compared to $92.3 million as of March 31, 2024, a decrease of $12.3 million. As of December 31, 2024 , we had $3.2 m illion 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, 2024 March 31, 2024 Cash and cash equivalents $ 75,203 $ 90,522 Restricted cash 4,837 1,758 Total cash, cash equivalents, and restricted cash $ 80,040 $ 92,280 For the nine months ended December 31, 2024, net cash provided by operating activities was $22.0 million, compared to cash used in operations of $0.1 million for the nine months ended December 31, 2023. The increase in cash flows provided by operating activities in the nine months ended December 31, 2024 was due primarily to increased net income, decrease in cash spent on accounts payable and accrued expenses, and increased deferred revenue, offset by an increase in accounts receivable, and cash spent on inventory purchases, prepaid expenses, and operating leases. For the nine months ended December 31, 2024, net cash used in investing activities was $34.1 million, compared to $0.6 million for the nine months ended December 31, 2023. The increase in net cash used in investing activities was primarily due to cash paid for the acquisition of Megatran. For the nine months ended December 31, 2024, net cash used in financing activities was $0.1 million compared to net cash provided by financing activities of $0.1 million for the nine months ended December 31, 2023. The decrease was due to the repurchase of common stock in connection with employee tax obligations upon the vesting of stock awards, offset by proceeds related to our ESPP. As of December 31, 2024, we had $3.5 million of restricted cash included in long-term assets and $1.3 million of restricted cash included in current assets. At March 31, 2024, we had $1.3 million of restricted cash included in long-term assets and $0.5 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 condensed consolidated balance sheet as of December 31, 2024, 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 15, "Contingent Consideration," Note 16, "Debt," Note 17, "Leases" and Note 18, "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. 33 We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. We raised $65.2 million, net of offering expenses, through an equity raise in February 2024. 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 global sources of instability, including the ongoing wars between Russia and Ukraine and 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 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, 2023. As of December 31, 2024, 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, 2024, we are evaluating the impact on our condensed consolidated financial statements. In March 2024, the FASB issued ASU 2024-02, Codification Improvements — Amendments to Remove References to the Concepts Statements . The amendments in ASU 2024-02 contain amendments to the Codification that remove references to various FASB Concepts Statements. Following the release of ASU 2024-02 in March 2024, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2024, we are evaluating the impact on our condensed consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures . The amendments in ASU 2024-03 address investor requests for more disclosure of disaggregated financial reporting information about expenses presented in the income statement. Following the release of ASU 2024-03 in November 2024, the effective date will be annual reporting periods beginning after December 15, 2026. As of December 31, 2024, 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. 34 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable