What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-07-30 · 72 added, 58 removed, 181 unchanged (42% of the section changed)

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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 addressable markets, our competitive position, macroeconomic conditions and their anticipated effect on our business, the benefits of our acquisitions, financial results and financial condition, expectations for when our products become operational, capabilities and potential uses of our products, steps taken to enhance liquidity, or our prospective results of operations or financial position, may be deemed to be forward-looking statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, our addressable markets, our competitive position, macroeconomic conditions and their anticipated effect on our business, the benefits of our acquisitions, financial results and financial condition, expectations for our products, capabilities and potential uses of our products, steps taken to enhance liquidity, or our prospective results of operations or financial position, 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.

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Other fiscal years follow similarly.

Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, tariffs, trade restrictions and resulting trade conflicts, 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.

Changes in macroeconomic conditions arising from various reasons, such as the ongoing war between Russia and Ukraine, tariffs, trade restrictions and resulting trade conflicts, 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.

On August 1, 2024, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the selling stockholders named therein.

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Results of Operations

Three months ended June 30, 2025 , compared to the three months ended June 30, 2024

Total revenues increased 80% to $72.4 million for the three months ended June 30, 2025, compared to $40.3 million for the three months ended June 30, 2024.

Three and six months ended September 30, 2025 , compared to the three and six months ended September 30, 2024

Total revenues increased 21% to $65.9 million for the three months ended September 30, 2025 and total revenues increased 46% to $138.2 million for the six months ended September 30, 2025 compared to $54.5 million and $94.8 for the three and six months ended September 30, 2024, respectively.

Our revenues are summarized as follows (in thousands):

Three Months Ended June 30,

Our Grid business segment accounted for 83% of total revenues for the three months ended June 30, 2025, compared to 80% for the three months ended June 30, 2024.

Our Grid business segment revenues increased 86% to $60.1 million in the three months ended June 30, 2025, from $32.3 million in the three months ended June 30, 2024.

The increase in the Grid business segment revenues in the three months ended June 30, 2025, compared to the three months ended June 30, 2024 was primarily driven by the acquisition of NWL and increased shipments of new energy power systems than in the prior year period.

Our Wind business segment accounted for 17% of total revenues for the three months ended June 30, 2025, compared to 20% for the three months ended June 30, 2024.

Revenues in the Wind business segment increased 54% to $12.3 million in the three months ended June 30, 2025, from $8.0 million in the three months ended June 30, 2024.

The increase during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was driven by additional shipments of electrical control systems ("ECS").

Three Months Ended September 30,

Six Months Ended September 30,

Our Grid business segment accounted for 83% of total revenues for both the three and six months ended September 30, 2025, compared to 86% and 84% for the three and six months ended September 30, 2024, respectively.

Our Grid business segment revenues increased 16% to $54.3 million in the three months ended September 30, 2025, from $46.9 million in the three months ended September 30, 2024.

Our Grid business segment revenues increased 44% to $114.4 million in the six months ended September 30, 2025, from $79.3 million in the six months ended September 30, 2024.

The increase in the Grid business segment revenues in the three and six months ended September 30, 2025, compared to the three and six months ended September 30, 2024 was driven by the acquisition of NWL, increased shipments of new energy power systems, and additional ship protection systems revenues than in the prior year periods.

Our Wind business segment accounted for 17% of total revenues for both the three and six months ended September 30, 2025, compared to 14% and 16% for the three and six months ended September 30, 2024, respectively.

Revenues in the Wind business segment increased 53% to $11.5 million in the three months ended September 30, 2025, from $7.5 million in the three months ended September 30, 2024.

Revenues in the Wind business segment increased 54% to $23.8 million in the six months ended September 30, 2025, from $15.5 million in the six months ended September 30, 2024.

The increase during the three and six months ended September 30, 2025, compared to the three and six months ended September 30, 2024, was driven by additional shipments of electrical control systems ("ECS").

Cost of Revenues and Gross Margin

Cost of revenues increased by 71% to $47.9 millio n for the three months ended June 30, 2025 , compared to $28.1 million for the three months ended June 30, 2024.

Gross margin was 34% for the three months ended June 30, 2025, compared to 30% for the three months ended June 30, 2024.

The increase in gross margin in the three months ended June 30, 2025 was due to higher revenues, a favorable product mix and favorable impacts across the business due to pricing increases across our product lines.

Cost of revenues increased by 17% to $45.4 millio n for the three months ended September 30, 2025 , compared to $38.9 million for the three months ended September 30, 2024.

Cost of revenues increased by 39% to $93.3 millio n for the six months ended September 30, 2025 , compared to $66.9 million for the six months ended September 30, 2024.

Gross margin was 31% and 33% for the three and six months ended September 30, 2025, respectively, compared to 29% for both the three and six months ended September 30, 2024.

The increase in gross margin in the three and six months ended September 30, 2025 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 88% in the three months ended June 30, 2025 , to $4.3 million from $2.3 million in the three months ended June 30, 2024.

The increase in the three months ended June 30, 2025 was driven primarily by the addition of NWL R&D expenses, higher overall compensation expense and additional stock-based compensation expense.

Research and development ("R&D") expenses increased 41% in the three months ended September 30, 2025 , to $3.7 million from $2.6 million in the three months ended September 30, 2024.

R&D expenses increased 63% in the six months ended September 30, 2025 , to $8.0 million from $4.9 million in the six months ended September 30, 2024.

The increase in the three and six months ended September 30, 2025 was driven primarily by the addition of NWL 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 60% in the three months ended June 30, 2025, to $ 14.2 million from $8.9 million in the three months ended June 30, 2024.

The increase in SG&A expense in the three months ended June 30, 2025 was driven primarily by the addition of NWL SG&A expenses, higher overall compensation expense and additional stock-based compensation expense.

Selling, general and administrative ("SG&A") expenses increased 27% in the three months ended September 30, 2025, to $ 13.4 million from $10.5 million in the three ended September 30, 2024.

SG&A expenses increased 42% in the six months ended September 30, 2025, to $27.6 million from $19.4 million in the six months ended September 30, 2024.

The increase in SG&A expense in the three and six months ended September 30, 2025 was driven primarily by the addition of NWL SG&A expenses, higher overall compensation expense and additional stock-based compensation expense.

Amortization of acquisition-related intangibles

We recorded amortization expense related to our core technology and know-how and customer relationships of $ 0.3 million in the three months ended June 30, 2025, and $0.4 million in the three months ended June 30, 2024.

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.

We recorded amortization expense related to our core technology and know-how and customer relationships of $ 0.3 million in the three months ended September 30, 2025, and $0.4 million in the three months ended September 30, 2024.

We recorded amortization expense related to our core technology and know-how and customer relationships of $0.7 million in the six months ended September 30, 2025, and $0.8 million in the six months ended September 30, 2024.

The decrease in amortization expense in the three and six months ended September 30, 2025 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, Inc.

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 $3.9 million in the three months ended June 30, 2024 driven from an increase in fair value.

There was no activity in the three months ended June 30, 2025 as the contingent consideration was settled during the prior fiscal year.

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in a gain of $0.5 million from a decrease in fair value and a loss of $3.4 million resulting from an increase in fair value in the three and six months ended September 30, 2024, respectively.

During the three and six 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.

There was no activity in the three and six months ended September 30, 2025 as the contingent consideration was settled during the prior fiscal year.

Operating income (loss)

Our operating income (loss) is summarized as follows (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Operating income (loss):

Unallocated corporate expenses

Ou r Grid business segment generated operating income of $ 4.2 million in the three months ended June 30, 2025 , compared to an operating loss of $0.2 million in the three months ended June 30, 2024 .

The improvement in the Grid business segment operating income in the three months ended June 30, 2025 was due to higher revenues and gross margins.

Our Wind business segment generated operating income of $ 1.5 million in the three months ended June 30, 2025 , compared to operating income of $0.9 million in the three months ended June 30, 2024 .

The increase in the Wind business segment operating income in the three months ended June 30, 2025 was due to higher revenues and gross margins from increased sales of ECS units.

Unallocated corporate expenses included a net loss on contingent consideration of $3.9 million in the three months ended June 30, 2024.

Ou r Grid business segment generated operating income of $ 1.3 million and $5.4 million in the three and six months ended September 30, 2025 , respectively, compared to an operating income of $1.6 million and $1.3 million in the three and six months ended September 30, 2024 , respectively.

The decrease in the Grid business segment operating income in the three months ended September 30, 2025 was due to higher overall compensation expense and higher stock comp expense .

The improvement in the Grid business segment operating income in the six months ended September 30, 2025 was due to higher revenues and gross margins.

Our Wind business segment generated operating income of $ 1.7 million and $3.2 million in the three and six months ended September 30, 2025 , respectively, compared to operating income of $0.4 million and $1.3 million in the three and six months ended September 30, 2024 , respectively.

The increase in the Wind business segment operating income in the three and six months ended September 30, 2025 was due to higher revenues and gross margins from increased sales of ECS units.

Unallocated corporate expenses included a net loss on contingent consideration of $2.8 million and $6.7 million in the three and six months ended September 30, 2024, respectively.

Interest income, net

Interest income, net, was $0.9 million in the three months ended June 30, 2025, compared to $1.1 million in the three months ended June 30, 2024 .

The decrease in interest income, net, in the three months ended June 30, 2025 was due to lower interest rates.

Other income (expense), net

Other income, net, was $0.3 million in the three months ended June 30, 2025, compared to other expense, net of $0.2 million in the three months ended June 30, 2024 .

The improvement in other income, net, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was driven by the impacts of favorable fluctuations in foreign currencies and gain on earnings from our NWL Pacific joint venture during the periods.

Income tax expense was $0.2 million in both the three months ended June 30, 2025 and June 30, 2024 .

Net income (loss)

Net income was $ 6.7 million in the three months ended June 30, 2025, compared to a net loss of $2.5 million in the three months ended June 30, 2024.

The improvement in net income was driven primarily by increased revenues and gross margins .

Interest income, net, was $2.3 million and $3.2 million in the three and six months ended September 30, 2025, respectively, compared to $1.0 million and $2.1 million in the three and six months ended September 30, 2024, respectively.

The increase in interest income, net, in the three and six months ended September 30, 2025 was due to higher cash balances primarily generated from the public offering completed in June 2025 .

Other expense, net

Other expense, net, was $0.4 million and less than $0.1 million in the three and six months ended September 30, 2025, respectively, compared to $0.3 million and $0.5 million in the three and six months ended September 30, 2024 , respectively.

The increase in other expense, net, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024 was driven by unfavorable fluctuations in foreign currencies.

The improvement in other expense, net, during the six months ended September 30, 2025, compared to the six months ended September 30, 2024, was driven by the impacts of favorable fluctuations in foreign currencies and gain on earnings from our NWL Pacific joint venture during the periods.

Income tax expense was $0.1 million and $0.3 million in the three and six months ended September 30, 2025, respectively, compared to income tax benefit of $5.0 million and $4.8 million in the three and six months ended September 30, 2024 , respectively.

The increase in income tax expense was a result of the release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of Megatran in the prior year.

Net income was $ 4.8 million and $11.5 million in the three and six months ended September 30, 2025, respectively, compared to $4.9 million and $2.4 million in the three and six months ended September 30, 2024, respectively.

The decrease in net income for the three months ended September 30, 2025 was driven primarily by the benefit of release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of Megatran in the prior year .

The improvement in net income for the six months ended September 30, 2025 was driven primarily by increased revenues and gross margins.

Non-GAAP Financial Measure - Non-GAAP Net Income

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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 as net income (loss) before stock-based compensation, amortization of acquisition-related intangibles, change in fair value of contingent consideration, and other non-cash or unusual charges.

We define non-GAAP net income as net income 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 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.

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A reconciliation of GAAP to non-GAAP net income is set forth in the table below (in thousands, except per share data):

Three Months Ended June 30,

Net income (loss)

Three Months Ended September 30,

Six Months Ended September 30,

Stock-based compensation

Acquisition costs

Amortization of acquisition-related intangibles

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Weighted average shares outstanding - diluted

We generated non-GAAP net income of $11.6 million, or $ 0.30 per share, for the three months ended June 30, 2025 , compared to a non-GAAP net income of $3.0 million, or $0.09 per share, for the three months ended June 30, 2024 .

The improvement in the non-GAAP net income for the three months ended June 30, 2025 was due to higher revenues and gross margins.

We generated non-GAAP net income of $8.9 million and $20.4 million, or $ 0.20 and $0.50 per share, for the three and six months ended September 30, 2025 , respectively, compared to a non-GAAP net income of $10.0 million and $13.2 million, or $0.27 and $0.36 per share, for the three and six months ended September 30, 2024 , respectively.

For the three months ended September 30, 2025, the decrease in non-GAAP net income was a result of the release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of Megatran in the prior year, partially offset by higher revenues and gross margins.

The improvement in the non-GAAP net income for the six months ended September 30, 2025, was due to higher revenues and gross margins .

Liquidity and Capital Resources

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We believe that these sources of liquidity are sufficient to meet both our short-term and reasonably foreseeable long-term requirements and obligations.

As of June 30, 2025, we had cash and cash equivalents of $207.9 million.

As of September 30, 2025, we had cash and cash equivalents of $212.9 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.

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The offering closed on June 16, 2025.

As of June 30, 2025, we had cash, cash equivalents and restricted cash of $213.4 million, compared to $85.4 million as of March 31, 2025, an increase of $128.0 million.

As of June 30, 2025, we had $3.3 million in cash, cash equivalents, and restricted cash in foreign bank accounts.

As of September 30, 2025, we had cash, cash equivalents and restricted cash of $218.8 million, compared to $85.4 million as of March 31, 2025, an increase of $133.4 million.

As of September 30, 2025, we had $3.4 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):

June 30, 2025

September 30, 2025

March 31, 2025

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Total cash, cash equivalents, and restricted cash

For the three months ended June 30, 2025, net cash provided by operating activities was $4.1 million, compared to cash provided by operating activities of $3.4 million for the three months ended June 30, 2024.

The increase in cash flows provided by operating activities in the three months ended June 30, 2025 was due primarily to increased net income, decrease in cash spent on accounts payable and accrued expenses as well as inventory, offset by an increase in accounts receivable, cash spent on prepaid expenses, and change in deferred revenue.

For the three months ended June 30, 2025, net cash used in investing activities was $0.7 million, compared to less than $0.1 million for the three months ended June 30, 2024.

The increase in net cash used in investing activities was primarily due to purchases of property, plant and equipment.

For the three months ended June 30, 2025, net cash provided by financing activities was $124.6 million compared to cash used in financing activities of $0.1 million for the three months ended June 30, 2024.

The improvement was due to the equity raise in June 2025.

As of June 30, 2025, we had $4.2 million of restricted cash included in long-term assets and $1.3 million of restricted cash included in current assets.

For the six months ended September 30, 2025, net cash provided by operating activities was $10.6 million, compared to $16.1 million for the six months ended September 30, 2024.

The decrease in cash flows provided by operating activities in the six months ended September 30, 2025 was due primarily to changes in deferred revenue, offset by change in accounts payable and accrued expenses, accounts receivable, deferred income taxes, and stock-based compensation expense.

For the six months ended September 30, 2025, net cash used in investing activities was $2.1 million, compared to $33.5 million for the six months ended September 30, 2024.

The decrease in net cash used in investing activities was primarily due to cash paid for the NWL acquisition and related contingent consideration in the prior year.

For the six months ended September 30, 2025, net cash provided by financing activities was $124.8 million compared to cash used in financing activities of $0.1 million for the six months ended September 30, 2024.

The increase in net cash provided by financing activities was due to the equity raise in June 2025.

As of September 30, 2025, we had $3.0 million of restricted cash included in long-term assets and $2.9 million of restricted cash included in current assets.

At March 31, 2025, we had $4.3 million of restricted cash included in long-term assets and $1.6 million of restricted cash in current assets.

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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 June 30, 2025, while others are considered future commitments.

Certain contractual obligations are reflected on the condensed consolidated balance sheet as of September 30, 2025, 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.

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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, tariffs, trade restrictions and resulting trade conflicts, 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.

Additionally, the impact of global sources of instability, including the ongoing war between Russia and Ukraine, tariffs, trade restrictions and resulting trade conflicts, 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.

Legal Proceedings

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Following the release of ASU 2023-09 in December 2023, the effective date was annual reporting periods beginning after December 15, 2024.

June 30, 2025 , we are evaluating the impact on our condensed consolidated financial statements.

September 30, 2025 , we are evaluating the impact on our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements — Amendments to Remove References to the Concepts Statements .

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Following the release of ASU 2024-02 in March 2024, the effective date was annual reporting periods beginning after December 15, 2024.

As of June 30, 2025 , we are evaluating the impact on our condensed consolidated financial statements.

As of September 30, 2025 , we are evaluating the impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures .

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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 June 30, 2025 , we are evaluating the impact on our condensed consolidated financial statements.

As of September 30, 2025 , we are evaluating the impact on our 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis