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 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. 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 not been historically profitable, which may recur in the future. Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter; While we generated positive operating cash flow in fiscal 2024 and the prior year, 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; 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 be required to issue performance bonds, which restricts our ability to access any cash used as collateral for the bonds; We may not realize all of the sales expected from our backlog of orders and contracts; If we fail to implement our business strategy successfully, our financial performance could be harmed; 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; Our contracts with the U.S. and Canadian governments are subject to audit, modification or termination by such governments and include certain other provisions in favor of the governments. The continued funding of such contracts may remain subject to annual legislative 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; Our business and operations may be materially adversely impacted in the event of a failure or security breach of our or any critical third parties' IT Systems or Confidential Information; 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; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; 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; A significant portion of our Wind 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; Many of our revenue opportunities are dependent upon subcontractors and other business collaborators; 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; Uncertainty surrounding our prospects and financial condition may have an adverse effect on our customer and supplier relationships; Pandemics, epidemics, or other public health crises may adversely impact our business, financial condition and results of operations; 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; Industry consolidation could result in more powerful competitors and fewer customers; Our success could depend upon the commercial adoption of the REG system, which is currently limited, and a widespread commercial market for our REG products may not develop; Increasing focus and scrutiny on environmental sustainability and social initiatives could adversely impact our business and 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; 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; 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; 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, 2025, 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 Quarterly Report on Form 10-Q. 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™, NWL™ 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 2025 refers to the fiscal year that began on April 1, 2025. Other fiscal years follow similarly. 28 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. 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, Industries, Inc. ("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. (together with Megatran, "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. We refer to this transaction as the "acquisition of NWL". In June 2025, we completed an offering of 4,743,750 shares of our common stock at a public offering price of $28.00 per share under our Registration Statement on Form S-3. We received aggregate net proceeds of approximately $124.6 million after deducting underwriting discounts and commissions and offering expenses. 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. Results of Operations Three and six months ended September 30, 2025 , compared to the three and six months ended September 30, 2024 Revenues 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 September 30, Six Months Ended September 30, 2025 2024 2025 2024 Revenues: Grid $ 54,342 $ 46,936 $ 114,429 $ 79,272 Wind 11,520 7,535 23,791 15,489 Total $ 65,862 $ 54,471 $ 138,220 $ 94,761 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. 29 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 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 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 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 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 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. 30 Operating income (loss) Our operating income (loss) is summarized as follows (in thousands): Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Operating income (loss): Grid $ 1,278 $ 1,570 $ 5,435 $ 1,333 Wind 1,687 439 3,175 1,306 Unallocated corporate expenses — (2,762 ) — (6,682 ) Total $ 2,965 $ (753 ) $ 8,610 $ (4,043 ) 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 $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 Taxes 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. 31 Net income 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 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 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. In addition, we use non-GAAP net income as a factor to evaluate the effectiveness of our business strategies. 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 September 30, Six Months Ended September 30, 2025 2024 2025 2024 Net income $ 4,750 $ 4,887 $ 11,474 $ 2,363 Stock-based compensation 3,766 843 8,292 2,072 Acquisition costs — 850 — 1,080 Amortization of acquisition-related intangibles 337 608 674 1,020 Change in fair value of contingent consideration — 2,762 — 6,682 Non-GAAP net income $ 8,853 $ 9,950 $ 20,440 $ 13,217 Non-GAAP net income per share - basic $ 0.20 $ 0.27 $ 0.50 $ 0.36 Non-GAAP net income per share - diluted $ 0.20 $ 0.27 $ 0.49 $ 0.36 Weighted average shares outstanding - basic 43,242 36,952 41,070 36,317 Weighted average shares outstanding - diluted 44,210 37,499 41,988 36,951 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 . 32 Liquidity and Capital Resources The Company’s primary sources of liquidity are internally generated cash provided by operating activities, our cash and cash equivalents on hand, along with access to capital markets, including through our currently effective Registration Statements on Form S-3. 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 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. 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, may reduce our operating and capital spending to enhance liquidity. On June 10, 2025, we completed an offering of 4,125,000 shares of our common stock at a public offering price of $28.00 per share under our Registration Statement on Form S-3. We received net proceeds of approximately $108.2 million after deducting underwriting discounts and commissions and offering expenses. The offering included an option to purchase an additional 618,750 shares over the initial offering of 4,125,000 shares at the public offering price, less underwriting discounts and commission. This option was fully exercised on June 16, 2025 resulting in an additional $16.3 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses payable by the Company, for total net proceeds of approximately $124.6 million. The offering closed on June 16, 2025. 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): September 30, 2025 March 31, 2025 Cash and cash equivalents $ 212,891 $ 79,494 Restricted cash 5,865 5,887 Total cash, cash equivalents, and restricted cash $ 218,756 $ 85,381 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. 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 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. For information regarding our other contractual obligations, refer to Note 14, "Contingent Consideration," 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. There have been no material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. 33 We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. We raised $124.6 million, net of offering expenses, through an equity raise in June 2025. 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. 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 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 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 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 was annual reporting periods beginning after December 15, 2024. As of 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 . 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 was annual reporting periods beginning after December 15, 2024. 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 . 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 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. 34