AMERICAN SUPERCONDUCTOR CORP /DE/

Previous wording

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.

Current wording

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 generators, power utilities, industrial manufacturers, the military and renewable energy companies.

Previous wording

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 operation.

Current wording

Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine, and in the Middle East, 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.

Previous wording

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. ("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".

Current wording

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".

Previous wording

Total revenues increased by 53% to $222.8 million in fiscal 2024 from $145.6 million in fiscal 2023. Our revenues are summarized as follows (in thousands):

Current wording

Total revenues increased by 34% to $299.2 million in fiscal 2025 from $222.8 million in fiscal 2024. Our revenues are summarized as follows (in thousands):

Previous wording

Revenues in our Grid business segment are derived from our D-VAR product sales, Northeast Power Systems, Inc. ("NEPSI") product sales, Neeltran, Inc. ("Neeltran") product sales, NWL product sales, HTS wire sales, ship protection systems ("SPS"), government-sponsored electric utility projects and other prototype development contracts. We also engineer, install and commission our products on a turnkey-basis for some customers. The Grid business segment accounted for 84% of total revenues in both fiscal 2024 and 2023. Grid revenues increased 53% to $187.2 million in fiscal 2024 from $122.1 million in fiscal 2023. The increase in revenues was driven by higher D-VAR and NEPSI revenues than in the prior year period along with the NWL revenues earned after the acquisition of NWL.

Current wording

Revenues in our Grid business segment are derived from our D-VAR product sales, Northeast Power Systems, Inc. ("NEPSI") product sales, Neeltran, Inc. ("Neeltran") product sales, NWL product sales, Comtrafo product sales, HTS wire sales, ship protection systems ("SPS"), government-sponsored electric utility projects and other prototype development contracts. We also engineer, install and commission our products on a turnkey-basis for some customers. The Grid business segment accounted for 84% of total revenues in both fiscal 2025 and 2024. Grid revenues increased 34% to $251.3 million in fiscal 2025 from $187.2 million in fiscal 2024. The increase in revenues was driven by higher new energy power systems revenues, higher ship protection systems revenues, and the contribution from the acquisition of Comtrafo in fiscal 2025.

Previous wording

Revenues in our Wind business segment are derived from wind turbine electrical control systems and core components, wind turbine license and development contracts, service contracts and consulting arrangements. Our Wind business segment accounted for 16% of total revenues in both fiscal 2024 and 2023. Revenues in the Wind business segment increased 51% to $35.6 million in fiscal 2024 from $23.6 million in fiscal 2023. The increase over the prior year period was driven by additional shipments of electrical control systems ("ECS") at increased prices.

Current wording

Revenues in our Wind business segment are derived from wind turbine electrical control systems and core components, wind turbine license and development contracts, service contracts and consulting arrangements. Our Wind business segment accounted for 16% of total revenues in both fiscal 2025 and 2024. Revenues in the Wind business segment increased 34% to $47.8 million in fiscal 2025 from $35.6 million in fiscal 2024. The increase over the prior year period was driven by additional shipments of electrical control systems ("ECS") in fiscal 2025.

Previous wording

Research and development (“R&D”) expenses increased by 43% to $11.4 million, or 5% of revenue in fiscal 2024, compared to $8.0 million, or 5% of revenue, in fiscal 2023. The increase in R&D expenses is primarily a result of additional total compensation and stock compensation expense due in part to additional employees as a result of the acquisition of NWL.

Current wording

Research and development (“R&D”) expenses increased by 38% to $15.7 million, or 5% of revenue in fiscal 2025, compared to $11.4 million, or 5% of revenue, in fiscal 2024. The increase in R&D expenses is primarily a result of additional compensation and stock compensation expenses in fiscal 2025.

Previous wording

Selling, general and administrative (“SG&A”) expenses increased by 36% to $43.1 million, or 19% of revenue in fiscal 2024 from $31.6 million, or 22% of revenue, in fiscal 2023. The increase in SG&A expenses is primarily a result of higher total compensation expense, additional stock compensation expense and acquisition costs related to the acquisition of NWL.

Current wording

Selling, general and administrative (“SG&A”) expenses increased by 34% to $57.6 million, or 19% of revenue in fiscal 2025 from $43.1 million, or 19% of revenue, in fiscal 2024. The increase in SG&A expenses is primarily a result of the addition of Comtrafo operating expenses and additional compensation and stock compensation expenses in fiscal 2025.

Previous wording

We recorded $1.7 million in fiscal 2024 and $2.2 million in fiscal 2023 in amortization expense related to our core technology and know-how, customer relationships, and other intangible assets. The decrease in amortization expense is primarily a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets related to NEPSI and Neeltran, partially offset by the increase related to amortization of NWL related intangibles.

Current wording

We recorded $2.4 million in fiscal 2025 and $1.7 million in fiscal 2024 in amortization expense related to our core technology and know-how, customer relationships, and other intangible assets. The increase in amortization expense is primarily a result of additional amortization related to the Comtrafo acquisition.

Previous wording

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 fiscal 2024, and $4.9 million during fiscal 2023. During fiscal 2024, we issued 300,000 shares of our common stock to the selling stockholders following certification of the achievement of specified earnout revenue objectives. We also recorded a $3.3 million payment relating to the acquisition of NWL, 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 2024 when the payment was calculated and paid.

Current wording

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 fiscal 2024. During fiscal 2024, we issued 300,000 shares of our common stock to the selling stockholders following certification of the achievement of specified earnout revenue objectives. We also recorded a $3.3 million payment relating to the acquisition of NWL, as a payment to settle the remaining obligations after the acquisition.

Previous wording

Our Grid business segment generated operating income of $1.8 million in fiscal 2024 and operating loss of $6.9 million in fiscal 2023. The improvement in the Grid business segment was due to higher revenues and gross margins in fiscal 2024, compared to fiscal 2023.

Current wording

Our Grid business segment generated operating income of $8.5 million in fiscal 2025 and $1.8 million in fiscal 2024. The improvement in the Grid business segment operating income was due to higher revenues and improved gross margins in fiscal 2025.

Previous wording

The Wind segment generated operating income of $3.8 million in fiscal 2024 and $0.4 million in fiscal 2023. The increase in the Wind business segment operating income was due to higher revenue and gross margins in fiscal 2024, compared to fiscal 2023.

Current wording

The Wind segment generated operating income of $7.1 million in fiscal 2025 and $3.8 million in fiscal 2024. The increase in the Wind business segment operating income was due to higher revenues and improved gross margins in fiscal 2025.

Previous wording

Unallocated corporate expenses consisted of a loss on contingent consideration of $6.7 million in fiscal 2024, and a loss on contingent consideration of $4.9 million infiscal 2023.

Current wording

Unallocated corporate expenses consisted of a loss on contingent consideration of $4.2 million in fiscal 2025 and $6.7 million infiscal 2024.

Previous wording

Interest income, net was $3.7 million in fiscal 2024 compared to $1.3 million for fiscal 2023. The increase in interest income, net, was primarily due to higher cash balances in fiscal 2024.

Current wording

Interest income, net was $6.4 million in fiscal 2025 compared to $3.7 million for fiscal 2024. The increase in interest income, net, was primarily due to higher cash balances generating additional interest income in fiscal 2025.

Previous wording

Other expense, net was $0.3 million in fiscal 2024, compared to $0.7 million in fiscal 2023. The decrease in other expense was driven by the impacts of more favorable fluctuations in foreign currencies in fiscal 2024, compared to fiscal 2023.

Current wording

Other expense, net was $1.1 million in fiscal 2025, compared to $0.3 million in fiscal 2024. The increase in other expense, net was driven by unfavorable fluctuations in foreign exchange rates, resulting in translation losses.

Previous wording

We recorded an income tax benefit of $3.7 million in fiscal 2024, compared to income tax expense of $0.3 million in fiscal 2023. The net improvement in income tax is a result of the release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of NWL.

Current wording

We recorded an income tax benefit of $117.1 million in fiscal 2025, compared to $3.7 million in fiscal 2024. The net impact to income tax is primarily a result of a non-cash tax benefit from the release of the majority of our valuation allowance against deferred tax assets due to a change in facts and circumstances that impact our conclusion on realizability of such assets.

Previous wording

Net income was $6.0 million in fiscal 2024, compared to net loss of $11.1 million in fiscal 2023. The improvement in net income was driven primarily by higher revenues and gross margins in fiscal 2024 and other factors described above.

Current wording

Net income was $133.8 million in fiscal 2025, compared to $6.0 million in fiscal 2024. The improvement in net income was driven primarily by the non-cash tax benefit from the release of the majority of our valuation allowance against deferred tax assets, higher revenues and improved gross margins in fiscal 2025.

Previous wording

Non-GAAP Financial Measure - Non-GAAP Net Income

Current wording

Non-GAAP Financial Measure - Non-GAAP Net Income and Non-GAAP Net Income Per Share

Previous wording

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, acquisition costs, 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. Areconciliation of GAAP net income (loss) to non-GAAP net income is set forth in the table below (in thousands, except per share data):

Current wording

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, acquisition costs, 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. Areconciliation of GAAP net income to non-GAAP net income (loss) is set forth in the table below (in thousands, except per share data):

Previous wording

Non-GAAP net income was$24.0 million, or $0.65 per share, for fiscal 2024, compared to $0.6 million, or $0.02 per share, for fiscal 2023. The improvement in non-GAAP net income in fiscal 2024 compared to fiscal 2023 was due to improved operating income driven by higher revenues and gross margins.

Current wording

Non-GAAP net income was$158.1 million, or $3.68 per share, for fiscal 2025, compared to $24.0 million, or $0.65 per share, for fiscal 2024 and $0.6 million, or $0.02 per share, for fiscal 2023. The improvement in non-GAAP net income in fiscal 2025 compared to fiscal 2024 was due primarily to the non-cash tax benefit from the release of the majority of our valuation allowance against deferred income tax assets, and improved operating margin in the Wind and Grid business segments.

Previous wording

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. The Company believes that these sources of liquidity provide adequate liquidity to meet both its short-term and reasonably foreseeable long-term requirements and obligations. At March 31, 2025, we had cash, cash equivalents and restricted cash of $85.4 million, compared to $92.3 million at March 31, 2024, a decrease of $6.9 million. As of March 31, 2025, we had approximately $4.7 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):

Current wording

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. The Company believes that these sources of liquidity provide adequate liquidity to meet both its short-term and reasonably foreseeable long-term requirements and obligations. At March 31, 2026, we had cash, cash equivalents and restricted cash of $147.6 million, compared to $85.4 million at March 31, 2025, an increase of $62.2 million. As of March 31, 2026, we had approximately $17.8 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):

Previous wording

Net cash provided by operating activities was $28.3 million compared to net cash used in operating activities of $2.1 million in fiscal 2024 and 2023, respectively. The increase in net cash provided by operations in fiscal 2024 compared to fiscal 2023 was driven primarily by higher gross margins, favorable changes in accounts payable and accrued expenses, relief of deferred revenue, increased non-cash expenses like stock-based compensation, depreciation and amortization, and change in fair value of contingent consideration, offset by decreased cash collections, increased prepaid balances, and change in deferred income taxes.

Current wording

Net cash provided by operating activities was $23.1 million, $28.3 million and $2.1 million in fiscal 2025, 2024, and 2023, respectively. The decrease in net cash provided by operations in fiscal 2025 compared to fiscal 2024 was due primarily to changes in deferred revenue and accounts receivable, offset by changes in accounts payable and accrued expenses, deferred income taxes, changes in fair value of contingent consideration and stock-based compensation expense. The increase in net cash provided by operations in fiscal 2024 compared to fiscal 2023 was driven primarily by higher gross margins, favorable changes in accounts payable and accrued expenses, relief of deferred revenues, increased non-cash expenses like stock compensation, depreciation and amortization, and change in fair value of contingent consideration, offset by decreased cash collections, increased prepaid balances, and change in deferred income taxes.

Previous wording

Net cash used in investing activities was $35.2 million and $1.0 million in fiscal 2024 and 2023, respectively. The increase in net cash used in investing activities in fiscal 2024 compared to fiscal 2023 was due primarily to cash paid for the acquisition of NWL.

Current wording

Net cash used in investing activities was $77.1 million, $35.2 million, and $1.0 million in fiscal 2025, 2024, and 2023, respectively. The increase in net cash used in investing activities in fiscal 2025 compared to fiscal 2024 was primarily due to cash paid for the Comtrafo acquisition in the current fiscal year. The increase in net cash used in investing activities in fiscal 2024 compared to fiscal 2023 was due primarily to cash paid for the acquisition of NWL.

Previous wording

Net cash provided by financing activities was less than $0.1 million compared to $65.4 million in fiscal 2024 and 2023, respectively. The decrease in cash provided by financing activitieswas primarily related to net proceeds received from an equity offering in fiscal 2023, while the Company had no equity offerings in fiscal 2024.

Current wording

Net cash provided by financing activities was $116.1 million compared to less than $0.1 million and $65.4 million in fiscal 2025, 2024, and 2023, respectively. The increase in cash provided by financing activities in fiscal 2025 compared to fiscal 2024 was primarily related to net proceeds received from an equity offering in June 2025. The decrease in cash provided by financing activities in fiscal 2024 compared to fiscal 2023 was primarily related to net proceeds received from an equity offering in fiscal 2023, while the company had no equity offerings in fiscal 2024.

Previous wording

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. 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.

Current wording

At March 31, 2026, we had $3.3 million of restricted cash included in long-term assets and $3.5 million of restricted cash 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.

Previous wording

In August 2024, the Company 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 the Company to offer and sell from time-to-time unspecified amounts of 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 the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its 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.

Current wording

In August 2024, the Company 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 the Company to offer and sell from time-to-time unspecified amounts of 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 register the Comtrafo selling stockholder's AMSC shares, and is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its 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.

Previous wording

We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. 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 tariffs, trade restrictions and resulting trade conflicts, 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.

Current wording

We believe we have sufficient available liquidity to fund our operations and capital expenditures for at least the next twelve months. 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 tariffs, trade restrictions and resulting trade conflicts, the ongoing wars between Russia and Ukraine and in the Middle East, 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. In addition, the current interest rate environment may affect the cost and availability of debt financing for future acquisitions or other capital needs. While we funded our recent acquisitions primarily with cash on hand and equity, we may seek to use debt financing for future transactions, and higher interest rates could increase the cost of such financing or make certain transactions less attractive.

Previous wording

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. We are evaluating the impact on our consolidated financial statements.

Current wording

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 March 31, 2026, we have adopted ASU 2023-09, made the required disclosures, and noted no other material impact on our consolidated financial statements.

Previous wording

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. Weare evaluating the impact on our consolidated financial statements.

Current wording

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 March 31, 2026, we have adopted ASU 2024-02 and noted no other material impact on our consolidated financial statements.

Previous wording

Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions as well as the use of specialists as needed. The Company utilizes management estimates and an independent third-party valuation firm to assist in determining the fair values of assets acquired, including intangible assets and liabilities assumed. The primary intangible assets acquired include customer relationship and trade names. Intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The fair value of customer relationships is measured using the multi-period excess earnings method (“MPEEM”). The fair value of the trade names is measured using a relief-from-royalty (“RFR”) approach. The basis for future sales projections for both the MPEEM and RFR are based on internal revenue forecasts which the Company believes represents reasonable market participant assumptions. The future cash flows are discounted using an applicable discount rate. The key uncertainties in the calculations, as applicable, are the selection of an appropriate royalty rate, assumptions used in developing estimates of future cash flows, including revenue growth and expense forecasts, assumed customer attrition rates, as well as perceived risks associated with those forecasts in determining the discount rate. There is inherent uncertainty in forecasted cash flows and therefore, actual results may differ and could result in a subsequent impairment charge of acquired intangibles and/or goodwill.

Current wording

Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions as well as the use of specialists as needed. The Company utilizes management estimates and an independent third-party valuation firm to assist in determining the fair values of assets acquired, including intangible assets and liabilities assumed. The primary intangible assets acquired include customer relationship. Intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The fair value of customer relationships is measured using the multi-period excess earnings method (“MPEEM”). The basis for future sales projections for both the MPEEM and RFR are based on internal revenue forecasts which the Company believes represents reasonable market participant assumptions. The future cash flows are discounted using an applicable discount rate. The key uncertainties in the calculations, as applicable, are assumptions used in developing estimates of future cash flows, including revenue growth and expense forecasts, assumed customer attrition rates, as well as perceived risks associated with those forecasts in determining the discount rate. There is inherent uncertainty in forecasted cash flows and therefore, actual results may differ and could result in a subsequent impairment charge of acquired intangibles and/or goodwill.

Previous wording

The consideration for our acquisitions may include future payments that are contingent upon the occurrence of a particular event. We record a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date. We estimate the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and the likelihood of making related payments. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the fair value of contingent consideration recorded at each reporting period.

Current wording

The consideration for our acquisitions may include future payments that are contingent upon the occurrence of a particular event. We record a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date. We estimate the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones, the likelihood of making related payments, the EBITDA volatility, and the discount rate. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the fair value of contingent consideration recorded at each reporting period.

Previous wording

Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated. We perform our annual assessment of goodwill on February 28th of each fiscal year and whenever events or changes in circumstances or a triggering event indicate that the carrying amount may not be recoverable. An entity is permitted to first assess qualitatively whether it is necessary to perform a goodwill impairment test. Significant judgment is required to determine if an indication of impairment has taken place. Factors to be considered include the following: adverse change in operating results, decline in strategic business plans, significantly lower future cash flows, and sustainable declines in market data such as market capitalization. The quantitative impairment test is required only if the entity concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We determine the fair value of a reporting unit, using a methodology which combines an income approach, using a discounted cash flow method, with a market approach. The income approach includes estimates and assumptions about revenue growth rates, operating margins and terminal growth rates, discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint. These estimates are based on historical experiences, our projects of future operating activity and our weighted-average cost of capital. A significant change in events, circumstances or any of these assumptions could adversely affect these estimates, which could result in an impairment.

Current wording

Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated. We perform our annual assessment of goodwill on February 28th of each fiscal year and whenever events or changes in circumstances or a triggering event indicate that the carrying amount may not be recoverable. Circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, or unanticipated competition. The Company may first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test, or the Company can bypass the qualitative assessment and proceed directly to the quantitative test. The quantitative goodwill impairment test requires the Company to estimate and compare the fair value of the reporting unit with its carrying value. We determine the fair value of a reporting unit, using a methodology which combines an income approach, using a discounted cash flow method, with a market approach. The income approach includes estimates and assumptions about revenue growth rates, EBITDA and discount rates, discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. These estimates are based on historical experiences, our projects of future operating activity and our weighted-average cost of capital. A significant change in events, circumstances or any of these assumptions could adversely affect these estimates, which could result in an impairment.

Previous wording

We regularly assess our ability to realize our deferred tax assets. Assessments of the realization of deferred tax assets require that management consider all available evidence, both positive and negative, and make significant judgments about many factors, including the amount and likelihood of future taxable income. Based on all the available evidence, we have recorded valuation allowances to reduce our deferred tax assets to the amount that is more likely than not to be realizable due to the taxable losses that have been incurred since our inception and uncertainty around our future profitability.

Current wording

We regularly assess our ability to realize our deferred tax assets. Assessments of the realization of deferred tax assets require that management consider all available evidence, both positive and negative, and make significant judgments about many factors, including the amount and likelihood of future taxable income. As of March 31, 2026, the Company recorded a $118.4 million non-cash income tax benefit related to the release of a substantial portion of its valuation allowance against deferred tax assets. This was based on the Company's evaluation of the positive evidence, including cumulative income position over the three year period ended March 31, 2026, revenue growth, current profitability, expectations regarding future forecasted income, and negative evidence, including uncertainty in economic and political environments from industry competition and dependence on government contracts. This release of the valuation allowance resulted in the recognition of a deferred tax asset and a corresponding increase to income tax benefit in fiscal 2025, the effect of which is an increase in reported net income.