American Superconductor Corporation Price & Performance (AMSC)

Thank you, Gary. Good morning, everyone. Welcome to American Superconductor Corporation's third quarter of fiscal year twenty twenty four conference I am Nicole Goles, AMSC's Director of Communications. On today's call, I'm joined by Daniel McGann, Chairman, President and Chief Executive Officer and John Casiba, Senior Vice President Chief Financial Officer and Treasurer. American Superconductor issued its earnings release for the third quarter of fiscal year twenty twenty four yesterday after the market closed. For those who have not seen the release, a copy is available in the Investors page of the company's website at www.amsc.com. The earnings release contains forward looking statements with respect to future future financial results. These statements are not guarantees of future performance. The company's actual results may differ materially from the anticipated events performing or results expressed or implied by these forward looking statements. Including due to the risk factors detailed in the SEC filings. Which can also be accessed through the company's website. The company disclaims any obligation these forward looking statements. Also, on today's call, management will refer to non GAAP net income a non GAAP financial measure. Tables of reconciliation GAAP to adjusted financial measures can be found in the company's earnings release With that, I will turn the call over to Chairman, [indiscernible] And Chief Executive Officer, Daniel McGinn.

Daniel?

And good morning, everyone.

I'll begin today by providing an update and sharing a few remarks on our business. John Kosiba will then provide a detailed review of our financial results for the third fiscal quarter which ended 12/31/2024, and will provide guidance for the fourth fiscal quarter which will end 03/31/2025, Following our comments, we'll open up the line to questions from our analysts. We're really excited to share a quarter of outstanding financial results Total revenue for the third quarter of fiscal year twenty twenty four exceeded our guidance range and came in at a new record for us of over $60,000,000 Revenue grew over 55% versus the year ago period driven by both organic growth as well as the acquisition of NWL with strong performance in both grid and wins. The business really outperformed This quarter, We showed a new record level of revenue for John and I We reported our second consecutive quarter of net income We delivered our sixth quarter in a row of positive operating cash we continue the rate at which we're booking orders to backlog. We ended the third quarter with $80,000,000 in cash. Talking a bit more about revenue, total revenue for the past nine months is greater than total revenue for the entire [indiscernible] fiscal year This means that whatever we do in the fourth quarter, will be year over year growth.

Our grid revenue accounted for 85% of AMSC's total revenue and grew over 55% versus the year ago period. Almost 15% of the revenue came from our wind business which grew by almost 60% versus the year ago period 5560%. These are really big numbers. During our third quarter, we saw a wide range of product shipments, but third of our products shipped to renewables projects about 10% were military [indiscernible] went into industrials. This quarter, we received over $557,000,000 dollars of new orders, 75% of which came from our grid business and 25% from our wind business. Our orders come from a diverse set of markets including renewables, industrials, utilities, and military. We secured nearly $15,000,000 in Electrical Control Systems or ECS orders from our customer Inox wins, They expect to receive these e over the course of the first half of fiscal year 2025. Timing really depends on our customers' payment schedule. It seems clear they are ramping up their production. We see continuous demand for i9 two and three megawatt turbines, as well as our two and three megawatt electrical control systems.

We secured over $42,000,000 of Grid orders driven in large part by a diverse of industrial projects This puts our twelve month backlog above $200,000,000 and total backlog $300,000,000 We are pleased with these results and super excited about the rest of the fiscal year. Now I'll turn the call over to John Kasiba to review our financial results for the third quarter of fiscal year twenty twenty four and provide guidance for the fourth quarter of fiscal year twenty twenty four which will end March 31, 2025. [indiscernible] Thanks, Daniel.

And good morning, everyone.

AMSE generated revenues of $61,400,000 for the third quarter of fiscal twenty twenty four. Compared to $39,400,000 in the year ago quarter. Our great business unit accounted for 85% of total revenues while our wind business unit accounted for 15%. Grid business unit revenues for the third quarter increased by 56% versus the year ago quarter. This increase in revenue was primarily driven by the acquisition of NWL and increased shipments of new energy power systems. Our wind business unit for the third quarter increased by 58% versus the year ago quarter. This increase in revenue was primarily driven by additional shipments of electrical control systems Looking at the P and L in more detail, gross margin for the third quarter of fiscal twenty twenty four was 27% compared to 25% in the year ago quarter. The year over year increase in gross margin was was primarily driven by higher revenues, which improved factory utilization We also experienced a favorable product mix within both our grid and wind business units. Moving on to operating expenses. R and D and SG and A expenses for the third quarter of fiscal twenty twenty four were $14,600,000 compared to $10,000,000 in the year ago quarter.

The year over year increase is largely associated from our recent acquisition of NWL. Approximately 19% of R and D and SG and A expense in the third quarter of fiscal twenty twenty four were non cash Our non GAAP net income for the third quarter of this or $0.16 per share compared with non GAAP net income of $900,000 or $0.03 per share in the year ago quarter. Our net income in the third quarter of fiscal twenty twenty four was $2,500,000 or $0.07 per share. This compares to a net loss of $1,600,000 or $0.06 per share in the year ago quarter. As you can see, our business scaled nicely with the shop increase in revenue over the past year. The increase in both non GAAP net income and net income was primarily driven by the contribution margin associated with the increased shipments of our new energy power systems increased wind shipments of ECS and the additional revenue from our NWL acquisition.

Please see our press release issued last night for a reconciliation of GAAP to non GAAP results. We ended the third quarter of fiscal twenty twenty four with $80,000,000 in cash, cash equivalents and restricted cash. This compares with $74,800,000 on 09/30/2024 We generated $5,900,000 of operating cash flow in the third quarter of fiscal twenty twenty four, and CapEx in the quarter was 500,000 Now turning to financial guidance for the fourth quarter of this we expect that our revenues will be in the range of $59 dollars Our net loss is expected not to exceed $1,000,000 or $0.03 per share our non GAAP net income $2,500,000 or or $0.07 per share. With that, I'll turn the call back over to Daniel. Thanks, John.

We've now achieved two consecutive quarters of what I consider record breaking revenue level. One of $50,000,000 that was last quarter and now $60,000,000 and we're guiding to another possible record breaking quarter. As we approach the final quarter of fiscal year twenty twenty Total revenue for the past three quarters reached an impressive $156,000,000 This revenue surpasses our entire [indiscernible] fiscal year. When we look at our compound annual growth rate, we have grown by more than 25% over the past three fiscal years. The business has demonstrated growth both organically and through our recent acquisition. Let's discuss some additional benefits of the acquisitions when combined. The team has done an excellent job of integrating and making the last several acquisitions work and work together. We now have a combined product offering for industrials that is Very broad. We are providing power supplies for industrial equipment, as well as industrial manufacturing capacity.

We are providing capacitor banks and harmonic filters for these types of installations as well. We provide industrial power supplies for motor drives, for a variety of applications from pumps to fans to compressors. The same product portfolio is being deployed to support and stabilize [indiscernible] to integrate renewable energy.

By leveraging content from our prior acquisition We've expanded our ability to target industrial applications that were previously [indiscernible] attainable. Looking at The U. S. Political climate, there appears to be a lot of rhetoric which could translate into a better reality S. Industry. In fact, over 85% of our grid revenue This quarter, came from The United States, We believe we could be well positioned to benefit from the drive to manufacture in America as most of our business is based in The U. S, and supported by a mainly U. S. Supply chain. We may be presented with opportunities uniquely available to us given this fact.

If we look back at the first term, of the current administration, the drive towards re shoring American American capabilities was very strong And factually, the renewable energy industry In The U. S, grew I'll be For us, it's a very small part of our business.

Overall, we see electricity needs driven in part by key industries such as artificial intelligence and data centers. This likely means that demand for electricity To conclude, our longstanding customer is starting to accelerate their business which could translate into growth for us.

You can see that wind has been growing over the past several quarters. We see that orders from India this quarter giving us a clear path to continuing this trend in the near term.

If we look out a bit further in time, we see a deep pipeline of projects for a variety of materials, be it mining or chemical processing.

And we have several potential semiconductor orders on the horizon. If we look even longer term, we see our business with the military having the potential to expand Further, The business crew organically in both wins and grid, The addition of MWL is working and has opened up a of customers We are seeing business opportunities in new areas with utilities for data centers and for pipelines for traditional energy. We believe that it is imperative not only to enable clean energy, but to provide cleaner power for traditional energy as well. We are very well positioned as a company that has diversified and has been growing at 25% when compounded annually over the past several years. It feels like we really have reached a new level at over $60,000,000 of quarterly revenue for the company growing from having quarterly revenue in the $30,000,000 range only two years ago, I am personally very excited about the future of the company. This is probably the most excited I have been We believe we're in a tremendous position to take advantage of an ever changing world. We are prepared to capitalize on the growing demand for energy, and the need for a stable grid to support it.

We have delivered another outstanding quarter and can see that the fundamentals of our business are well grounded. This is truly an exciting time for us here at AMSC. Our future facing technologies help harmonize the world's desire for decarbonization and clean energy with the need for more reliable effective and efficient power delivery. I look forward to reporting back to you at the completion of our fourth fiscal quarter and fiscal Gary will now take questions.

Our first question today is from Eric Stine with Craig Hallum. Please go ahead.

Hi, Daniel. Hi, John. Hey, Eric. Good to hear your voice.

Good morning.

So you mentioned the deep pipeline. Obviously, you've got the backlog of 300,000,000 has grown pretty substantially. Is there any way you can give more detail to the description deep pipeline, whether it's trying to quantify it, how it's grown over the last year or two and with the new acquisitions?

Yes. I think the simple way to look at it is that the pipeline growth rate is greater than the company's growth rate. The types of new opportunities that we're seeing Really, I think the thing that shines most is the diversity of what we're doing.

So one of the things we want to ensure that we do as we grow is to not concentrate. And we've tried to really push as we brought more content in from the different acquisitions to get them to work together to get them to work in projects across a variety of industries. And that really is showing up in the pipeline So I'm really, really jazzed about where we are, where we've been and where I think it looks like we're going to head to go. And I think we have multiple pathways here to growth, be it in India with wind, be it in The U. S. With industrials and then longer term the military, everything that we're now offering not just ship protection, but the whole suite of products that I think we're in a really great position to continue on the trend that we've established.

Got it. And I mean, obviously, I would think it's It's magnitudes larger than your current backlog. I mean, is it fair to say that With these acquisitions, it increased by a factor of whatever the number is, 2x, 3x. Yes, I don't know even the factor, Eric.

I just look at it and I look at the depth in the breast the deepness of our offering the fact that the project sizes have grown our content per project has grown, Our engagement with customers has grown. Across the company we realize that each of the different elements within the total business had its own customer [indiscernible] And we're now starting to see the ability to crossover through multiple product lines off one combined offering into these great customers that we've been able to serve. And they're very excited that we can do more for them. And I think that really puts us in position to keep maintaining those great customer relationships that we've established. Got it. Okay. Great color.

Maybe last one for me. Just on the win side.

You mentioned the orders received in this quarter.

And I know Inox obviously three plus gigawatt backlog that you are exclusively supplying. Mean, how do you envision kind of this playing out going forward? I know if we look back a number of years, you kind of got a large order from Inox and then worked it off over time. And now I know you're focused on getting paid. And so they've been smaller, but more frequent. I mean, is that kind of how we should expect things playing out going forward?

Simply, yes. I think that if you go back in our history Inox was young and our financial stability wasn't [indiscernible] it's desired on both parties to make sure that we were committed to long term relationship. We have demonstrated a great long term relationship with Inox. I believe that will continue and hopefully will continue for a long time. They've really done a nice job in managing their business. We've told them not to worry about big orders or things like that. Whatever that they need, we're ready to serve. We have a good contract terms that works for both sides. And they basically pay as they go and they give us an instruction and say, hey, we need this as soon as we can. And here's the next batch. So I think we're going to see going forward more of a batch to batch to meet their demand. Clearly, based upon and you articulated, I think, factoring their backlog, that means more orders will come and hopefully they'll come at a certain pace. But that pace is really predicated on it's really not Inox. It's Inox's customers ability to pay them at the rate that they're paying them.

So we are in a position right now, we see the wind business accelerating And I think with these additional orders and the timing that they've ascribed to our delivery, it means that that patient continue.

The next question is from Colin Rusch with Oppenheimer. Please go ahead. Ahead.

Thanks so much guys. As you start to digest some of the [indiscernible] just a question around capacity and how you need to capacityize the company to meet that demand and what can we think about from an operating leverage perspective or manufacturing leverage perspective?

I think it's a fantastic question. It's one of the things that I concern myself with because we've been growing so nicely and so rapidly. We want to make sure that our revenue outpaces the growth in fixed costs. I think we've demonstrated a great ability to do that. We think there's a lot of financial leverage in the business. We have said that we may need to at some point in the future think about capacity expansion But that cost of that project is relatively minuscule compared to the the cash balance that we hold today. So we want to make sure we're in a position to go forward with growth and we want to be able to have the manufacturing capability to do that. But I think directly that doesn't mean we need to expand fixed at least certainly not at the rate that we have been growing revenue or hope to grow revenue. We think it's a fairly nicely constructed business. And we're looking as we bring in each of these different acquisitions, we're looking to learn what each group does maybe better or best practices out of the group and bring that forward to all of them.

I think the team has been very receptive to that. And more and more, it's a one unified face to the customer selling a stack of content that really is chosen by the give us as a scope of a project. But I think our capacity today, we've been we've had to be able to grow [indiscernible] I do expect at some point in our future, we may have to spend some cap a huge project and it's something that we can afford given the very strong balance sheet of the company.

Excellent. And then the second question is really around the pipeline of acquisition targets. You guys have clearly demonstrated a nice job in digesting some of that that new capacity and integrating those businesses. But it looks us like there's maybe a half dozen or a dozen potential incremental targets. How are you guys thinking about that inorganic growth opportunity? And augmenting the portfolio of offerings from here?

Yes. I think what you said is accurate. We try to look for the right people with the right product, ideally with the right profit leverage as well that would fit into our business model. And the last P, I'd say it has to be at the right price. So I think one of the things that the company has shown is great strength in not chasing things at a very, very high price. We've been able to get what we think are great companies at great prices with great people, great products And if we can continue to do that again and it fits in, That certainly works. I think with the uncertainty that's coming in the market here in The U. S, it's an opportunity for us because I think we're uniquely positioned to grow. But it may be an opportunity as well for potential targets where they may have some challenges in the near term and worry about their access to capital and working with a company like ours might be a good fit for them.

So we'll see how that works. Right now, we're digesting We feel very comfortable with what the team is doing. We've been able to do growth organically and with the addition of the revenue from NWL. But at some point, we need to turn and say, okay, can we continue to accelerate the rate of growth we've demonstrated such a nice rate If we can continue that, or come close to continuing that, I think that's in everybody's advantage and interest here. Okay.

Thanks so much guys.

The next question is from Justin Claire with ROTH Capital Partners. Please go ahead.

Hi, good morning.

Thanks.

Good morning. So wanted to start here you had mentioned in your comments potential opportunity here in data centers that that you're exploring. I was wondering if you could just expand on how you're viewing that Marcus, how you might approach it, which products could be a good fit for data centers? And then do you have any visibility into potential timing for orders that you could capture there?

That'd be helpful as well. Yes, I think it's a great question. It's something that we're looking at internally. We've seen inbound coming from really all the different business lines that face utilities And what we're finding is there's a certain number of utilities and you kind of know who they are based upon where these data centers are being built that are coming to us time and time again now with real distinct problems on the grid So what we foreshadowed back a few quarters ago that really the opportunity for us is going to be that grid needs to become more reliable to be able to support this additional capability that seems like that's starting to come to fruition at least in the pipeline. So we're seeing multiple projects, handfuls of projects from the same utilities that have the same problems that we can uniquely solve. So it could be that they need some level of capacitance to be able to buffer [indiscernible] they may need to have more power supplied to a specific area. And in all those cases, we have an offering that fits really nicely. Again, it doesn't mean that we're going to be part of the CapEx to build the building, but we're going to be part of the CapEx to build the grid out.

To be able to support the capacity that's going into that project. So that's relatively new for us. That's exciting. I think the heart part, Justin, with me always is, well, what's the timing and what's the pace I think that's to be determined I think it's up to our team to try to turn these prospects into projects that are funded and are going to use our products. So So, I'd say stay tuned. I think it becomes part of the growth story. Certainly not in the next maybe year or so because the lead time for these things are more than a year.

But I think as you look at the overall trajectory, as we look at out a few years I think it's very positive for us. And then this would be one area that potentially future growth.

Okay, got it. Yes, that's helpful. The detail there. So then maybe just shifting over to your semiconductor business and the opportunity there.

It looks like toward the end of the Biden administration, there was a rush to allocate funds under the CHIPS Act And so wondering how that opportunity is evolving here How is demand trending? And do you see the potential for an acceleration as the CHIPS Act funding starts to get dispersed here? Yes. I think that's the exact way to look at it is that the policy been enacted, the funding has happened and now projects are being constructed. I was looking at a bunch of stuff the past few days.

And we look at all the names we're trying to support, it's not just the ones that we've mentioned. There is and I was trying to be deliberate about it in the prepared remarks. There are a series of kind of key large orders from semi that are right in our crosshairs we want to get over the line. These are all for projects that are ready to construct fully financed to construct was really without any risk around the timing. I think longer term, what we're hearing from our semiconductor customers are is the need for increased capacity is there. So I think in the longer term, I think that will translate into more pipeline and more projects for us in the future as well. But in the relative near term, We have have a number of opportunities we're trying to get over the goal line here that we think would be nice for the business into the next year or so.

Okay.

Great. Then just one more We have heard that there are some challenges relating to permitting, particularly for wind projects, but also for solar projects This follows the President's executive order on permitting for wind projects. Wondering if you could share, are you seeing any change in terms of order flow for your renewables business in The U. S. As a result of this? Or do you see any potential challenges ahead here?

Yes. It's such a small part of our business. We do not do a lot of business in The U. S. In renewables. So from a diversity and from [indiscernible] position of strength. We do win in India and we report that as a segment and we said that's 15% of the business.

The rest of renewables that would occur in The U. S. Are a small fraction of that. So I think if in the future there's a drive to do more renewables, we stand ready and have it, but it's not been part of our business the past quarters or year or two or so. [indiscernible] It's not something that we really concern ourselves. And I think for our audience, it's it's not something that you're investing in us For us, it's really about becoming more about hardening the grid, strengthening the grid for a lot of these industrial capacity projects that we think are really going to start to take off here in the coming year and years.

Okay. That's helpful. Thanks. I'll pass it on. This concludes our question and answer session. Like to turn the conference back over to Daniel McGann for any closing remarks.

What a great quarter. We're really, really happy This is a point that we had hoped to get to And I think when John and I looked at this back of ways, we thought we'd be here a year or two from now. We think we're well ahead of schedule We think the business really has outperformed even our own optimistic Look, so as we look towards the future, it's clear We stand ready to capitalize on that rising demand for energy. And the critical need for the dependable grid to support it. We reached another consecutive recent record quarter with the revenue levels now over $60,000,000 on a The business has already demonstrated revenue growth with only nine months in fiscal year, This means we're close to doubling revenue from our fiscal year 2022 level only two years later.

We see more industrials including chips, as well as some wind on the horizon really out of India. I believe our business is at an exceptionally strong position and I'm really excited to talk about some new markets for us today data centers, more traditional energy, These are all things that require our product that we think we can benefit our key customers with. I look forward to talking to you again when we report our full fiscal year results Next time.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [indiscernible]