American Superconductor Corporation

Good morning and welcome to the AMSC third quarter fiscal 2023 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Hileshorn of LHA. Please go ahead.

Thank you. Good morning, everyone, and welcome to American Superconductor Corporation's third quarter of fiscal 2023 earnings conference call. I am John Hileshorn of LHA Investor Relations, AMSE's Investor Relations Agency of Records. With us on today's call are Daniel McGann, Chairman, President, Chief Executive Officer, and John Kaseba, Senior Vice President, Chief Financial Officer, and Treasurer. American Superconductor issued its earnings release for the third quarter fiscal 2023 yesterday after the market closed. For those of you who have not yet seen the release, a copy is available in the Investors page of the company's website at www.amsc.com. Before I start the call, I would like to remind you that various remarks that management will make during today's call about American Superconductors' future expectations, including expectations regarding the company's fourth quarter of fiscal 2023 financial performance, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actually, results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those set forth in the risk factors section of American Superconductors' annual report on Form 10-K for the year ended March 31, 2023, which the company filed with the Securities and Exchange Commission on May 31, 2023, and the company's other reports filed with the SEC. These forward-looking statements represent management's expectations only as of today and should not be relied upon as representing management views as of any subsequent date to today. While the company anticipates that subsequent events and developments may cause the company's views to change, the company specifically disclaims any obligation to update these forward-looking statements. Also on today's call, management will refer to non-GAAP net loss, which are non-GAAP financial measures. The company believes that non-GAAP net income loss assists the management and investors in comparing the company's performance across reporting periods on a consistent basis by excluding these non-cash, non-recurring, or other charges that it does not believe are indicative of its core operating performance. The reconciliation of GAAP net loss to GAAP net income can be found in the third quarter of fiscal 2023 earnings press release the company issued and furnished with the SEC last night on Form 8K. All the American Superconductors press releases and SEC filings can be accessed from the Investors page of its website at www.amsc.com. With that, I will now turn the call over to Chairman, President, and Chief Executive Officer Daniel McGann. Daniel. Thanks, John, and good morning, everyone.

I'm really excited to share some great news with everyone today. I'll begin by providing an update and sharing a few remarks on our business. John Kaseba will then provide a detailed review of our financial results for the third fiscal quarter, which ended December 31, 2023, and will provide guidance for the fourth fiscal quarter, which will end March 31, 2024. Following our comments, we'll open up the line to questions from our analysts. We're really pleased to announce another quarter of outstanding financial results. Total revenues for the third quarter of fiscal year 2023 exceeded our expectations and guidance range. The business really outperformed this quarter. We showed higher revenue, we showed expanded gross margins, we had positive operating cash flow, we generated non-GAAP net income, and we continue the rate at which we're booking orders to backlog. Total revenue for the past nine months is about the same as total revenues for our entire previous fiscal year. Let me repeat that because I think it's important, and I'm convinced that people are missing this point about the strength of our business. Through the first nine months of this fiscal year, we had about the same revenue for the 12 months as the previous entire fiscal year. This means that whatever we do in the fourth quarter will be year-over-year growth. I won't steal John's guidance later in the call, but given the fact the basis is about $100 million, you basically see the revenue for our fourth quarter as the growth of our business for the fiscal year. This success was driven by our pricing initiatives, product and regional mix, and overall customer demand. All signs this quarter are very positive. Our third quarter revenue of over $39 million was driven by new energy power system shipments. This was due to customers' demand needing products earlier than forecasted. We are finding lead times are shrinking and our customers want products sooner. We see this as a great indicator of the health of our business. Our grid segment revenue accounted for approximately 85% of AMSE's total revenue and grew over 60% versus the year-ago period. This represents a record-breaking grid quarter with unprecedented quarterly revenue. Nearly 15% of the revenue came from our wind business, which also grew about 90% versus the year-ago period, 60% and 90%. These are big numbers. During our third quarter, we saw a diverse set of product shipments. We shipped voltage compensators, capacitor banks, harmonic filters, transformers, rectifiers, volt-far optimizers, chip protection systems, and electrical control systems. These products went into renewables and a variety of industrial markets, including semiconductor mining, as well as our Navy projects. During our third quarter, we booked over $34 million of new orders and grew our 12-month backlog to over $137 million. Our backlog at the end of the third quarter increased by nearly 25% when compared to the year-ago period. We had $25 million of new energy power systems orders. Our new energy power systems orders have averaged over $30 million a quarter during fiscal year 2023, varying by quarter because of timing. These third quarter orders serve an increasingly diverse market. They represent strong contributions from the renewables market with wind and solar projects, accounting for approximately two-thirds of the total. Industrial orders, which contribute approximately one-third of the total, include orders for utilities, metals, and mining, as well as semiconductor projects. With strong demand across our end markets, we expect to continue to grow and diversify our grid business through these and future strong bookings in both renewable and industrial sectors. Okay, let's talk about some great news and wins. We secured our second three megawatt electrical control systems, or ECS, order from INOX Wind. INOX Wind has requested immediate delivery under this $8 million follow-on order, and we expect to ship these ECS over the course of calendar year 2024. It is depending on our payments. INOX would like all sets to be delivered during our first quarter of fiscal 2023, We see it impacting the first and second quarter. It could take longer to deliver if they are not timely with their payments. INOX's business seems poised to take off in 2024. Their public information would lead one to believe this. We are off to an encouraging start in calendar year 2024 with this follow-on order from our partner INOX for our cutting-edge 3-megawatt class ECS. We see continuous demand for their two megawatt turbine and our two megawatt ECS as well. Additionally, we have made progress on our Navy development programs and secured orders to continue that work. We are working to insert our technology into multiple Navy's fleets. Over the past several years, we've taken a series of very deliberate actions to diversify our business, and grow through our grid business. Over a five-year period, we nearly tripled our grid business revenue and had consistent revenue growth of over 17% compounded annual growth rate. We acquired and integrated three companies, which have successfully broadened our sales leverage, expanded our content of offerings, and contributed to our increased total revenue. We are pleased with these results and super excited about the rest of the year. Now I'll turn the call over to John Kasiba, to review our financial results for the third quarter of fiscal year 2023, and provide guidance for the fourth quarter of fiscal year 2023, which will end March 31, 2024.