American Superconductor Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 30, 2024

There are 7 speakers on the call.

Operator

Good morning and welcome to the AMSC 4th Quarter Fiscal 2023 Financial Results Conference Call. All participants will be in listen only mode. Please note, this event is being recorded. I would now like to turn the conference over to John Heilshorn of LHA. Please go ahead.

Speaker 1

Thank you, Gary. Good morning, everyone, and welcome to American Superconductor Corporation's 4th quarter and full fiscal 2023 earnings conference call. I am John Hiles, Horn of LHA Investor Relations, AMSC's Investor Relations Agency of Record. With us on today's call are Daniel McGahn, Chairman, President and Chief Executive Officer and Daniel Castillo, John Castillo, Senior Vice President, Chief Financial Officer and Treasurer. American Superconductor issued its earnings release for Q4 fiscal year 2023 yesterday after the market closed.

Speaker 1

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 starting the call, I'd like to remind you that various remarks that management may make during today's call about American Superconductors' future expectations, including expectations regarding the company's Q1 of fiscal 2024 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. Actual 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 ks for the year ended March 31, 2024, which the company filed with the Securities and Exchange Commission on May 29, 2024, 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's views of any date subsequent to today. While the company anticipates that subsequent events and developments may cause the company's views change, the company specifically disclaims any obligation to update these forward looking statements.

Speaker 1

Also on today's call, management will refer to non GAAP net income loss on a non GAAP as a non GAAP financial measure. The company believes non GAAP net income loss assists 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 non GAAP net income loss can be found in the Q4 and full fiscal year 2023 earnings press release the company issued and furnished the SEC last night on Form 8 ks. All of 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 our Chairman, President and Chief Executive Officer, Daniel McCann.

Speaker 1

Daniel?

Speaker 2

Thanks, John. Good morning, everyone, and thank you for joining us. 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 Q4 and full fiscal year 2023. He will also provide guidance for the Q1 of fiscal 2024, which will end June 30, 2024.

Speaker 2

Following our remarks, we'll open up the line to questions from our analysts. I'll begin with a brief recap of our Q4 before discussing fiscal year 2023. Our 4th quarter results exceeded our forecast by nearly every measure with remarkable revenue growth in both grid and wind segments and a third consecutive quarter of non GAAP net income. We saw revenue grow by more than 30% against the year ago period as we reached a record level recently of revenue surpassing $40,000,000 Both wind and grid grew. Our wind business revenue increased significantly by more than 125% over the year ago quarter, while our grid business revenue grew more than 20% for the same period.

Speaker 2

We believe this unprecedented quarterly revenue level and product mix illustrates our ability to generate cash through the improved operating leverage now built into our business. In the March ending quarter, our 4th quarter, we saw dramatic operating cash flow improvement when compared to our operating cash burn in the year ago quarter. Gross margins doubled when compared to the year ago quarter. We are being pushed by customers to accelerate shipments. Our manufacturing team and supply chain have been able to respond.

Speaker 2

We see this in wind, ship protection and new energy across the entire business. Fiscal year 2023 was one of continued business diversification, outstanding operational performance and strong overall growth. We saw total revenue grow over 35% to nearly $146,000,000 During the year, we booked on average over $37,000,000 of new orders per quarter. We booked over $39,000,000 of new orders during our Q4. Of those 4th quarter orders, over $33,000,000 came from our new Energy Power Systems.

Speaker 2

Our robust 12 month backlog stands at $140,000,000 at the end of March. We have decided to move away from issuing New Energy Power Systems orders press release. We were reporting orders during our earnings call. The initial purpose of these press releases was to have you understand and value our company's grid growth. We talked a lot about growth through grid.

Speaker 2

We feel we're past that point with growth now coming from both our new energy power systems and ship protection systems in our grid segment as well as the return of growth in our wind segment. All parts of our business are now positioned for growth. Our prospective order sizes are increasing. And as I've mentioned, the balance sheet is supporting this. In fiscal year 2023, we saw diverse revenue in renewable, industrial, mining, navy projects as well as semiconductor.

Speaker 2

About 1 third of our sales were to renewable projects. Industrials represented about a quarter. Metals, mining and materials were over 15% and the navy was just over 10%. Semiconductor projects accounted for nearly 10%. Our diverse orders for the power grid include military resiliency markets.

Speaker 2

The orders serving the U. S. Military represent an exciting new opportunity for AMSC's new energy power systems. These orders have come and are expected to continue to come from serving the U. S.

Speaker 2

Military by providing efficient and reliable shore power to naval vessels. We reached nearly $20,000,000 in military revenue, which includes both ship protection and new energy power systems revenue. We successfully delivered and tested the 1st ship protection system. The system is now operating on the ship. We delivered our 2nd ship protection system, and we're currently delivering the 3rd.

Speaker 2

In our wind business, we more than doubled our year over year growth as Inox business prospects demonstrate improvement and our 3 Megawatt ECS demonstrates its capabilities. Now I'll turn the call over to John Kasiba to review our financial results for the Q4 and full fiscal year 2023 and provide guidance for the Q1 of fiscal 2024, which will end June 30, 2024. John?

Speaker 3

Thanks, Daniel, and good morning, everyone. Total revenues for the Q4 of fiscal 2023 were $42,000,000 This is an increase of 32% compared to the year ago quarter of $31,700,000 Grid business revenues of $34,200,000 increased by 21% versus the year ago quarter, while our wind business revenues of $7,800,000 more than doubled versus the year ago quarter. Moving on to the full fiscal year, our total revenues were $145,600,000 Our Grid business represented 84% of fiscal 2023 revenues. This included year over year growth within our new energy power systems and our ship protection systems product lines. Our wind business represented 16% of fiscal 2023 revenues, composed of increased ECS shipments to Inox of both their 2 megawatt and more recently 3 megawatt class turbines.

Speaker 3

Gross margin for the Q4 of fiscal 2023 was 25% compared to the year ago quarter at 12%. And for the full fiscal year, AMSC generated gross margins of 24%. This was up from 8% in fiscal 2022. Our focus on gross margin expansion has been effective with both our grid and wind segments experiencing significant gross margin improvements throughout fiscal 2023. In fact, our consolidated gross margins expanded by over 1600 basis points in fiscal 2023.

Speaker 3

Now moving on to operating expenses. Research and development and SG and A expenses totaled $10,300,000 for the Q4 of fiscal 2023. This is up from $8,500,000 in the year ago quarter. Approximately 10% of R and D and SG and A expenses in the 4th quarter were non cash. For the full fiscal year, research and development and SG and A expenses totaled 39 $600,000 compared with $37,700,000 in fiscal 2022.

Speaker 3

Approximately 11% of R and D and SG and A expenses in fiscal 2023 were non cash. Our net loss in the Q4 of fiscal 2023 was $1,600,000 or $0.05 per share compared to $6,900,000 or $0.25 per share in the year ago quarter. Our non GAAP net income for the Q4 of fiscal 2023 was $1,900,000 or $0.06 per share compared with a non GAAP net loss of $7,800,000 or $0.28 per share in the year ago quarter. For the full fiscal year, our net loss was $11,100,000 or $0.37 per share. This compares to a net loss of $35,000,000 or 1.2 $6 a share in fiscal 2022.

Speaker 3

Our non GAAP net income for fiscal 2023 was $600,000 or $0.02 per share. This compares to a non GAAP net loss of $28,800,000 or $1.03 per share for fiscal 2022. We ended fiscal 2023 with $92,300,000 in cash, cash equivalents and restricted cash. This compares with $25,700,000 on March 31, 2023. In the Q4 of fiscal 2020 3, we generated $2,200,000 in operating cash flow.

Speaker 3

And for the full fiscal year, our operating cash generation was 2,100,000 dollars Now turning to our financial guidance for the Q1 of fiscal 2024. We expect that our revenues will be in the range of $38,000,000 to $42,000,000 Our net loss on net revenues is expected to be no more than $2,200,000 or $0.05 per share and our non GAAP net loss is expected to be no more than $500,000 or $0.01 per share. We anticipate operating cash flow to be in the range of breakeven to positive $2,000,000 dollars With that, I'll now turn the call back over to Daniel.

Speaker 2

Thanks, John. AMSC delivered a terrific year of operational performance and success, the culmination of our efforts to build a more diversified and financially stronger company. We have developed growing customer relationships across successive projects of increasing size, content and complexity. We now deliver higher quantities to repeat customers and markets. We believe our company's diverse bookings, strengthened balance sheet and operational success in fiscal 2023 have laid the groundwork for AMSC's long term growth trajectory.

Speaker 2

Over the past 2 years, we have managed well through a sharp increase in revenue. If we look back to fiscal year 2017, our annual revenue was under $50,000,000 Fast forward 4 years to fiscal year 2021 and you will see that we doubled revenue to over $100,000,000 If we look at our revenue for fiscal 2023, we can see that we're nearly halfway to doubling revenue again. We believe we can double revenue from today's annual rate with our current manufacturing capabilities. We are driving operating leverage and cash flow on our improved business model without significant CapEx investment. The business is in the best position it's been in over a decade and continues to improve.

Speaker 2

We are guiding to another quarter of high revenue levels for our Q1 of fiscal 2024. Again, seeing the $40,000,000 level as possible, the guidance range always depends on the customer timing of milestones many of our projects. But it's nice to be talking about $40,000,000 when we were talking about $30,000,000 per quarter only a year ago. We just mentioned the possibility of doubling revenue. To double revenue from our fiscal 2021 levels, and let me remind you those levels were in the $100,000,000 a year range, we would need to get to $50,000,000 a quarter.

Speaker 2

We believe this is certainly conceivable. At this $50,000,000 quarterly level, we have the potential to generate net income with today's product lineup. We see strong indicators in our end markets. We expect that our new energy power system products should provide a strong base of grid revenue in fiscal 2024 and we expect that any additional orders from Inox and the Navy to have meaningful impact on our business. With that, I'll move on to what we're focused on in fiscal 2024.

Speaker 2

Let's start with the Navy and Ship Protection Systems or SPS. Our systems help move U. S. Navy ships into the future by installing protection systems that help them stay hidden from our enemy threats.

Speaker 1

To date, we have

Speaker 2

a total of 5 SPS contracts for the San Antonio class LPD, the USS Fort Lauderdale, the USS Harrisburg, the USS Richard McCool, the USS Pittsburgh and the USS Philadelphia, which offers improved pricing on the SPS system. We have been talking about more ship content coming and I emphasize this today as it could dramatically impact the business' cash generation capabilities. We are making tremendous headway with engineering work to specify a potential solution. If we look back a year ago, we announced our proprietary high temperature superconductor mine countermeasure or MCM system to be designed, built, integrated and deployed on the U. S.

Speaker 2

Navy's mine countermeasure unmanned service vehicle. Our proprietary MCM system is a capability that is incorporated into an unmanned service vehicle and launched during mine countermeasure operations that patrol for and neutralize mines. We believe that this program is positioned to grow Navy related revenue in the near future. To be clear, we hope to be serving multiple ship platforms for the U. S.

Speaker 2

Navy with the addition of the MCM product when it goes into production. We are very focused on expanding to other U. S. Ship platforms as well as Allied Navies. Clearly, there are more ships on the horizon.

Speaker 2

I'm looking forward to talking about the things our team has been focused on hopefully in the relatively near future. Another near term opportunity is wind. We design wind turbines and provide electrical control systems or ECS to make the turbine more competitive and profitable. In fiscal 2023, we secured nearly $15,000,000 of 2 Megawatt wind turbine ECS demand from Inox in India. We also announced an initial 3 Megawatt class wind turbine ECS order of $5,000,000 followed by an additional $8,000,000 order.

Speaker 2

We shipped most of the ordered 2 megawatt and 3 megawatt ECS systems against those orders during fiscal year 2023. Additionally, we completed type certification for the 3 Megawatt class wind turbine. The 3 Megawatt class wind turbine is now operating in the field and is expected to drive additional customer demand. We are supporting Inox's growth through our proprietary technology that can enable our partner to deliver superior products to the marketplace. Inox is reporting their highest backlog in recent memory with nearly 2.7 gigawatts of orders.

Speaker 2

This is why we've been talking about more ships on the horizon and more wind at our back. We should start to see the impact of these two themes relatively soon. Let's discuss our expanding opportunities in our grid business, really focusing on our new energy product lineup that we have. We have orders and backlog generated from demand associated with the electrification of transportation where we expect to deliver multiple units of the same design. This is something we've been working on.

Speaker 2

We are seeing demand for identical solutions for repeat customers. 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. That's why we believe to be well positioned for long term growth. The world is quickly moving towards decarbonization to slow down climate change and create a path for a more sustainable world. Transitioning to a low carbon economy potentially increases demand for our new energy power systems through 2 main avenues: renewables and key materials for the new energy economy.

Speaker 2

In 2023, Renewables saw nearly $1,800,000,000,000 of global investment in the low carbon energy transition. This global surge of 17% is a new record level of annual investment and demonstrates the resilience of the clean energy transition in a year of geopolitical turbulence, high interest rates and cost inflation. In the U. S, we see positive effects coming from the Inflation Reduction Act and CHIPS Act, which were enacted in part to address the challenges of climate change with the goal of reducing emissions by 40% in 2,030. India, the world's fastest growing electricity market, is forecasting wind power demand to double to 140 gigawatts by 2,030.

Speaker 2

India's government added 2.8 gigawatts of wind energy in 2023, representing an increase of over 50% when compared to calendar year 2022. The key materials for the new energy economy are mainly driven by the electrification of transportation. These key materials include metals and mining as well as semiconductors. For calendar year 2024, the global semiconductor market is expected to grow by nearly 17%, while the global mining market is expected to grow by nearly 7%. The materials industry is being driven by the electrification of transportation, the need to prioritize energy security and the need to bolster domestic supply chains.

Speaker 2

This exciting energy future depends on computer chips, batteries and fuel cells that are built from silicon, lithium and carbon. All of these building blocks must be mined, processed and assembled into components and final products. Industrial manufacturers of these essential materials must be able to power their factories in ways that scale without adding complexity or size. Right now, we're powering the evolution of a grid that's fit for the future, a more reliable and resilient grid that can incorporate renewable energy sources and our pioneering product software and control solutions. In summary, AMSC delivered an outstanding year of improved operational performance.

Speaker 2

We've become a more diversified and financially stronger company. Through diligent execution of our strategy during 2023, we expanded gross margins dramatically versus a year ago. We delivered 3 consecutive quarters of non GAAP net income and operating cash flow. We ended fiscal 2023 with over $90,000,000 in cash. This cash balance is critical in order to support larger orders.

Speaker 2

It also presents us with opportunities for further future business growth. And we feel multiple tailwinds coming from our Navy and wind business. The team is receiving kudos from many customers. We're optimistic our business may benefit from the investments in our key growth markets, Renewables, mining and metals, semiconductors and military. We're off to a very good start for fiscal 2024 with tremendous opportunities ahead of us.

Speaker 2

We believe we have a conceivable pathway to get to $50,000,000 a quarter and potentially generate net income. Several years ago, our annual revenue was under $50,000,000 for the entire year. We are confident of our near and long term prospects. I am very proud of our team and what they've been able to accomplish. Already our transformative power solutions

Speaker 3

are moving the world forward.

Speaker 2

We are executing on our vision and believe that our creativity can meet today's challenges and help us progress to a better future. This means using future facing technologies to harmonize the world's desire for decarbonization and clean energy with the need for more reliable, effective and efficient power delivery. We are committed to powering progress by designing, developing and deploying power control solutions that harmonize an increasingly complex energy system. I look forward to reporting to you again following the completion of our Q1 of fiscal 2024. Gary, we can now open the line to any questions from our analysts.

Operator

The first question is from Eric Stine with Craig Hallum. Please go ahead. Hi, Daniel. Hi, John.

Speaker 2

Hey, Eric.

Speaker 4

Hey, good morning. So maybe just starting with grid and particularly interested in the semiconductor focus part of that business. I'm wondering when you look at that growth, I mean is that broad based? Is it with 1 or 2 customers? And maybe just some details on why you win because clearly that is a component of the grid

Speaker 2

strength? Yes. I think when we look at our future, it's more win, more ships and more chips. I think that the chip part of the equation here is positioned to really boom. Obviously, not next quarter, but in the coming quarters, we have a very dramatic pipeline of potential projects for our solutions.

Speaker 2

And that's from multiple chip fab makers, not just the one that people know about because they've been a significant customer for a number of years. But there's a huge investment moving in the U. S. It's only just begun. We're kind of at the tip of the iceberg, we think, with semiconductor.

Speaker 2

It's probably around of the next maybe 3 years, could be longer. And we're very well positioned. And the reason is why we win is we are able to provide a complete solution without changing complexity or size. So we can fit our equipment easily into small substations as they expand existing fabs or build new ones. We have a very economical solution that we can deliver very quickly to our customers.

Speaker 2

It's all built in the factory fully test ready to plug into the grid and it's become for some chip makers the standard on how they build fast. So we think we're in a great position, Eric, for the semiconductor market and really we see the future very bright there.

Speaker 4

Got it. And is that I mean, do you envision going forward, I believe, with your primary or with one of the main customers you may be specked in, I mean is that your expectation that you would, as you said, become the preferred solution and that every build out that happens it would most likely include AMSC?

Speaker 2

Yes. We've identified literally 100 of 1,000,000 of dollars of potential business from multiple chip fabs that we are working on competing in. And as you know from prior conversations and calls, we have been specked in by some, and we hope to be able to expand that, and we think it's a tremendous opportunity for our business. It's probably an opportunity that most investors don't fully appreciate where we are and where we're going to go, I think, pretty rapidly over the coming years.

Speaker 4

Got it. Okay, that's helpful. And maybe then just turning to wind. So obviously a great win quarter here, But should we take from your comments that maybe the first half of the fiscal year might be soft simply because although you're in a good position to get more follow on orders from Inox, you've worked through most of the orders that you currently have in hand?

Speaker 2

Yes. Other than the word soft, I think it's relatively strong to where we've been in the past years, but I think it's only going to continue to get better. And probably the earliest as you're indicating and for us to confirm is that the earliest you're going to see further improvement would be later this fiscal year. Our lead time to our customer is about 6 months. And obviously, the last time that we announced an order was back in January.

Speaker 2

If you look at their demand, particularly our key customer that we love in India, their demand is only going up and we believe that there's more orders on the horizon. They're coming and we want to make sure we're in good position to be able to deliver them timely because their business really, if you listen to them, it just seems to be strengthening quarter on quarter.

Speaker 4

Right. Okay. So just to confirm, maybe I misunderstood, but in your prepared remarks talking about that you'd shipped kind of the majority of the 3 megawatts, we shouldn't read into that, that there's necessarily much of a sequential difference. It's more about don't expect a step up until you get further orders, which obviously you're well positioned to get.

Speaker 2

Yes, I think that gets right at it.

Speaker 4

Okay. Thank you very much.

Speaker 1

Thanks, Eric.

Operator

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

Speaker 5

Thanks so much, guys. I just want to have 2 questions on the demand side and the sales cycle. Can you talk a little bit about what you're seeing as book and ship business either within the quarter or within a 9 to 12 month period? And then also, if you're starting to see any sort of interest from data centers, given the substation solution that you talked about, It seems like as folks increase the power on some of those data centers, given the increased in power on the new servers, that solution could make a lot of sense.

Speaker 2

Let me take the second one first and then I'll ask you what the first one was again, Collin. Data centers are certainly on our radar. We see a large propensity of projects in our pipeline. I think we're trying to figure out how we fit, how we can win, how we can continue to differentiate. I think the combined offering that we have now between what we do in power electronics and superconductors probably could have a relevant fit in data centers.

Speaker 2

But kind of like we did when we launched the VVO product, kind of like when we started talking about resiliency for the military using the new energy power solutions. I'd like to give you a proof point or 2 to point to. And hopefully, in the coming quarters or year or so, we can deliver on that. And then we can say with more strength that we think data centers is going to be a future important part of our business. Today, how we're going to benefit is really through more chips and more demand on the grid requires more of our equipment.

Speaker 2

But there may be eventually a more direct play for us in data centers.

Speaker 1

And do you mind going

Speaker 2

back and restating the first part of the question?

Speaker 5

Yes. I'm just curious about how much of your sales is book and ship

Speaker 2

There are There are product lines that work that way. Most of them we're looking at 9 months plus, but we are taking orders still for later this calendar year, later this fiscal year. What we're seeing is our supply chain has been able to respond. Our manufacturing capabilities set up we can deliver and one of the things that our customers are giving us kudos for is we are shorting lead times. So that certainly helps us to look at potential further acceleration in the business, but we have to be able to add more order book I think to give everybody comfort and color that this business is going to continue to accelerate to higher levels.

Speaker 2

You can see just what we have in backlog. We can be at about the curve revenue levels for the coming quarters. And then as I mentioned to Eric, there's the potential maybe later in the year we could see further acceleration. But today, I don't know if the order book fully justifies that, but I'm certainly leaning forward that there's a lot more orders coming, and I think the business is going to improve over the coming months and coming quarters.

Speaker 5

That's super helpful. And then I just have a question around some of the value based pricing initiatives that you've had and if there's more to do there. Obviously, you pushed through some price increases. And is there an incremental opportunity there in your mind? Or are you a place where you're just driving volume at this point because there are compelling price points?

Speaker 2

I'd say in the general sense, we're just driving volume. But I think there are in certain projects where there's combined offering from our different manufacturing locations that there we may have some ability to command more price. That's something we're working on to try to figure out. So there may be a piece of that, but I think the main driver will be more volume and kind of a secondary order. There might be some improved pricing for some of the larger orders where we're providing more content.

Speaker 5

Great. Thanks so much guys.

Speaker 2

Thanks, Collyn.

Operator

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

Speaker 3

Yes, good morning. Hi guys.

Speaker 2

Hey Justin. Good morning. Good morning.

Speaker 3

Hey. So I just wanted to

Speaker 6

start out, you talked about the possibility of reaching $50,000,000 in quarterly revenue and the potential to generate positive net income. I was wondering, do you think that $50,000,000 is potentially achievable in fiscal 2024 or potentially fiscal 2025 based on the demand you're seeing? And then as we think about higher levels of revenue, how should we think about your operating leverage? Should we anticipate growth in OpEx that's needed to get to that $50,000,000

Speaker 1

level?

Speaker 2

Yes. I think the hard part and I think you're asking the right question is the timing of when that can happen. I think certainly given where the backlog is today, I don't see $50,000,000 per quarter happen in the next 4 quarters. We want to focus on being able to deliver timely to our customers on the order book that we have. I think as we see if we do see an acceleration in orders, then you can start to think about higher revenue levels than the 40 ish that we did last quarter and we guided, what, 38 to 42 for this quarter.

Speaker 2

So similar kind of number. So we're really excited that we were talking a year ago about 30%, now we're at 40%. And I felt compelled we should talk about 50% because I don't want people to realize we don't have to invest I want people to be able to realize that we don't have to invest a lot of CapEx to continue growing this business. And to your question about operating leverage, we don't have to scale OpEx, certainly not at the same rate relative to revenue, right? So we think we have a very capital light manufacture capability.

Speaker 2

We think we have an OpEx that's highly scalable today and we think we have the demand to potentially scale the business. I think the hard part to answer your question, Justin, really is the when and the timing. I know that's what everybody wants. I think all we can do is demonstrate. We're talking about more orders coming.

Speaker 2

We see winds at our back. We see more ships on the horizon. We see a plethora of new chip opportunities for us that can help continue to drive some growth for new energy. So we think everything is very well aligned, but you know me long enough, Justin. I usually talk about how, I just very rarely talk about when.

Speaker 2

We're going to see how it all figures out as we generate more significant orders in the future. But we're very happy with where the business is today, where we've grown it to. And I really want people to realize that, yes, there is a lot more upside in what we can do. And that's why I talked a lot about doubling because that's what we want to be in position that we think the markets are driving. There's a lot of tailwinds that are hitting our entire complete business and we want to be in position to take advantage of those as they come.

Speaker 6

Okay, got it. I appreciate that. And then I guess just recently it does seem like there's a lot more optimism around the potential for recovery in wind project deployments in the U. S. We recently got guidance on domestic content, which could be beneficial for accelerating some wind projects.

Speaker 6

But wondering if you're seeing signs of an acceleration for deployments in the U. S. And a potential for maybe an uptick in order flow for your business?

Speaker 2

Yes. We see more potential coming from wind and solar. If you go back to the prepared remarks, I think John said the wind business, which is inside the wind turbine is about 16%. I talked about that renewables, which is wind and solar combined is more than a third of the business, right? So there's a good fraction of the grid business in new energy that's supporting both wind and solar.

Speaker 2

So we see that tremendous investment today, that investment is growing all over the world, including in the U. S. And we're trying to be in position to take advantage of that the best we can. And we have an approved lineup. We don't just use D VAR, we also use capacitor banks for NEPC.

Speaker 2

It's a more broader effort and offering that we have in renewables today than we did just a few years ago.

Speaker 6

Okay. Okay, got it. And then one more for me. I was wondering if you could just speak a little bit more to what's driving these larger order sizes. Is this coming from an increase in the content per order that you're supplying?

Speaker 6

Or are you seeing the size of projects that you're delivering to? Are those product sizes increasing? And then wondering how you're thinking about this into the future here. Is there further opportunity to increase content per order? Or are you seeing opportunities for larger projects?

Speaker 2

Yes. I think if I go back to the first part, the answer to both is yes. So we're seeing larger projects on the customer that they're building and we're able to offer more content into those projects. So that helps to drive larger project size. If I look at the future, a lot of our pipeline has very large projects in it.

Speaker 2

So when we look at our future order size, I think the potential is there to continue to increase it. And for the same two factors that you outlined this increased past revenue, which is larger projects and more content per project. Part of why we want to be in position with the balance sheet that we are today is to support those larger orders. Having that larger balance sheet gives our customers more comfort, but it also potentially allows us to invest in more content, be that on our own organically or be that inorganically eventually through additional acquisitions. We've been very successful with the entities that we've acquired.

Speaker 2

The whole business across the board is operating very nicely. And we anticipate we want to make the effort to make sure that, that continues to happen. So I think that today the message is a lot of doubling and a lot of more and more and more, which is really what we see on the horizon. I think the question for everybody is how quickly can we go after that and address that? And I think time will tell that.

Speaker 2

But we're in a wonderful position. This is the healthiest position we've ever been in really as a company, all the way back to the founding. Okay.

Speaker 6

I appreciate it. Thanks guys.

Speaker 1

Thanks Justin.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mr. McGann for any closing remarks.

Speaker 2

I'm trying to curtail my kind of strong excitement that I have here and where we sit. This is a point we've really worked hard to get to, and we're here. The numbers are delivering. The things that we wanted you all to believe that we could do are now happening. The business generated cash for the full fiscal year.

Speaker 2

That's huge, right? And that's not something we said was going to happen. We tried to manage the business and the growth to get to that point. And John and I as management team, we don't go out and say we're going to do all these glorious things and then come back and only do a fraction of them. We like to under promise and over deliver and we feel the business is doing that because our customers are driving us to do that.

Speaker 2

And that's really given us strong performance financially the last several quarters. We see a strong Q1 continuing that trend possibly given the numbers that we set. And I think Justin got at it, Colin hinted at it, Eric hinted at it. We got large orders on the horizon coming folks. I think a lot of my excitement is not just today and how the financial results are, but what we see the future possibilities for this company.

Speaker 2

We've put together a great company run by our employees that are able to deliver and step up to the plate. They've been able to do it at every turn, and we're counting on that to happen. We have great customers. We're getting a lot of great feedback from customers where they want to make bigger orders. They want to make multiple unit orders.

Speaker 2

Things that are parts of our business weren't able to do a few years ago, we can do now. And that's really a testament to everybody's support. So I think there's a lot of belief that I get feedback from investors and where we're going. Come with us for the ride here and I think it's going to be a bright and shining future for us. So thanks everybody for your time and attention.

Speaker 2

Look forward to talking to you again in a couple of months.

Operator

The conference is now concluded. Thank you for

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Earnings Conference Call
American Superconductor Q4 2024
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