American Superconductor Corporation Aktie

Good day, and welcome to the AMSC Fourth Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nicol Golez, Director of Communications. Please go ahead.

Thank you, Keith. Good morning, everyone, and welcome to American Superconductor Corporation's Fourth Quarter and Full Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

Yesterday, after market close, American Superconductor issued its earnings release for the fourth quarter and full fiscal year 2025. A copy of this release is available on the Investors page of the company's website at www.amsc.com. Remarks that management may make during today's call about American Superconductor's future expectations, including future financial results, plans and prospects constitute forward-looking statements. 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 Superconductor's annual report on Form 10-K for the year ended March 31, 2026, which the company filed with the Securities and Exchange Commission on May 27, 2026, and the company's other reports filed with the SEC, which are also available on our website.

The company disclaims any obligation to update these forward-looking statements. On today's call, management will refer to non-GAAP net income, a non-GAAP financial measure. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release.

With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, Nicol. Good morning, everyone, and thank you for joining us. I will 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 fourth quarter and full fiscal year 2025. He will also provide guidance for the first quarter of fiscal 2026, which will end June 30, 2026. And following our remarks, we'll open up the line for questions from our analysts.

We are really excited to report a record revenue quarter. Our fourth quarter closed a very successful fiscal 2025, and we delivered another year of significant growth. Revenue for the quarter came in at a new high, surpassing $85 million. We saw revenue grow by nearly 30% over the year ago quarter. Our Grid business revenue grew by more than 30% over the year ago quarter, while our Wind business revenue increased by 15% for the same period. We delivered 3 recent record revenue quarters during the fiscal year, over $72 million for the first quarter, over $74 million in the third quarter and now over $85 million in the fourth quarter.

We have delivered 7 consecutive quarters of GAAP profitability and 11 consecutive quarters of non-GAAP profitability. We believe these record results and continued profitability reflect the strong momentum and the discipline behind our success. The business is growing, the business is scaling and the business has been consistently profitable.

Now let's take a look at our order bookings for the quarter, which were extremely strong. Fourth quarter orders reached nearly $100 million, driven by strong utility and traditional energy demand. In the traditional energy sector, we are increasingly supporting the growing demand for reliable power across natural gas, coal and large industrial power applications. As these energy facilities expand and modernize, their operations rely on large motors, compressors and electrical systems that can create power quality and Grid challenges.

For example, LNG facilities cool natural gas into a liquid for easier transportation, then convert it back into gas for local distribution. These facilities utilize large motors, compressors, drives and other heavy electrical loads that require a certain level of power and can create harmonics, poor power factor and voltage instability. To mitigate these electrical disturbances, we provide solutions which help the site maintain power quality and protect assets within their operations. Our offerings are for both power supplies and power quality solutions for this key market.

Additionally, nearly 10% of our fourth quarter orders were driven by the data center sector within our utility market. This demand, combined with our orders in traditional energy reflects a powerful tailwind across our core markets. We closed the fiscal year with a robust 12-month backlog of over $280 million. This represents nearly a 40% increase versus the year ago 12-month backlog of $200 million. We believe that this puts us in great position to keep momentum going in the business for fiscal year 2026.

Average quarterly orders in fiscal 2025 exceeded $70 million. This compares to about $60 million in the prior year, adjusting the numbers for the onetime Royal Canadian Navy order, which was more than $70 million itself. We booked a total of nearly $290 million of new orders in fiscal 2025 across larger projects, repeat customers and increasing activity in our end markets.

Overall, fiscal 2025 represented a significant step forward for our company. We completed the acquisition of Comtrafo, which broadened our transformer product portfolio and expanded our reach into Brazil and Latin America. We believe this acquisition creates new opportunities across utilities, transmission infrastructure and Grid expansion. We saw total revenue grow more than 30% to nearly $300 million. We saw revenue diversity across traditional energy, renewables, materials, military, utility as well as some other sectors. Over half our sales came from traditional and renewable projects combined. The remainder came from materials at over 15%, followed by military and utility projects at over 10% each.

A significant part of our strong performance was driven by our core business, which achieved approximately 25% organic growth for the fiscal year. We ended the year with over $145 million in cash. These accomplishments highlight the growing demand for our solutions as well as our position as a trusted partner domestically and growingly abroad.

We also made great strides in our military business. In fiscal year 2025, we completed the delivery of another ship protection system for the U.S. Navy San Antonio Class platform aboard the USS Richard McCool Jr. Today, our power supplies play a critical role in the shipyards by providing steady, reliable power to vessels during assembly and docking when they're disconnected from other power sources. And principally, we are powering critical ship systems for the U.S. Navy.

Through our renewable installations, we're facilitating the Grid infrastructure needed to safely expand and integrate distributed power. This ensures utilities can maintain reliability without sacrificing performance. In our Wind business, we showed year-over-year growth driven by Inox business and the proven capabilities of our 2- and 3-megawatt ECS. We believe the business is aligned and poised to deliver improvement.

Now I'll turn the call over to John Kosiba to review our financial results for the fourth quarter and full fiscal year 2025 and provide guidance for the first quarter of fiscal 2026, which will end June 30, 2026. John?

Thanks, Daniel, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2025 were $86.4 million. This is an increase of 30% compared to the year ago quarter of $66.7 million. Grid business revenues of $73.7 million increased by 33% versus the year ago quarter, while our Wind business unit revenues of $12.7 million increased by 15% versus the year ago quarter.

Moving on to the full fiscal year. Our total revenues in fiscal 2025 were $299.2 million. This is an increase of 34% compared to fiscal year 2024 revenues of $222.8 million. In fiscal 2025, our Grid business revenues increased by 34% and represented 84% of total revenue. The year-over-year increase is a result of organic growth as well as contributions from Comtrafo. Wind business revenues increased 34% in fiscal 2025 and represented 16% of total revenue. The year-over-year increase is a result of increased ECS shipments to Inox for our 2-megawatt and 3-megawatt class ECS systems.

Gross margin for the fourth quarter of fiscal 2025 was 27.3% compared to the year ago quarter of 26.5%. Included in cost of goods sold in the fourth quarter was approximately $1.5 million of purchase accounting and noncash adjustments related to Comtrafo. This had an impact of approximately 170 basis points on the quarter. For the full fiscal year, AMSC generated gross margins of 30.5%. This was up from 27.8% in fiscal year 2024. This represents a gross margin expansion of 270 basis points over the prior year.

Now moving on to operating expenses for the fourth quarter of fiscal 2025. Research and development and SG&A expenses totaled $18.8 million. This was up from $15.6 million in the year ago quarter. Approximately 20% of R&D and SG&A expenses in the fourth quarter of fiscal 2025 were noncash. For the fiscal year, research and development and SG&A expenses totaled $73.4 million compared with $54.5 million in fiscal 2024. The year-over-year increase is largely associated with the inherited operating expenses and onetime acquisition-related expenses from our recent acquisition of Comtrafo.

Our net income in the fourth quarter of fiscal 2025 was $4.5 million or $0.10 per share. This compares to $1.2 million or $0.03 per share in the year ago quarter. Included in our fourth quarter fiscal 2025 net income was a $4.2 million loss on contingent consideration, a noncash expense related to the likelihood of achieving Comtrafo earn-out targets. Our non-GAAP net income for the fourth quarter of fiscal 2025 was $14.1 million or $0.31 per share. This is compared to a non-GAAP net income of $4.8 million or $0.13 per share in the year ago quarter. Included in our fourth quarter of fiscal 2025 net income and non-GAAP net income was a tax benefit of $5.3 million due to the release of the valuation allowance on deferred tax assets.

For the full fiscal year, our net income was $133.8 million or $3.12 per share. This compares to a net income of $6 million or $0.16 per share in fiscal 2024. Our non-GAAP net income for fiscal 2025 was $158.1 million or $3.68 per share. This compares to non-GAAP net income of $24 million or $0.65 per share for fiscal 2024. Included in our fiscal year 2025 net income and non-GAAP net income was a tax benefit of $118.4 million due to the release of a valuation allowance on deferred tax assets. We ended fiscal year 2025 with $147.6 million in cash, cash equivalents and restricted cash. This compares with $85.4 million on March 31, 2025. In the fourth quarter of fiscal 2025, we generated $9.3 million in operating cash flow. For the full fiscal year, we generated $23.1 million in operating cash flow.

Now turning to our financial guidance for the first quarter of fiscal 2026. We expect our revenues will exceed $85 million. Our net income on that revenue is expected to exceed $3 million or $0.07 per share, and our non-GAAP net income is expected to exceed $8 million or $0.17 per share. Included in our net income and non-GAAP net income guidance is approximately $1.5 million of purchase accounting and noncash amortization associated with the Comtrafo acquisition that is expected to be expensed into cost of goods sold. These charges will taper down starting in Q2 FY 2026. Once these noncash purchase accounting charges fall off the amortization schedule, we expect Comtrafo's gross margin will fall well within AMSC's gross margins.

With that, I'll turn the call over to Daniel. Dan?

Thanks, John. AMSC delivered a transformational year. During fiscal 2025, we grew organically while expanding throughout acquisition. Profitability improved this year, marking an important milestone for us. After delivering 7 consecutive quarters of GAAP profitability and 11 consecutive quarters of non-GAAP profitability, we are now operating as a profitable company, and that includes adapting to normal financial items such as tax expenses. As our company scales and to the extent that we're unable to utilize our existing net operating losses, we expect items such as tax expenses to become more regular going forward. We are now seeing our financials reflect the characteristics of a more mature company.

More importantly, this progress reflects the strength of the business and the customer relationships we've built over time. We've cultivated growing relationships with our customers across multiple projects that have increased in size, scope and technical complexity. Today, we're delivering greater volumes to repeat customers. In addition, we are delivering integrated solutions that add unique value to the challenges customers face. By delivering integrated power systems, we ensure that certain products such as rectifiers, filters, STATCOMs, capacitor banks and/or transformers are designed to work together. This design simplifies integration and improves project reliability. We believe our integrated power systems help improve power quality and meet Grid requirements from the start, avoiding extra cost, downtime, redesigns, expensive Grid updates or penalties from utilities.

We are now providing our integrated power solutions to customers in the mining and utility sector. We believe our diverse bookings, strong balance sheet and operational success in fiscal 2025 have set the stage for long-term improvement in the business. The business is in its strongest position ever, and we believe it's still getting better. We enter fiscal 2026 confident in achieving our goal to continue building a more resilient and profitable company. It is certainly nice to be talking about $85 million of revenue this quarter, considering we were talking about $30 million of revenues per quarter only 3 years ago.

With that, let's turn our focus to fiscal 2026, starting with the growing opportunities in our power solutions. Global energy demand is accelerating, putting more pressure on the Grid. Traditional energy, renewables, semiconductors, data centers and defense are driving major investments in power infrastructure, while reshoring and aging infrastructure increase the need for reliability. This is creating strong demand for our power solutions as customers expand capacity, particularly in environments where harmonics, voltage instability and rapidly changing loads challenge Grid performance. Our solutions are supporting applications across natural gas, mining, renewable heavy grids and data centers, and we are participating in more utility projects.

During fiscal 2025, we extended our utility presence into Latin America as well as entering the data center market. These utility projects improve substation power quality to support demand, including that of data centers, stabilize voltage to enable expansion as thermal plants retire, reinforce transmission infrastructure to support industrial load growth, including large mining operations on vulnerable lines and integrating renewables and distributed energy resources while supporting Wind, rooftop and community solar and battery storage systems.

Our products are designed to optimize reliability, maximize output and enhance power quality. We are uniquely positioned to enable our customers to power facilities in ways at scale without adding complexity or size. We're not just responding to Grid challenges. We're enabling the changes to support the changing environment.

Additionally, our power supplies power critical ship systems and deliver reliable power for shipyards and docked vessels. Our Ship Protection Systems, or SPS, help naval vessels by reducing their visibility to enemy threats. Over the last several years, we've delivered on 4 out of the 5 SPS systems to the U.S. Navy's following vessels: the USS Fort Lauderdale, the USS Harrisburg, the USS Pittsburgh and most recently, this fiscal 2025, we delivered on the USS Richard McCool Jr. We expect to begin our first delivery to the Royal Canadian Navy this fiscal year 2026. We've continued to deliver advanced power solutions that keep naval operations running strong at the shipyard.

In our Wind business, we design and supply Electrical Control Systems, or ECS, that make Wind turbines more competitive and efficient. In fiscal 2025, we secured nearly $50 million in orders for our 2- and 3-megawatt ECS from Inox to service their growing demand. About 40% of these systems were shipped during the fiscal year, leaving our backlog in a great position. Our proprietary technology is helping Inox scale, supporting what they've called their strongest backlog in recent memory with over 3 gigawatts of orders.

In closing, fiscal 2025 was a defining year of execution and scale for our company. We delivered record revenue, growing more than 30% year-over-year, driven by 25% organic growth. We increased our workforce from 569 to 1,195 team members during the year, marking a new record employment level. We are surrounded by an exceptionally driven, innovative and accountable team that helps us take our service, value and company to the next power. We closed an acquisition backed by an ambitious team that is deeply inspired by our purpose to power progress.

Operationally, we experienced momentum from powerful tailwinds. We expanded our 12-month backlog by 40% to over $280 million, giving us exceptional visibility into the next fiscal year while maintaining a strong balance sheet with over $145 million of cash. Strategically, we successfully diversified our revenue base by expanding our geographic footprint, expanding our product portfolio and delivering integrated solutions. Furthermore, our initial entry to data centers, while early, validates our ability to capture high-growth tailwinds. We closed a fantastic fiscal 2025 and are off to a very good start for fiscal 2026 with tremendous opportunities ahead of us.

We are at the center of some of the most important transformations of our time from defense to industrial growth from renewable integration to Grid modernization. With a proven strategy, a strong capital position and a unified organization, we believe we are exceptionally well positioned to drive long-term value for our customers. Our solutions are helping power the evolution of a Grid that is fit for the future, a more reliable and resilient Grid built to support and incorporate a broad mix of energy sources.

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 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.

Thank you for your continued trust and support. We look forward to sharing our progress with you in the months ahead and invite you to explore our new website, which better reflects the company AMSC has become.

Keith, we can now open the line to any questions from our analysts.

[Operator Instructions] And the first question comes from Eric Stine with Craig-Hallum.

So can we just talk about the orders first? I mean, obviously, a highlight of the quarter. And this is a pretty good step up. You referenced the $70 million average over the last previous 4. So just curious how much of that is Comtrafo? Is this -- is there something that impacted this that's out of the ordinary? Or should we expect this to kind of be a new level as your business historically has kind of made these steps up over time?

We're hoping it's a step up to the next level. I think to be blunt, so far in 2026, things have started out very well for us. These tailwinds are really driving the business. There's a part of it, but it's proportional for Comtrafo. So they're moving at the right pace. We're very excited about them and the prospects there in that market. It's a diverse set of orders. A lot of it is traditional energy. We highlighted 10% of it is data centers, where last quarter, we had 5% was data centers. So that's a piece. I think we're just in the right place at the right time. The problems that we solve are paramount and being invested in by a number of parties. And we're very excited, Eric, about what the prospects bear for us for 2026.

No, absolutely. Maybe just sticking with data center. So I know that last quarter, one thing you highlighted is that you had made a sale or delivered directly to a data center customer. I know historically, you have been involved, but it is in support of utilities as they prepare for everything that's required there. And it sounds like the 10% this quarter was more skewed to utility. So maybe just kind of talk about the breakout.

Yes, that was again -- I'm sorry, -- it was direct to utility, which is why we -- sorry, direct to data center, which is why we highlighted. There's additional utility business. And we do think that there will be a fit for us for the same application set in Latin America as well, and that's something that we're going to work on.

Okay. And I guess just last thing. I mean, I know in some of your other applications, the way that they have played out over time as you get in, you prove the application, then eventually you are spec-ed in. So I know it's still pretty early days, but is that kind of how you see this playing out in the data center space as well?

That's what we hope. That's the playbook that we've run in the other markets, and we're seeing the beginning of that. We have a pretty robust pipeline of future orders for data center, which is why I'm opening my big mouth today highlighting it again. We think it's part of the business. I'm always joyful in the diversification that this opportunity presents. We're a well-diversified company in power. And I think that we're in a fantastic position. And it's really now incumbent on us as you're getting at the order book, seeing that grow certainly helps support the thesis that we're taking advantage of these tailwinds, which is what we want to continue to do.

And the next question comes from Colin Rusch with Oppenheimer.

Dan, can you talk a little bit about the Comtrafo integration and progress on qualifying the transformer product for the U.S. I'm just curious about from a product perspective, if there's a mix headwind near term as you guys work through all the supply chain optimization and then how quickly we might be able to see some of those transformers sold into North America?

Yes, I don't see a headwind there. What I see is a company that is very excited to be part of us. What I see is a company that's operating exceptionally well, driven by a family that is super excited to be part of AMSC. I think the opportunities ahead of us combined are extraordinary to be very blunt. I think in the near term, we need to tend to our knitting in Brazil. There's a huge opportunity in the utility space and in the industrial space in Brazil alone.

The main reason that we went forward with the acquisition of Comtrafo is the access to that opportunity and the expansion of the product line in the form of large power transformers. So I think that alone really is the focus and what's going to drive us. I do think the North American market will come. I am very excited about the prospects there. I'm very excited about the progress that we're making.

And I look forward, Colin, that becomes a highlight of a future call. But right now, we're trying to get the team to focus on let's take advantage of the Brazilian opportunity let's set plant the seeds throughout Latin America to be able to expand the combined business in mining and in utilities throughout Latin America and then be in a position to be a qualified supplier for North American utilities.

The third part will take time, but I'm very excited that we'll be able to demonstrate some progress hopefully, along the way as that develops. So there's kind of a 3-step focus on Brazil, expand throughout Latin America with the combined product offering and then bring those large power transformers here to North America.

Perfect. And then shifting gears a little bit into the military opportunity. I appreciate the level of detail on the ship protection systems. But I'm curious about the port opportunity and how quickly that might move. We're seeing pretty substantial numbers passed around for budgets in the U.S. And curious, given the portfolio that you have and the ability to really support incremental power out to the ports, how we might see that start flowing through the Grid business?

Yes. I think as we look at where we are, given the conflicts in the world, Garret, given where we are with energy demands and prices for things that we are seeing demand driven on the Grid in a variety of areas. And the port thing is we initially started looking at shipyards and how we take our industrial power supplies and bring them there. I think that there is further diversification that we're going to see happen throughout energy infrastructure all the way through to the delivery at the port. So it's an opportunity that we're positioned, we hope to take advantage of, and we're excited about that broader opportunity in more traditional power.

And the next question comes from Justin Clare with ROTH Capital Partners.

I wanted to follow up just on the data center opportunity. Wondering if you could just better help us understand how AMSC is participating here and where in the value chain. If you could share which types of products are being pulled forward by the data center-related demand. And then is this primarily utility side power quality equipment that's at the substation? Or are you actually supplying equipment that is installed on the data center campus or within the facility itself?

Let me try to unpack all that. So the data center wins that we've had direct to the data centers are principally for power quality at the data center as the data center is being constructed. What's being realized in the industry is that as data centers get larger, there is a persistent power quality problem that we can uniquely solve. It's very akin to what we do in semiconductors with semiconductor fabs. So it's managing voltage -- it's managing harmonics. It's basically providing power quality. Now that being said, we do think that there's an opportunity for power supplies at data centers. And part of the mindset and shifting to have a more broad offering in transformers, a lot of transformers are getting sold into data centers. It puts us in the position now to be an offering, again, direct to data centers for there.

We do also kind of as a complement, continue to see demand on the utility side to be able to further bolster the Grid in part because of data center demand. So there's kind of -- what we used to say was kind of we were kind of a second order driver to data centers. Now we kind of have a one-two punch, support the data center directly and also be able to support the utilities as clusters of these grow and the Grid itself gets more strained or constrained.

Got it. Okay. I appreciate that. And then we're just looking through the 10-K, we saw that the Asia Pacific Grid revenue for fiscal '25, it increased almost 6x year-over-year relative to fiscal '24. I was wondering if you could just help us understand what drove the magnitude of that growth. Was this concentrated in a few large projects or with specific customers? Or does this reflect kind of a broader regional inflection in the demand you're seeing there?

That's a good pickup in the tables in the detail. So on the Grid side, if you look on the Wind side, you know that's really driven by Inox. On the Grid side, it's a couple of things. It's supporting some very large renewable projects in the region, which I won't say is brand new to us, but it was a bigger business opportunity this year, which helped drive some of that growth. But principally, it's semiconductor and in the material space. So we are actively promoting not only in North America, but in Asia Pacific, those solutions and offerings, and we had a tremendous year in the Asia Pac region overall.

[Operator Instructions] And the next question comes from Tom Moore with Clear Street.

Congratulations on your order growth and backlog magnitude subsequent to the Comtrafo contribution boost in the December quarter. Good job on the EBITDA margin expansion. I just want to kind of go into a thread on SG&A expense leverage. I mean that's been an important part of our thesis. We know you'll expand gross margin with volume, but we know that there's SG&A seasonality seems to be the lowest percentage of revenue in the last 3 years in your fiscal fourth quarter. How do you think about SG&A as a percentage of revenues improving this fiscal year despite getting Comtrafo?

Yes. So if you look at our Q4 SG&A, I would say that, that's a fairly good reference. If you back out the contingent consideration, obviously, we don't know what that will be quarter-to-quarter. But if you look at the research and development, sales and marketing and regular G&A, we feel pretty good, but that's not a bad baseline to run into 2026. We'll have some growth as the business scales up, but not to the level of, hopefully, the revenue growth that we experienced. I said several times that we still believe the business we're still sized overall that we think the business can grow substantially before we have to really see substantial increases in SG&A.

No, that's a great driver of incremental EBITDA margin part of our thesis. And then just switching gears, I know you've talked a lot about the backlog. But just please correct me if I'm wrong. Your backlog figure that you report in your release and talk about quarterly, that's the 12-month amount, right, not the 18-month value that could be $75 million or $100 million higher. Is that true?

Yes. The total backlog, I think, is about $375 million. North of that -- and the 12-month number we highlight because it gives people a good predictor of what the next 4 quarters could look like at any point in time. And our lead times are still kind of averaging in that 9 to 12 months, which means that we can continue to add orders to improve the forward-looking 4 quarters.

That's terrific. And we know you're going to plan to add capacity in Brazil for Comtrafo. But how comfortable are you with any capacity constraints in the U.S. and North America, given your backlog that's been growing? Are you -- do you need to add any more capacity?

The only -- the good thing about the way the business is designed is to increase capacity, it's just increasing labor. So going to more days and more shifts. And we're seeing some of that beginning in some of our factories. So we're really excited about the opportunities that our customers are presenting to us for challenging work for our employees. So we're very much in a -- we need to take care of our business now, operate very well and service our customers, and that's coming back kind of in spades with bigger orders and more business from those customers. So the factories are set up to be able to scale to be able to respond, and it's really principally driven by labor.

Great. I appreciate that. My last question is, now that Comtrafo integration is underway, you've had it for almost 6 months. We know you got to do capacity planning expansion there. How comfortable would the management team be to possibly make another acquisition this fiscal year, maybe something in North America given your cash balance?

Yes. I think we'll see on that. I think we're still digesting Comtrafo. We're only 4 months into the relationship with them. It's really brought a whole new level of excitement because in North America, the team is very excited about some of the earlier comments that were made that I tend to say, well, let's take our time. But the team is very excited about the opportunities for Comtrafo in North America to the point where I kind of try to slow it down and say, hey, let's make sure we're taking advantage of all our opportunities.

But I think the combined product offering throughout Latin America really is a huge winner. And I don't think that's something that we've probably talked a lot about. Hopefully, in coming quarters, we'll have demonstrable success that we can highlight along the way. But we're a very different company than we were even a year or so ago. I mean the total available market for us went up by 50%. I don't know people appreciate that. The opportunity for this company and the tailwinds that we're seeing really is a unique time in history. And we're super excited, and we're trying to be in a position to take advantage of those opportunities as they come.

That does conclude the question-and-answer session. I would like to turn the conference back over to Daniel McGahn for any closing comments.

I think one thing I'll say is, in John's remarks, he made a very important reflection on gross margin. So that would be something I definitely would point out and say he really tried to explain things so you understand that gross margin will continue to improve probably incrementally really, but going forward, it's growing the top line and getting the leverage over the operating expenses that we're going to see really help drive profit. And that's what the team is focused on going forward.

This has really been a transformative year for the company. I can't say that enough for in many different ways. I don't think it's fully appreciated. I think within our employee base, they're just starting to really understand we are much bigger and broader than we ever have been or ever thought we would be from a product lineup standpoint. The nearly $300 million in revenue, that represents really -- it's 34% growth. I mean it's extraordinary and really driven by the organic part of the business.

We showed pretty significant improvement in gross margin, going from about 28% to about 30%, right? So continuing to be able to move that. Delivering profit consistently. That's something that we're very proud of, but we know now we need to drive the leverage throughout the business. We believe we're positioned for growth given just where the FY '26 backlog sits and having the acquired revenue from Comtrafo. The expansion you can hear I'm just jubilant about in Latin America, the diversification of our revenue, and this is really driven by traditional energy and utility business. We're becoming now really about power and the new tagline of the company is to the next power AMSC. That's really purposeful. It's very powerful, and that's where we're headed.

So we're excited. I hope that you are as well. We appreciate your time and attention and look forward to be able to talk to you in the coming months. Thank you. Be well.

Thank you. This concludes today's teleconference. Thank you for attending today's presentation. You may now disconnect your lines.

Good day, and welcome to the AMSC Third Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Nicol Golez, Director of Communications. Please go ahead.

Thank you, Bailey. Good morning, everyone, and welcome to American Superconductor Corporation's Third Quarter of Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

Yesterday, after market closed, American Superconductor issued its earnings release for the third quarter of fiscal year 2025. A copy of this release is available on the Investors page of the company's website at www.amsc.com. Remarks that management may make during today's call about American Superconductor's future expectations, including expectations regarding the company's financial results, plans, and prospects constitute forward-looking statements.

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 Superconductor's annual report on Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21, 2025, and the company's other reports filed with the SEC, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements.

On today's call, management will refer to non-GAAP net income or non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release.

With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, Nicol, and good morning, everyone. I will 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 December 31, 2025, and we'll provide guidance for the fourth fiscal quarter, which will end March 31, 2026. Following our comments, we'll open up the line to questions from our analysts.

We are excited to share a quarter of outstanding financial results. Total revenue for the third quarter of fiscal year 2025 exceeded our guidance range and came in at over $74 million.

Revenue grew over 20% versus the year ago period, driven by organic growth as well as a few weeks of contributions from the acquisition of Comtrafo, which we closed on December 5, 2025. The business outperformed this quarter.

We delivered our sixth consecutive quarter of profitability and our 10th consecutive quarter of non-GAAP profitability. Strong market demand drove bookings, resulting in a robust 12-month backlog of over $250 million. Gross margins again topped 30% and we closed the quarter with a strong balance sheet of over $145 million in cash after acquiring Comtrafo.

Total revenue for the past 9 months is nearly total revenue for the entire previous fiscal year. This means that most of what we do in the fourth quarter will contribute to year-over-year growth. Our grid revenue accounted for 85% of AMSC's total revenue and grew over 20% versus the year ago period. Nearly 15% of the revenue came from our Wind business, which grew by 25% versus the year ago period.

During our third quarter, we generated revenue across a diverse set of sectors. Traditional energy accounted for nearly 1/3 of shipments. Renewables represented about 1/4. Military and utility markets each contributed over 15% and materials, including semiconductors, made up more than 10% of revenue.

Additionally, we delivered into a data center project this quarter. We've talked about this for the past couple of quarters. We believe this delivery marks an important milestone for additional potential opportunities in this market. We said we were going to deliver on a data center order, and we did. But please remember, these projects make up about 5% of total revenue.

Our revenue mix is well diversified, and we expect our recent acquisition to strengthen our reach to utilities while expanding our overall end market exposure. This quarter, we did record a significant tax benefit due in large part to our recent history of sustained profitability and our forecasted future earnings outlook. This is an important moment in the history of our company's financial progress, and John will get into more details later in the call.

Now I'll turn the call over to John Kosiba to review our financial results for the third quarter of fiscal year 2025 and provide guidance for the fourth quarter of fiscal year 2025, which will end March 31, 2026. John?

Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $74.5 million for the third quarter of fiscal 2025 compared to $61.4 million in the year ago quarter. Our Grid business unit accounted for 85% of total revenues, while our Wind business unit accounted for 15%.

Grid business unit revenues of $63.2 million, increased by 21% in the third quarter versus the year ago quarter. The increase in revenue was primarily driven by organic growth within our new energy product lines as well as the addition of Comtrafo revenues, which totaled $4.6 million in the quarter.

Please note that Comtrafo revenue and associated financial activity in the quarter was for a partial period from the date we closed on December 5, 2025, through the end of the quarter. There were approximately 19 days of Comtrafo financial activity included in our Q3 results.

Our Wind business unit revenues of $11.3 million increased by 25% over the same time period. The increase in revenue was primarily driven by additional shipments of electrical control systems.

Looking at the P&L in more detail, gross margin for the third quarter of fiscal 2025 was 31% compared to 27% in the year ago quarter. This marks the third sequential quarter with gross margins exceeding 30%. Included in cost of goods sold in the third quarter of fiscal 2025 is approximately $400,000 in noncash adjustments related to the purchase and accounting for the acquisition of Comtrafo.

The year-over-year increase in gross margin was primarily driven by higher revenues, a favorable product mix, both within our Grid and Wind business units.

Moving on to operating expenses. R&D and SG&A expenses for the third quarter of fiscal 2025 were $19 million compared to $14.6 million in the year ago quarter. The year-over-year increase includes the acquired operating expenses of our recent acquisition of Comtrafo. Additionally, there was approximately $1.2 million of acquisition-related expenses to complete the Comtrafo acquisition.

Approximately 20% of R&D and SG&A expenses in the third quarter of fiscal 2025 were noncash compared to 19% in the year ago quarter. Our net income for the third quarter of fiscal 2025 was $117.8 million or $2.68 per share. Our non-GAAP net income for the third quarter of fiscal 2025 was $123.5 million or $2.81 per share.

Included in our third quarter net income and non-GAAP net income was a tax benefit of $113.1 million due to the release of a valuation allowance on deferred tax assets. Excluding this tax benefit, net income in the third quarter of fiscal 2025 was $4.7 million or $0.11 per share. This compares to net income of $2.5 million or $0.07 per share in the year ago quarter. Excluding the tax benefit, non-GAAP net income was $10.5 million or $0.24 per share. This compares to a non-GAAP net income of $6 million or $0.16 per share in the year ago quarter. Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.

We ended the third quarter of fiscal 2025 with $147.1 million in cash, cash equivalents and restricted cash, which compares with $218.8 million on September 30, 2025. Included in the quarter was the acquisition of Comtrafo, which included cash consideration of $88.3 million. We generated $3.2 million of operating cash flow in the third quarter of fiscal 2025.

Our CapEx for the quarter was $900,000. I would like to note, it would not be unusual for CapEx to exceed $1 million a quarter, and at times, it may even exceed a couple of million dollars in a quarter as we scale up production, particularly within our power transformer lines, which are seeing high levels of demand.

Now turning to our financial guidance for the fourth quarter of fiscal 2025. We expect that our revenues will exceed $80 million. Our net income is expected to exceed $3 million or $0.07 per share, and our non-GAAP net income is expected to exceed $8 million or $0.17 per share.

With that, I'll turn the call back over to Daniel.

Thanks, John. We're very pleased with this quarter's result and super excited about the rest of the fiscal year. We believe going forward, the company has the capability to deliver consistent profit. We achieved 2 quarters of what I consider record-breaking revenue levels, one of over $72 million, that was our first quarter earlier this year and now over $74 million in the quarter that just ended. And we're guiding to another possible quarter that could become another record-breaking quarter for our fourth quarter.

As we approach the final quarter of fiscal year 2025, total revenue for the past 3 quarters reached an impressive $212 million. With 3 quarters completed, our revenue nearly matches our total revenue for the entire prior fiscal year. The business has demonstrated growth, both organically as well as through our recent acquisition.

Let's discuss some additional benefits that we expect of the acquisition when combined. The team has done an excellent job of integrating and making the last several acquisitions work and work together. The acquisition of Comtrafo strengthens our utility position and positions us to capture opportunities in Brazil and the broader Latin American markets. Comtrafo brings 30 years of operating history, a manufacturing presence in Brazil and deep relationships with utility customers across one of the world's fastest-growing electricity markets.

Comtrafo expands our transformer offering to include distribution and large power transformers up to 250 MVA. With their strong local demand driven by government-led grid investment, we can now serve critical transmission and grid expansion needs that we could not previously address.

In closing, this was an exceptional quarter for our company. The results reflect the strength of our core business and the discipline of our operations. We delivered strong financial results and remain focused on execution. The business grew organically and the addition of Comtrafo opens new possibilities.

Overall, we are truly excited about this business. We are developing business opportunities in new areas with utilities for data centers and for pipelines for traditional energy. We are very well positioned as a company that has diversified and has been growing.

I am personally very excited about the future of the company. We believe we are in a tremendous position to take advantage of our end markets. 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 we can see the fundamentals of our business are well grounded. This is an exciting and positive moment 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. We're now focused not only on the American market, but on the entire Americas. I look forward to reporting back to you at the completion of our fourth fiscal quarter and fiscal year-end.

Bailey, we'll now take questions from our analysts.

[Operator Instructions]. Our first question comes from Justin Clare with ROTH Capital Partners.

So I wanted to start out just on the data center opportunity. So you mentioned that you have delivered a solution to a data center project here. And so just wondering if you could speak to the scope of the engagement, which products were involved?

And then just within your portfolio, which solutions do you see as kind of the strongest fit for the data center application at this point in time? And then I guess just lastly, is the opportunity largely at the utility substation that you see at this point? Or is this inside the data center facility?

Yes. Let me talk a little bit about what we're doing. So it represented about 5% of revenue in the quarter, so on the 74%, 75% that we did. So a significant project. It's something that we were telegraphing that we thought would happen. And really, the only reason we're talking about it is because I get asked the question wherever I go about data centers and what are you going to do.

What we're finding is as these data centers get bigger, particularly when there are areas where they have a weaker grid, what we can do is modulate the instantaneous change in voltage. And we do that through a very contact footprint. So the more that they're loading equipment in for managing thermal load, HVAC, the more that they have higher computing power and they're worried about very small disruptions similar to what we do in a semiconductor fab, the more we think we fit. And we think that the footprint may be a unique competitive advantage that makes it easy for either the utility or the data center construction project to buy the equipment from us.

So in this case, this is really our first win in the construction of a data center. Alongside this in this current quarter, we also helped a utility that has a lot of data centers and has some challenges coming from them. So I think the answer to part of your question, Justin, is yes to both. I think that there are opportunities for us going forward. in data center construction projects, but also to help support challenges with the utility. That's no different than what we've seen in semiconductor. It's no different than what we see in mining. The market and the investment drives the need.

And then the question is, where does the solution physically fit? Where does it fit within the grid? Is it on the pad that sits as part of the data center? Or is it somewhere in the grid that's supporting that effort. So it's really no different application than what we do for semi, what we've done for a lot of other industrials. What we're finding is that there are changes in induction at the site that we can modulate what we think in a very unique way.

It's one data point, however, right? So it's hard for us to say this is the white paper and here's how we're going to analyze the return on investment for the customers. Those are all things that we're going to figure out. But what we found is there are a number of data center operators and a number of data center builders that have approached us looking for exactly the type of solution that we uniquely offer.

So I'm very opportunistic that -- and optimistic that this could become a part of the business. But again, we like diversity in what we do. Did I get to all the different pieces, Justin, if I didn't, I apologize and you can ask it again.

Yes. No, I think you got to everything there. So yes, I definitely appreciate that explanation. And I guess just thinking through it a little bit, just how significant do you think the growth opportunity might be here? And I'm just wondering, has your solution been installed and is now operating effectively with this project? Or is that coming in the next few months? Just wondering if this kind of proves out that your solution is effective and then others can see the effectiveness and this could potentially lead to upside in your orders here.

Yes. I think the hardest part for people that follow us is to realize so much of what we do is industrial construction. So there's a pacing that things go through a year to be able to build. So I'm pleased to announce we got the order. I'm pleased to announce that we delivered on the order, but that's as far as we can take it.

We're not at the point where it's going to operate and we'll get all the learning out of it. That's all going to come. It's a customer that knows us well, that we know well, and we'll try to use that as best as we can to try to market having a bonafide solution in the wild that works. But again, simplistically, this is no different than what we do in all the other markets. I think that there's an interesting need.

I think the form factor and the speed that we can go to market really becomes a critical advantage here. If I speak more broadly, we have a huge pipeline of larger orders. I keep talking about order expansion and -- we used to talk about cross-selling. Now we just talk about selling.

We have hundreds of millions of dollars of opportunity across all the different areas that we have tailwinds. We have probably in a dozen or 2 projects that are very large, we have several hundred million of potential business, not just for data centers, but for mines, for semiconductor, for traditional energy that the business is really working. The business is expanding because we're relied on to deliver more content into larger projects. That's what we've been talking about for the past few years. That trend seems positioned to continue to grow. And data centers will be a part of it. I hope to not have to talk about it every conference call because it's a piece of the business, and it's something that people get excited about.

But we're not a data center stock, and we're not we shouldn't be thinking of ourselves as a play just in one area. This is really a diversified company that's focused on the problem with energy, which is the grid designed today to be able to meet those needs and those demands that many uses and many sources of generation require to have a very effective and reliable and resilient grid.

Our next question comes from Eric Stine with Craig-Hallum.

Maybe we could just talk about traditional energy. I believe that was 1/3 of the quarter. And obviously, that's been a pretty increased focus here over the last year plus. I mean as we think about that, can you just talk to us about kind of where you're selling, where you play in there? I mean, should we view that as cyclical that it's more -- that swings in oil prices have an impact? Or is it insulated because it's more tied to traditional infrastructure? That would be helpful for me to clarify my thinking.

Yes. I think it's more insulated in that it's persistent demand. In general, I think what's changed in the American economy is that traditional energy is no longer considered something that people don't want to invest in. But creating cleaner energy in a traditional way is something we can help powering pipelines that move natural gas and things are an area that we fit in and as well as kind of general oil processing, being able to take from extraction [ of extra ] sources and move them downstream, midstream and end stream, the types of processes that move and refine that create other byproducts, all are becoming more and more energy dependent.

So you need energy to be able to move and process the traditional energy sources. And that's really where we come in. So we see it as a long-term kind of persistent trend for us. The climate is really more apropo there. We think there's a fit definitely in North America. We think there's a potential in Latin America as well as we look at not necessarily quarters and years.

The other part I'll say, Eric, realize and take everything I say with a little bit of a grain of salt. Our lead times are 9, 12 months for many products, right? So anything that we're going to do today that we think is exciting is really going to affect the financials a year plus out.

Okay. Yes. No, that's very helpful. That makes sense. Maybe just as you think about growth in the business, now you're guiding to $80 million plus, a new level on a quarterly perspective. I know capacity is less of an issue than I think in the past, you've talked about labor. I mean any updates you can share there? It clearly is an area which maybe is a bit of a push point, but just that would be great, an update.

Yes. I think the team has done very well at hiring. I feel like all the factories are being utilized very well. We have a lot of demand. We have a lot of bigger demand. So we feel really good. I think the new wrinkle in our portfolio is Brazil and the very strong demand there and the need potentially for some more expansion.

And John kind of almost directly said that given the CapEx guidance that we believe the business is positioned to ramp, and we may have to expand capability, particularly in Brazil to be able to go meet all of that demand 2, 3, 4, 5 years out. So there's a longer-term plan that we want to be able to implement.

We're at a point where the business really is driving us. We have a multiple set of very strong tailwinds that are pushing us, and we just need to be able to react to the market. If we do a good job for our existing customers, they're going to come back again and again as they have, and they come back with harder and bigger problems for us to solve.

Got it. And maybe last one for me. I know -- well, data center, just -- I mean, is that something as we think about that similar to semiconductor where potentially if it's a large data center operator or EPC that you potentially are spec-ed in? Or do you view it as it's a little more lumpy and then it would be kind of not one-off projects, but it would be more based on different projects moving forward rather than a few key partners.

Yes. I don't think I have clear visibility on that. Our EPC customers tend to try to design us in and we see a print that has our rectangle on it, and that's what we try to do. Obviously, doing one of these, we're not at that level yet. Do I think this has the potential for that? Yes. If this market grows faster than other markets, we'll have to invest in them to make sure that they grow to be able to maintain the diversity. part of the portfolio. That's tremendously valuable. It's a stabilizing effect on the business and allows us to grow on multiple fronts in parallel.

Our next question comes from Tim Moore with Clear Street.

Congratulations on your revenue growth and operating leverage. That was very nice to see. My first question for you is about the potential to cross-sell and bundle to customers. You've done that extremely well on oil and gas to target upstream, midstream and downstream power systems. Maybe curious if you can shed some light on maybe what end markets make the most sense to cross-sell near term besides oil and gas? Is there potential in mining or chemicals or just your overall thoughts on end markets to really get that through.

Yes, it's pretty much everything, Tim. The way the business is now aligned is we no longer cross-sell, we just sell. So we have combined solutions that come from the family of acquisitions that we have that we're now presenting in some cases, they're $10 million projects. In some cases, they're $25 million projects, where we're presenting a combined offering to be able to manage voltage, to be able to transform voltage, to be able to modulate AC/DC power flows and to be able to do all of those features and functions for customers.

So we no longer have to sell them as separate. We do because many of our customers think of them that way. But as for the larger projects, I'll say, more established customers, they like where we've headed with what we've added. And it's for mining, it's for traditional energy, it's for semiconductor. To some extent, it's even for renewable projects as we see them. Wherever we can, we want to be valuable to our customer. And if we can keep demonstrating that value, both from what the product does and what our engineers can help solve or derisk for the end customer, that's where we win, and that's why we win.

That's terrific color. Switching gears to my second question. I mean, you're clearly busy integrating Comtrafo in Brazil. And I know some comments were made on CapEx there, and they've got a great factory that you can expand. The organic growth is awesome there and the backlog is quite big. So can you maybe just give us a little bit more color on the near-term plan on increasing output there?

And then just on the topic of acquisitions, how comfortable do you need to be with integration there, maybe how many quarters in until you maybe consider doing your next acquisition given you're sitting on a lot of cash right now?

Yes, it's hard, Tim, at this point to speculate. We're 19 days in plus the days we have in January. So it's early days for us. It will take us some time to be able to digest and leverage. We have a huge opportunity just in Brazil alone that we want to go after with everything that the company has to offer there.

So I think we'll take our time and we'll be as we have been with each of them. We want them to run as they've run because we like the culture. We like the financials. That's true of all the acquisitions we've done. And then over time, how do we do more together? And that becomes the question that helps affect things 2, 3 years out from now.

So I don't anticipate we're going to turn around and do another acquisition right away. But we do have a lot of inbound. We do have a list. We are working -- it's becoming -- the business is evolving to we have an operation business and then an opportunistic part led by John here to say, okay, what can we add to the portfolio and how do we do that? We're also looking, and you can hear it in my tone at combining product to basically come up with whole new sets of opportunities for us. And that's taken some R&D investment to be able to do all those things. So the company is evolving and maturing in all the right ways.

That's great color, and comforting that you won't rush into the next acquisition, until you're ready for them.

Our next question comes from Colin Rusch with Oppenheimer.

I have a few. I would love to just get a quick read on working capital and how that transitions over time. Obviously, with the acquisition, you've got a substantial amount of inventory and some receivables that grew in the quarter. Would love to understand kind of how that trends over the next few quarters.

Yes. Good question, Colin. We have had -- I don't want to call it a drain on working capital, but we have invested into the growth of the company over the last couple of quarters. To the extent we continue that growth and if we can maintain elevated levels of growth, then we'll continue to invest in working capital.

If growth tapers to, call it, single-digit growth, then we would see working capital probably turn favorable. So it's difficult to tell depending on our growth strategy, but I can -- if working capital is an investment, I can assure you it's to support growth.

Okay. And then we haven't talked about some of the military opportunities. Certainly, there's an awful lot of activity in Washington right now around enhanced military capabilities. Can you just talk a little bit outside of the ships, you talked about ports and infrastructure being a meaningful growth opportunity. In your sales pipeline, what are you seeing these days? And how do you see that starting to flow through into the P&L over the next couple of years?

Yes. I think just topically for the quarter, Colin, we had a good percentage in military more than 15%. I think typically, it's closer to 10% quarter-to-quarter, and that was because we're doing a bunch of things at once within the quarter, which is good. And that helps strengthen quarters.

I think longer term, we're kind of front and center in some of the critical problems that have and ports have and those opportunities are going to be persistent kind of long term. But I'd say there's nothing I'll say specifically that's going to change the trajectory of that business in the next 2 to 4 quarters.

Awesome. And then just a final one on the R&D road map. As your customer intimacy has improved, you're getting a look at what the real needs are for a bunch of these applications in a different way. And obviously, you guys have capabilities around customization for different applications. But I would love to understand how you're thinking about the cadence of evolving the product suite and just the leverage that you have out of the existing designs to meet all of the opportunities that you're seeing with your customers these days?

Yes. I'll take by example. So we're working towards a project for a very large mine, and there's opportunities at the site, but there's also opportunities with the utility that the grid is going to need to be improved. So I think our capability has matured now to the point where we really understand the problems that capital investment will cause in capacity from an electricity standpoint.

So we try to just start with that as the premise and then work backwards and say, okay, what are going to be all the electrical challenges that this CapEx investment for this end customer is going to create, not just locally, but more broadly in the utility. So being able to combine our capabilities into products that are more proprietary, more defensible, more valuable to customers, that's where we're trying to push things as much as we can.

This concludes our question-and-answer session. I'd like to turn the conference back over to Daniel McGahn for closing remarks.

Thanks, [ Bailey]. As we look forward to the future, it's clear that the opportunities ahead are vast. We stand ready to capitalize on the rising demand for energy and the critical need for a dependable grid to support it.

We reached another recent record quarter with revenue levels of over $70 million, and we guided for our next quarter to potentially exceed $80 million. The business has already demonstrated a strong year through the first 9 months into the fiscal year.

We see more traditional energy and utility projects, including those driven by data center demand on the horizon. In the longer term, we have a very strong pipeline of materials and semiconductor projects as well.

I look forward to talking to you again when we report our full year results. Thank you, everybody, for your support and attention, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the AMSC Comtrafo acquisition call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Nicol Golez, Director of Communications. Please proceed.

Thank you, Eric. Good morning, everyone, and welcome to American Superconductor Corporation's Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

Yesterday, after market closed, American Superconductor announced the acquisition of Comtrafo Indústria de Transformadores Elétricos S.A, referred to as Comtrafo. A copy of this release is available on the Investors page of the company's website at www.amsc.com.

Today's remarks regarding American Superconductor's acquisition of Comtrafo and future expectations, including financial results, plans, prospects, markets, market opportunities, anticipated benefits and effects of the acquisition as well as expected Comtrafo financial results for calendar year 2025 constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, including those set forth in the Risk Factors section of American Superconductor's Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21, 2025, as well as our other filings, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements.

With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, Nicol, and good morning, everyone. We're very happy to announce the acquisition of Comtrafo, a 30-year-old family-owned and operated business in Brazil that manufactures large power transformers and distribution transformers, primarily for utility customers, and additionally, for industrial customers. They currently have principal production capability in the south of Brazil outside Sao Paulo of about 125,000 square feet and are prepared to expand. They have 580 employees. They are expected to do about $55 million in revenue this calendar year with gross margins comparable to our recently demonstrated levels and operating margins regularly exceeding 20%.

The acquisition is expected to be immediately accretive next quarter. These margins are normalized to not include events pertaining to the acquisition. We have and will have to do purchase accounting adjustments such as inventory and other events to bring their accounting in line with our standards.

They have total backlog of about USD 85 million and 12-month backlog of approximately USD 55 million. Their lead times are similar to our own, 6 to 12 months with longer lead times for larger projects.

We are paying roughly $55 million in cash and $78 million in stock for the business and an additional $29 million for the more than 100 acres of land set for manufacturing. We'll be working on the timeline for expansion and talk about that in the future. The team is very excited about the prospects for that, but that's going to take some time to understand and further plan out.

Additionally, there is an earn-out in cash that can be fully earned if they're able to more than double the business. So that's a very exciting plan that they have, and we hope to be able to help them as part of AMSC.

Brazil is 1 of the 10 largest economies in the world, the seventh largest electricity consumer and the largest electricity market in Latin America. The Brazilian transformer market is valued at $1.5 billion annually today. The broader Latin American market is expected to grow and become triple this by the middle of next decade. Their top customers typically are electric utilities in Brazil. They have begun to expand into the broader Latin American market.

Focusing on the Brazilian market dynamics, local governments are actively promoting modernization of the transmission and distribution grid. According to the Empresa de Pesquisa Energética, Brazil has a planned investment of over $20 billion, driven by the central and local government. This is anticipated to quadruple in the coming decade. It is quite a large market opportunity and growing.

We at AMSC currently build transformers as part of our business, typically for industrial customers. The acquisition extends the product portfolio to now include transformers for the distribution grid up to 15 MVA as well as large power transformers up to 250 MVA for the transmission grid. This really extends our offering for utilities, which until today was primarily focused on grid resiliency and power quality.

The acquisition now extends our offering to specifically take advantage of the critical needs of power utilities for the expansion of the grid's ability to supply power. We have been making transformers for industrial equipment up to 115 kilovolts. We now expand that to include 138 kilovolts and 230-kilovolt transformers for the power grid. These are the very large transformers that are in high demand.

They do extensive testing on site and believe the quality of the products as well as their speed to market are key differentiators. They have a full production team, engineering staff and quality management. They have a sales presence across Latin America, which has been focused principally on Brazil. The family intends to stay with the business and help continue to lead the operation. Their total staff of 580 individuals will double our employee population.

This is the highest profit business we have acquired. We are very excited about what we believe this means for the acceleration of our revenues and substantial profit leverage in the business. Their historic gross margins are in line with our broader business in the 30% level. Their current operating margins are already exceeding 20%. This accelerates our plans by at least 1 year and positions us for further future growth in the region.

Consideration for the deal was about 2.4x expected calendar year 2025 revenue, plus the additional acquisition of the land. We feel this is justified due to their established market presence and their trajectory of potential growth in a significantly growing market. The land is an important part of the acquisition, in that we believe it positions the company to be able to grow rapidly to take advantage of market dynamics.

We are buying a business that complements our current business. Like past acquisitions, we buy a family-operated business, but this time, at larger manufacturing scale and in a new market for us, Brazil. We love the product, the people and the profit capability of this business. It is a business that is positioned to grow. This further expands our offerings to power utilities at a time where there are significant lead times in a growing market.

The timing of the acquisition means that it won't have much of an impact on the current quarter, but we will intend to include their part of the business when we guide for the March ending quarter.

We don't buy businesses based on synergies. We buy well-performing businesses that expand our product and market reach. This is what we've announced today. This opens up a whole new chapter for the company and increases the number of market tailwinds that can drive our business. We have seen many opportunities, and this one seemed to be the right fit at the right time. We're very excited to bring Comtrafo into the AMSC family.

Eric, we will now take questions from our analysts that are queued up.

[Operator Instructions] Our first question today comes from Eric Stine with Craig-Hallum.

Daniel, so when thinking about this, so obviously, I mean, an expansion into Brazil, big market, but some slightly different products than what you have today. What I'm curious -- I mean, should we think about this as more expansion to a new market? Or do you believe that this is something with a slightly different product offering and set of customers that you can bring to different markets, I mean, namely, the U.S.? And then, conversely, what do you think the opportunity is to bring AMSC's existing products to Brazil through this acquired company?

Good question. It's kind of the heart of the matter, I think that people want us to talk to. I think there's 2 dimensions of the expansion here. One is the product line independent of geography, right? So we sell to utilities today. We sell mostly power quality type solutions for problems where there's voltage issues or whatnot. This puts us right into the main feed of power.

So, as the grid needs to be built to deliver more power to customers, transformers are an essential part of that. The part of the product line, we're very excited about for a longer-term growth, will be the transmission level larger type units. And those are things that potentially in the future, we'll be able to sell everywhere.

The second part of it is the expansion into Brazil. So we do some business in Latin America, but really not in Brazil. So this creates a whole new opportunity for the company combined to think about how do we service those customers in Brazil itself. So the way we're thinking about it from a growth standpoint is the first priority is we have a tremendous opportunity in Brazil to grow this business that we're acquiring. That's the first priority.

The second priority will be how do we expand more broadly into Latin America because there's a market there that's growing and becoming quite big, tripling probably over the next 10 years or so. So we think that opens up an opportunity to sell Comtrafo to the broader Latin American market. They started to do some of that, and we hope we can do more of that.

And then, on top of that is the, can we provide AMSC content into Latin America and can we provide Comtrafo content into North America? I think those are all things to come, but that's not something I think we're going to focus the group on in 2026. It's really we have a significant advantage immediately ahead of us in Brazil. We need to take advantage of that. We need to be able to scale to be in a position to service those customers.

And then, we'll continue to work with the broader team, probably over a longer period of time to get at the heart of what you're asking, Eric, which is how do you get the leverage across the entire product line, maybe throughout the Americas and eventually globally. Those are all things we're going to get to. But given the size of the company, we can't do all of the above at once. We have to focus and have success in a successive order of priorities.

Yes. Understood. Very comprehensive. I guess, maybe last one for me. So, I guess, it sounds like given that their -- the lead time is very similar to your current business. And so that $55 million annual number could change to an extent there could be some upside. But is it fair to say that people should not expect that number to grow substantially, at least over the next 12 months? Once you get beyond 12 months, then that's a different story.

I think yes and no. The lead times there kind of on average are similar to us, where it represents about 9 months on average, 6 to 12 is where the base part of that is. There are some that are more than that. You can see that with the $30 million additional to go from the $55 million to $85 million in backlog. The good news is they're basically starting the next calendar year with the prior calendar year already in backlog. So that's a very exciting position.

I think we will be mindful to help everybody understand now how the entire AMSC combined backlog will change, where revenue is going to head. But it really -- kind of simply, this adds another 20% to the business almost immediately. That's very exciting. And when we look at the leverage in that business, it's at or better than where we are today, and it's really at or similar to where we want to get to. So this is a nice building block piece that assures pretty significant additional growth for next year and doing it at the leverage in the business that we want to get to and maintain going forward.

Right, and immediately accretive if I heard that right.

Yes.

Our next question comes from Justin Clare with ROTH Capital Partners.

So I wanted to just start off. Wondering as you look to potentially expand the Comtrafo business outside of Brazil into other Latin American markets or into the U.S., are there particular product standards or certification requirements that might be needed as you expand? And maybe you can just speak to the potential timeline for when you might look to expand in a greater way across Latin America? And when could you enter the U.S.?

Yes. The standards for Latin America, they've established, and that's what they test to. We are looking at what we're going to be able to do in the U.S. from a thought exercise standpoint. They do standardize and test the product to international standards. One of the challenge with U.S. utilities, this is just from our own experience, is that you have to kind of go through the standard setting with each utility. We've done that with a number of our products. It does take some time. It could take 1 to 2 years depending on the utility to do that kind of work. So that's stuff we want to get at as quickly as we can to really understand what the opportunity is today.

I think today, the opportunity clearly is in Brazil. I think that there is an exceptional opportunity for us in the broader Latin America. I think it will take time, Justin, and I think we'll come back to you, not just next quarter, but as we go forward, kind of when do we start to expect to be able to enter the entire market of the Americas, including North America. So that's an exercise that we will go through.

And I think it's one of the things that Comtrafo was excited about us as an acquirer besides the fact that our CFO is a wonderful guy and gets along with them famously is that we can really help them with the market penetration more broadly because we've done -- we've been there and done that. We go through that all the time. And you guys know, I'm not a heavy promoter on saying, "Hey, we're going to do that, this, that or the other thing". I'm very pragmatic and practical. We're going to look at this the same way.

But it's a huge opportunity just in Latin America alone. If we can bring this in North America, I mean, this is a substantial change in the trajectory of the business. But it's going to take quarters and maybe years to even enter the broader market than the entire Americas.

Got it. That's helpful. And then -- so I guess I'm curious, which -- so kind of going in the other direction, which AMSC products could potentially be sold in Brazil or in Latin America more broadly? And maybe you could speak to the go-to-market strategy there? And then, are there similar kind of certifications or requirements that may need to be met for your product portfolio as you look to expand?

Yes. I think the timing is really the promotion and further deepening the relationships with customers in Latin America. We do some business there. Principally, it's on the industrial side in mining. We will provide transformers and power supplies for those types of applications. Certainly having a local presence should help bolster that. I think that will be something that the market will see positively, meaning the customer-driven market.

And then, we have to look at -- the investment in Brazil in power is pretty impressive. And we have offerings now, as we've talked on previous calls, for more traditional energy that we think could have applicability in Brazil. But these are all things that we have to kind of study, examine and go forward with. And I know everybody wants to focus on how big and how bright this can be.

One of the challenges when we do these acquisitions is we sign and close basically at the same time. So when we look at the businesses, we look at basically bolting them on and do they fit and does it fit overall with the amount of dilution in the deal and the pricing in the deal. And if that works, then we love it, we move forward and that any additional leverage will come in the 1- to 2-year kind of time frame, typically. We've seen that in the other acquisitions that we've done.

So I think the thing I want people to feel is hang in there, that there's growth coming in the overall market, there's growth coming in the product line. We've done, I think, a very good job in turning cross-selling into selling in the other acquisitions we've done, and we intend to do that with this as well. And we have a group down there that's super excited about doing that with us. So it will just take some time.

Got it. Okay. And then just 1 more. How are you thinking about adding incremental capacity given that it seems like you have a meaningful amount of space to expand there? What could be the potential time frame and the level of CapEx that you might be thinking about for expansion?

Yes. To talk about the level of capital, it's probably on a level just as we have said before with any expansion in the factory. It's things that we can do in our balance sheet. But I think that's reassuring for everybody. The timetable, this is something we're working together as a larger team, there's a lot of excitement on how fast can we go, how fast can we grow. That's something we have to work through as a combined team. So we're not announcing today that we're doing a specific expansion, but it's something that, as we make progress, we'll certainly kind of talk about what the capability of the business can become.

We did say in the prepared remarks, and it's in the 8-K, there's an earn-out portion of this. The team down there is very excited that this business is very much poised to grow, to the point where they put the earn-out in as part of the deal was something that we all wanted to have to be in a position to grow.

And with simple math, if they achieve all of the earn-out, it means that they've more than doubled the business. So the land is an important part of the transaction because we want to make sure we're in a position to grow the business as rapidly as we can. But those are things on future calls, we'll talk to kind of what our capital spending is and so on.

But this business is -- the only really difference between this business and the other ones we bought is the native language in the market that they're in. The way we're going to approach it is very similar to what we've done in the other businesses. I think that the acquisition of the land puts us in position to be able to exploit that and take advantage of that as rapidly as we're able to.

Our next question will come from Colin Rusch with Oppenheimer.

Dan, you've been pretty judicious around corporate culture and managing integrity of the business. Moving into a new geography, working with another language, another culture is a level of complexity you guys haven't engaged in historically. Can you just talk about your thought process on that integration? And how long you think that will take? And how much diligence you've been able to do in the M&A process here?

Yes, the multi-language we do today, I mean we have operations in a lot of countries all over the world. We've built factories in a number of countries. The principal language wasn't spoken was English. All of our material internally when we do all of our training, we do all of our policies, everything is multilanguage. I know the stuff I just was in the other day, it shows up in 8 languages. So we are a multilingual culture already. We're not a Portuguese-speaking culture. So that's something that we'll have to add. But we've had to do that with Romanian or Polish or different languages in India or any other geographies that we've operated in. So that part, I'm comforted with.

And I think in many ways, the family is very reminiscent of the other families in the other businesses that we bought. The level of excitement, the passion, what they've been able to do and grow, the idea of combining and going forward, something that's bigger and stronger, is exciting. So I think we have great alignment that the entire organization wants to continue on the trajectory that we've begun. And if we can accelerate that, that's all good, and that's what we're going to focus on.

Does that get at the heart of what you're thinking? Does it help?

I think so. You guys have done a nice job with the bolt-ons and then slowly integrating these businesses over time. So I think it's really just about a question of pacing for me. So we got after it.

The second question, you guys have been really capable around technology design and innovation for some complex problems. And certainly, you don't want to disrupt the product line, but you have been able to drive some cost benefits through improved design on some of the products and some of the optimization of how these things fit together. Can you talk a little bit about how mature your thought process is and kind of diligence is around that opportunity even as you think about this as a bolt-on with some multiyear potential synergies as you go forward, either from sales or customer-need perspective as you look at how some of these technology pieces fit together?

Yes. I think job one is exploit the market. I think the second or third order will be -- we're now going to operate in another low-cost manufacturing area, like we have in Eastern Europe, and we have in our past before. So how do we take better advantage of that over the longer term? I think where we generally make decisions around that is a customer helps to drive that decision-making, meaning that if we have technology that we typically sell in North America, if that needs to be engineered or designed for a South American market and a South American price point, then that's something that we have to look in to do.

But for us, each one of these acquisition ideas, all the kind of best ideas that we have in R&D always start with a customer conversation. And then, we try to be creative about how do we offer performance, how do we manage costs and how do we do those pieces. So I put in the number of markets about we don't buy businesses based upon the synergies. It doesn't mean that there aren't any, but that means that we're focused on the first job, which is just scale this business locally. And then over time, when we're able to, with the customer helping to drive it, we'll look at how we understand better performance and costs across the entire product line.

That's super helpful. I'll take the rest offline.

[Operator Instructions] Our next question comes from Tim Moore with Clear Street.

Dan, congratulations on the deal with a rapidly growing end market in Brazil and Latin America. Just kind of curious, roughly how long might have you been in talks with them? I know you raised equity in April. Just curious if there are other large U.S.-based acquisition targets just not growing as fast or maybe too high of asking valuation prices?

That's a whole portfolio that we've been looking at. This kind of was the right fit at the right time, meaning that we are able to mature the discussions to the point where you get down to terms and pricing and those things. We've looked at a number of things.

Valuations, I'll just say, are different this year than they were a couple of years ago. We want to be mindful of that. We want to make sure that we are leveraging the value of the company in the right way. But there are others that we want to continue to look at.

And the part of our growth strategy is to get the leverage across the product line, continue to grow organically, but also be in a position to accelerate growth when we can find the right -- I talked about the right product, the right people and the right level of profit if we find businesses to be able to add and extend. So we're now -- we've done -- this will be our fourth one in about 5 years. So there will be, I think, other opportunities, and we just have to find if it's the right fit and the right feel with some of the targets.

That makes sense, Dan. It's good that you didn't get too tempted on the U.S. stuff, but this looks very good. So I believe from the press release you talked about doubling, the double for the earn-out, that's their EBITDA in 3 years. Is that correct?

Yes. Basically, the way the structure looks, we do the reverse math. We have to basically double revenue in 3 years or sooner.

Okay. So it's doubling revenue. Is there anything tied to EBITDA? I thought I might have read that, maybe I read it wrong.

The whole structure, Tim, is EBITDA-driven. But I'm just -- as we're thinking revenue the most, that is an easier figure to understand growth in the business. That -- correlates to basically a bit more than doubling the revenue there.

And just on that, given this rapid growth and the potential to add more capacity, I know you're still working through this, and you mentioned it. I guess, you would be mindful kind of incremental margins and not adding a whole lot of capacity once it would be done in phases that you get the incremental margin without underutilization down there.

Yes. No, we want to make sure we continue to leverage in the business. That's the mindset. That's where our patience, I think, pays off.

Good. Good. And just my last question is, clearly, T&D work is booming in Brazil, in the U.S., in Europe. This is a great direct play into it. I was wondering, did you know if they have any work driven by data centers? I think Brazil is supposed to double their data sale -- data center investments over the next 5 years, and they're growing like 15%, 20% a year. I mean -- or do you think they're just doing work on T&D and they haven't pinpointed if any of it is actually going to data centers?

When you look at the market, like here in North America, Brazil seems to be trying to position itself as a center for AI. So I think it will create opportunities. I don't think that's in the immediate plans there because they kind of have their hands full with just the utility demand. But I think that there potentially could be a fit there. But that's something we have to explore, and we'll get back to everybody about.

I know probably the question I get asked the most for the past 6 months or so has been the question about AI. We're excited about this acquisition and what it means really for our relationship with utilities. And as we said in the last call, we hope to have some news soon on the AMSC side on what we're going to do with data centers. So we still remain very excited about that.

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

I really want to thank the team within AMSC to help to drive this. John Kosiba here led it. John Samia, our General Counsel, led the due diligence and the transaction process. This has been a very emotional acquisition for us because of the excitement on the other side because that excitement has translated to us in what we think and what we see as this is a business.

I think we have a demonstrated track record of doing a good job with selection, with pricing and managing dilution. And we try to be very pragmatic with these things, but we are wildly excited about the combined future. And I hope that, that comes across today.

So thanks, everybody, for your support, and look forward to talking to you next year when we report on the third quarter for us, which ends in this month in a few weeks. Thanks, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the AMSC Second Quarter Fiscal 2025 Financial Results Call. [Operator Instructions]. Please note this event is being recorded.

I would now like to turn the conference over to Nicol Golez, Director of Communications. Please go ahead.

Thank you, Jason. Good morning, everyone, and welcome to American Superconductor Corporation's Second Quarter of Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

Yesterday, after the market closed, American Superconductor issued its earnings release for the second quarter of fiscal year 2025. A copy of this release is available on the Investors page of the company's website at www.amsc.com.

During today's call, remarks that management may make about American Superconductor's future expectations, including expectations regarding the company's future financial results, plans and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, including those set forth in the Risk Factors section of American Superconductor's Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21, 2025, as well as our other filings, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements.

On today's call, management will refer to non-GAAP net income on non-GAAP financial measure. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release.

With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, Nicole, and good morning, everyone. I will 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 second fiscal quarter, which ended September 30, 2025, and provide guidance for the third fiscal quarter, which will end December 31, 2025. Following our comments, we'll open up the line to questions from our analysts.

We executed another quarter of strong results with revenue of nearly $66 million. This is our third consecutive quarter performing at this higher revenue level. Second quarter revenue grew more than 20% year-over-year, reflecting strong execution across our grid and wind businesses. Our Grid business delivered strong growth of over 15% compared to last year's quarter. Our Wind business also posted impressive growth of over 50% from the year ago period. We delivered our fifth consecutive quarter of profitability and our ninth consecutive quarter of non-GAAP profitability.

Gross margins topped 30% again, and we closed the quarter with a strong balance sheet of over $215 million in cash. Overall, we posted a quarter of very strong results.

The business is growing. Revenue came from a broad mix of sectors. About 1/4 of our sales came from traditional energy projects with another 1/4 from renewable energy projects. Materials projects, which include semiconductor, accounted for over 1/5, while military and other industrial sectors made up the remaining portion. This diverse mix of revenue reflects the growing demand across our end markets and the reach of our technology.

We are being designed into more and more projects where our proprietary technology has become the go-to solution, which is a great validation of the value we bring. Our technology has gained a strong foothold across multiple sectors.

I'll now turn the call over to John Kosiba to review our financial results for the second quarter of fiscal 2025 and provide guidance for the third quarter of fiscal 2025, which will end December 31, 2025. John?

Thanks, Daniel. Good morning, everyone. AMSC generated revenues of $65.9 million for the second quarter of fiscal 2025 compared to $54.5 million in the year ago quarter.

Our Grid business unit accounted for 83% of total revenues, while our wind business unit accounted for 17%. Grid business unit revenues increased by 16% in the second quarter versus the year ago quarter. The increase in revenue was primarily driven by the organic growth within our new energy product lines.

Wind business unit revenues increased by 53% over the same time period. The increase in revenue was primarily driven by additional shipments of electrical control systems.

Looking at the P&L in more detail. Gross margin for the second quarter of fiscal 2025 was 31% compared to 29% in the year ago quarter. This increase in gross margin was primarily due to a favorable product mix, particularly within our Grid business unit. This is now 2 consecutive quarters with gross margins exceeding 30%.

Now moving on to operating expenses. R&D and SG&A expenses for the second quarter of fiscal 2025 were $17.1 million compared to $13.2 million in the year ago quarter. This increase is primarily driven by the incremental NWL operating expenses and higher stock compensation expense.

Approximately 21% of R&D and SG&A expenses in the second quarter of fiscal 2025 were noncash. We generated non-GAAP net income for the second quarter of fiscal 2025 of $8.9 million or $0.20 per share, compared with a non-GAAP net income of $10 million or $0.27 per share in the year ago quarter.

Our net income on the second quarter of fiscal 2025 was $4.8 million or $0.11 per share. This compares to net income of $4.9 million or $0.13 per share in the year ago quarter. Included in both net income and non-GAAP net income in the year ago quarter was the release of a $5.1 million valuation allowance due to the recording of the deferred tax liability from the acquisition of NWL. This was a noncash benefit in last year's results.

Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results. We ended the second quarter of fiscal 2025 with $218.8 million in cash, cash equivalents and restricted cash. We generated operating cash flow in the second quarter of fiscal 2025 of $6.5 million.

Now turning to our financial guidance for the third quarter of fiscal 2025. We expect that our revenues will be in the range of $65 million to $70 million. Our net income on that revenue is expected to exceed $2 million or $0.05 per share, and our non-GAAP net income is expected to exceed $6 million or $0.14 per share.

With that, I'll turn the call back over to Daniel.

Thanks, John. We have sustained an average quarterly revenue above $65 million for the past 3 quarters. And you can see we're bullish with our expectation that this trend could continue next quarter. As is common in our business, timing plays a key role in quarterly results. Some quarters benefit from accelerated timing of projects or earlier deliveries. Others see projects shift into the next quarter or next period.

Typically, our 12-month backlog represents about 9 months of business. The team is always selling projects out 6, 9 or 12 months and in some cases, beyond 12 months. Our lead times have been reduced for the overall business, and we see this as a competitive advantage. We are growing, we are executing with discipline and focus, and we have tremendous tailwinds at our back. Our results reflect our progress in scaling the business, diversifying revenue and driving outstanding financial performance.

For our second quarter, we saw strong order demand across energy and military markets. Most of our orders came from traditional energy and renewables, making up nearly 65% of total orders. Military followed at roughly 15%, with the rest driven by materials such as metals, mining and as well as other markets. This demand is supported by powerful tailwinds across multiple sectors with significant investments projected for 2025.

In energy, traditional energy like oil and gas are expected to see over $1 trillion in capital spending, while renewables are attracting more than $750 billion. International growth, particularly in renewables, adds another layer of long-term opportunity.

In materials, the global mining project pipeline exceeds $1 trillion. Investments in semiconductors and global data centers together are expected to top $650 billion. And in military, defense spending is projected to reach nearly $3 trillion.

These sectors represent massive long-term capital investments. We believe we are well positioned to benefit with our broad product portfolio across power electronics, grid infrastructure and military systems. We see steady growth in demand. Over the past 4 quarters, we've averaged over $60 million in new orders per quarter. That is an improvement from the prior 4 quarters, which averaged over $45 million per quarter when we exclude the exceptional order we received from the Royal Canadian Navy.

We closed the quarter with a strong pipeline of opportunities and a 12-month backlog of well over $200 million. We did win a new contract with the U.S. Navy to begin design for a whole new class of product that we will hopefully talk about in the future. As we look ahead, we did mention last quarter about a coming acceleration in our military business. We see this coming. We expect revenue to be driven by strong activity in materials, particularly semiconductors, along with increasing investments in data center infrastructure.

We may even see another acceleration in the coming quarters in this part of our business. We are benefiting from power-intensive materials manufacturing. These are the feedstocks of the future. Our semiconductor offering performs exceptionally well, helping protect fabs from power variability and supporting the rapid build-out we're seeing in that market. We are just beginning in data centers. We have served grid projects to help support a more resilient grid and now hope to begin to deliver directly to data center construction projects.

In addition, we've broadened our reach beyond renewables to include traditional energy projects. That diversification is making our business stronger and more resilient across multiple sectors. We are prepared to capitalize on the growing demand for energy and the need for a stable grid to support it. We are excited about the future, and we believe we're exceptionally well positioned to capitalize on the opportunities ahead.

After an acceleration in the first quarter, the business performed nicely in the second quarter. We are guiding to another strong quarter ahead. Our third quarter is off to a great start, supported by healthy new orders. The business is seeing tailwinds across the energy and materials markets. Expansion in materials capacity and build-out of data centers could further accelerate this part of our business.

Given our backlog and balance sheet, the business is very well positioned for what might lie ahead. 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 to you again following the completion of our third fiscal quarter of 2025.

Jason, we will now take questions from our analysts.

[Operator Instructions]. Our first question comes from Eric Stine from Craig-Hallum.

So wondering if we could start -- so obviously, you talked about you've been above $60 million, $65 million here for a couple of quarters and the typical cadence of your business has been you're at a level, as orders pick up, you see -- then your revenues obviously pick up. And so I'm just curious, thoughts given your macro tailwinds, how you're positioned, expanded offering, what you're seeing on the order front and what that implies about kind of that next step up for the company?

Yes. I think the next step that's going to be determined on how all this cadence comes together at a single point in time. But we do see an acceleration coming in military, not only from new orders that I mentioned, but also based upon the more complete offering that we now have, not only protecting ships, but powering ships and powering the construction of ships. So there's a bunch of opportunities there for us.

I did mention that we do see a potential acceleration kind of similar like we did in Q1 with semiconductor build-out. We have a pretty robust pipeline and backlog of orders there.

And in data centers, we hope to announce at some point in the relatively near future that we've delivered on our first project to the construction of the data center. We think that opens up a whole another opportunity for us, but it's very early days there.

So I think it's always hard for me to tell you definitively what it's going to look like to get to 75 or to 80 and beyond. But I think when you look at the macro environment that we're in, everything is at our back right now. We see that with the pipeline. We see that with the cadence of the orders. We see that the operation is being able to deliver timely to customers. I mentioned that our lead times are shrinking. That's a good sign, I think, in our business. It gives us a competitive advantage, we think. So as we start today, we think that the opportunities for us are bigger and brighter than they were even a quarter ago.

Got it. Maybe just digging in on the data center piece, I mean, obviously, top of mind in the market. I know it's early days, but I mean, is that something that you envision eventually becomes where you're spec-ed in like you have been with some of the semiconductor fabs with that data center provider?

Yes. I think that's where we're hoping to go. I don't know how long it will take. But when you think about design wins, we're spec-ed in a variety of systems for the military. We're spec-ed into a number of chip makers for fabs. We don't talk a lot, but we're spec-ed into a lot of utilities where our products are things that they can basically purchase on order as opposed to doing a whole design work and selling them on the efficacy of the technology. That's been a huge transformation of the pipeline for utilities.

Some of that's driven by data center, really the data center impact on the grid. But now we're seeing that EPCs that we work with for many years are getting more and more involved with data centers, and they're attempting to pull us along with them. So our hope is that customers that are very familiar with us as they get more involved with the construction of data centers are going to turn to us like they have in other industries as a known and trusted supplier. So we think there's a very nice opportunity there. How long it takes to pay off? I don't know.

I think what we're optimistic is that there are so many positive signs in our business that the business should continue to improve. I understand always the question is the cadence, and you have it right. We've gotten to a level. This is a great level for us to be at. I think we finally demonstrated the level of profitability we can get at this level. And now we're looking to kind of continue to push with our key customers to expand our order book. And I see that coming in the coming quarters.

Our next question comes from Colin Rusch from Oppenheimer.

Given some of your advantages around having compact form factors, your ability to deal with high voltage and some noisy power, along with some of the expertise that you guys have around DC to DC architectures and where the data centers are going in terms of how they're being built out. Can you just talk a little bit about how you see your competitive advantage in that data center opportunity given where the technology is headed and some of the legacy IP that you guys bring to the table?

Have you been on some of our sales calls recently, Colin?

I mean, listen, we see the alignment. But...

I mean you're talking about kind of how we go about marketing what we have. I think -- the idea of noisy, less resilient grids are a key in the data center market. I think first and foremost, what we've really discovered is a lot of it's about time and speed. So being able to build things quickly, being able to focus on lead time, being able to focus on our supply chain, if that part of the business starts to ramp, that's been, I'll say, something that the team has had some focus on.

I hope that we can talk about more specifically what we're doing. I think as we kind of figure out where our fit is, I think that there is an opportunity for an offering across our businesses. So not thinking the individual elements, but a combined offering. And I think order sizes could be quite large in the data center area. But you have it right. It's about the noisiness of the system, and it's about quieting it quickly and being able to deliver stuff to site that fits in well. You mentioned the compact nature of it. So the speed and size is kind of really paramount, we think, in this application, and that's really the strength of our technology.

That's super helpful. And then kind of broadly speaking, the customer base is diversified. Your end market exposure is diversified. But the military history here is pretty meaningful for the company in terms of what your opportunity set is. Can you talk a little bit about -- you've got the ship protection system business, but there's also the port opportunity. How much progress are you making around the non-ship military exposure in terms of resilience for some of the infrastructure that the Department of Defense is looking for in its kind of asset base over the course of the next, call it, 4 to 5 years?

Yes. There's kind of 3 flavors to what we're offering. There's the protection, which is the superconductor-enabled technology. There's powering critical ship systems, which we have a number of design wins there. Many of the ships that we're on with power supplies are the same size or bigger of what we're doing in protection. So that's a very important part of the business.

And the third part, as you mentioned, for ports or for construction, that's an area that we see acceleration potentially coming. We're designed in for, I'll say, a number of ship makers. We've been able to take the relationships we have and helping to build the ship with capability to now powering the capacity to build those ships. So that's an area that there's investment that is forthcoming.

There are pieces of our backlog that represent that, but we think that there's some order pipeline that can help that grow. And that's why last quarter, this quarter, I see the signals of an acceleration on the military side coming. I think, again, to go back to the previous question, for us, it's always hard to kind of predict when the timing comes. We know when need dates are. We know what our build cycle is going to be, and we try to map those 2 together for the customer and deliver what they need when they need it.

[Operator Instructions]. Our next question comes from Justin Clare from ROTH Capital Partners.

So I guess I also wanted to just follow up on the data center opportunity. And just wanted to see, are you currently engaged with utilities on that opportunity or data center developers? And then wondering if that is something you see as more at the substation level? Or do you see the ability to kind of offer a solution within the data center? Any added detail you could share on the specifics of the solution that might be a good fit for that end market?

Yes. I think the good news today, and maybe I can say it more clear than the last quarter is that the answer to your question is, d, all of the above. We started with the relationships with utilities to be able to fortify the grid. So challenges that are happening on the grid side because of the rapid build-out and demand for power from data centers.

We're now seeing bids where there's direct offering to the construction of the data center that will be directly with the developer. And in many cases, it's an engineering procurement construction company that knows us well that we know well. So that puts us in a good position where we're not trying to sell the efficacy of technology. It's more about lead time and how can we get product into the field faster.

The feature set, it's really -- and that's what we're talking about with the previous question, it's really managing the noisiness that can come from the grid or can cause disruptions for the data center. It's very similar to -- not quite identical, but similar to what we do for a semiconductor fab, where you're trying to deal with the speed of transient changes in the power flow. those are even more paramount and more critical for data centers even than a semi fab.

So as they're trying to build out those out more rapidly, they're trying to find simple solutions for their problems that they can get to quickly. So that's why we're excited about it. I hope to talk about that market more in the future. I think it is early for us, but I'm hoping that we talk about some wins and some deliveries in the coming quarters.

Okay. Great. And then you mentioned that the semiconductor market and the orders there. I'm wondering for the data center end market here, would you anticipate the order sizes being similar to those in the semiconductor market? And then I guess while we're on it, I wonder if you could just speak to the trend in orders for semis. It sounds like historically, those order sizes have been increasing. Is that trend continuing at this point?

Yes. Simple order of magnitude with the semiconductor fab. We offer anywhere from $2 million to $10 million of content. We've gotten orders within those ranges to the low end and certainly to the high end. That's what's helped, I think, the financials and the scale there.

On the data center side, we have projects that are exactly in that same range and larger. I think that what we need to do is kind of crawl before we walk and walk before we run. We want to get to the point where we can deliver, we'll say, first systems into the construction of data center. And then I think the opportunity there is certainly possible for larger and larger order sizes. I don't know what those will be until we get them, but certainly, we hope to be able to talk about those in the future.

Got it. Okay. And then just one more follow-up on the military business. You mentioned that you had won a new contract with the U.S. Navy for a new class of ship. I'm wondering, did that show up in the backlog this quarter? Or is that something you anticipate in the future?

And then just thinking through the magnitude of the potential impact, you've been on one class of ship so far, if you're seeing a new class of ship now, could you potentially double the ship protection business? Any sense for the magnitude of the impact here would be helpful.

So the contract that we won is for the design of a completely new class of product, not for protection. The order of magnitude of it is greater than ship protection. But the time it will take to develop and deliver and test and qualify, that's not in the immediate future. We're at a step where we're looking to design, look to be able to understand what the value and the efficacy are there and then get into the point where you do preproduction product and do all the things we've had to do on the protection side.

So I don't want to get people so excited that in the coming quarters, you're going to see that driving a ramp in the military part of our business. What's going to drive the ramp in our military business is more powering ship systems and powering the port and the construction of ships. That's what we see kind of in the very near term. So I don't -- part of why I'm not -- we don't put a press release out about this order and things because I don't want people asking for an update every quarter, every year where we are.

A lot of the technology that we're going to work on for the U.S. military will be at a level of clearance. We're not going to be able to talk about it. So we're wildly excited with inside the company on this win. It's been many years in the making. There's been a whole huge team that's been after it that this has been a big part of their drive and desire to help diversify our offering for the U.S. Navy. But we're really just at a design point. So we think we have the right idea. We think it's a long-term fit for the U.S. Navy, but it will take time to go through all the process steps to eventually get into something in production that delivers real revenue.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Daniel McGahn for any closing remarks.

We're really excited in the company, and I hope that comes through. I think every quarter as we go and be able to put up great numbers again, just bolsters our confidence, the ability to deliver products to great customers. In just 1 year, we've moved from breakeven to meaningful and consistent profitability. We're incredibly proud of that. We believe that's a strong indicator of how the business is scaling and how we're executing across our core markets. We're highly confident in our direction and look forward to building on this progress in the quarters ahead.

The market is enabling extraordinary opportunities for us, and we hope to be able to talk to you about progress in future quarters on those as well. Thank you for your time and your patience with us, and we'll talk to you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the AMSC First Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ms. Nicol Golez, Director of Communications at AMSC. Please go ahead, ma'am.

Thank you, Chuck. Good morning, everyone, and welcome to American Superconductor Corporation's First Quarter of Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are: Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

Yesterday, after market closed, American Superconductor issued its earnings release for the first quarter of fiscal year 2025. A copy of the release is available on the Investors page of the company's website at www.amsc.com.

During today's call, remarks that management may make regarding American Superconductor's future expectations, including financial results, plans and prospects, constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements due to various factors, including those outlined on Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21 as well as our other filings, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements.

On today's call, management will refer to non-GAAP net income, non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release.

With that, I will now turn the call over to Chair, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, Nicol, and good morning, everybody. 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 first fiscal quarter, which ended June 30, 2025, and provide guidance for the second fiscal quarter, which will end September 30, 2025. Following our comments, we'll open the line up to questions from our analysts.

We kicked off fiscal 2025 with accelerated growth. Our results surpassed expectations, highlighting the strength and discipline fueling our business. This was our strongest quarter in years, a clear signal that our strategy is delivering consistent positive results and that the financial leverage we've talked about can happen.

One of the key highlights for the quarter was a request from a customer who asked us to accelerate delivery for a specific project. This boosted our results, reflects the strong relationship we have with our customers and demonstrates the rising demand across multiple markets, especially in the Materials sector.

We crossed a major milestone this quarter. Revenue exceeded $70 million for the first quarter. This is the acceleration we've been signaling over the past months. Total revenue came in above our guidance range, growing by 80% versus the year ago period, significantly driven by organic growth. Our Grid revenue led the way, accounting for over 80% of AMSC's total revenue and growing over 85% versus the year ago period.

Meanwhile, our Wind business posted extremely strong growth as well, up nearly 55% from the year ago quarter. We delivered net income of over $6 million, marking our fourth consecutive quarter of profitability.

Gross margins topped 30%, driven by a combination of higher revenues and increased operating leverage through a near ideal product mix. A key thing to note is that this quarter truly showcased the margin profile and operating leverage we've been working towards. In many ways, it was a near-perfect quarter, one the team feels very proud of, and one made possible by the relationships we have with our customers. We closed the quarter with a strong balance sheet of over $210 million in cash. Simply put, the business really is thriving.

This quarter, the Materials sector was the main growth driver driven directly by semiconductor capacity expansion. We believe this sector growth is fueled by demand for artificial intelligence applications and data center infrastructure. We closed the quarter with a 12-month backlog of over $200 million, up from $160 million the year ago quarter, and a total backlog of over $300 million. Over the past 2 quarters, we brought in an average of just under $70 million in new orders each quarter. This is above the trailing 4-quarter average of over $60 million of new orders per quarter.

We continue to see strength across a range of industries. Revenue this quarter came from a diverse set of sectors. About 1/4 of our sales came from Traditional Energy projects with another quarter from Renewable Energy projects. Materials projects driven by semiconductor accounted for nearly 25%, while military and other industrial sectors made up the remaining portion.

First quarter orders exceeded $63 million and reflected demand across Renewables, Traditional Energy, Materials, specifically semiconductors and mining as well as Industrials and Utilities. Notably, the semiconductor industry is in the midst of a major capital expenditure cycle, and we are seeing the benefits of this.

We see more semiconductor orders on the horizon and more broadly in the Materials sector. I'm including semiconductors in the materials sector along with mining, metals and other specialty materials. Traditional Energy appears to be robust in the coming quarters as well. We feel encouraged by our strong momentum and believe the business is exceptionally well positioned for the future.

Now I'll turn the call over to John Kosiba to review our financial results for the first quarter of fiscal 2025 and provide guidance for the second quarter, which will end September 30, 2025. John?

Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $72.4 million for the first quarter of fiscal 2025 compared to $40.3 million in the year ago quarter.

Our Grid business unit accounted for 83% of total revenues, while our Wind business unit accounted for 17%. Grid business unit revenues increased by 86% in the first quarter versus the year ago quarter. This year-over-year increase was led by organic growth and the contribution of NWL revenue. Wind business unit revenues increased by 54% in the first quarter versus the year ago quarter. This year-over-year change was driven by increased ECS shipments.

Looking at the P&L in more detail. Gross margin for the first quarter of fiscal 2025 was 34%. This is up from 30% in the year ago quarter. Gross margin for the quarter was favorably impacted by increased revenues, a favorable product, project and market mix, which includes beneficial impacts across the business due to pricing increases across our product lines. And lastly, we continue to experience high levels of factory utilization. This was an ideal culmination of events that yielded these elevated gross margins.

Moving on to operating expenses. R&D and SG&A expenses for the first quarter of fiscal 2025 were $18.5 million compared to $11.2 million in the year ago quarter. Approximately 23% of R&D and SG&A expenses in the first quarter of fiscal 2025 were noncash. Our net income in the first quarter of fiscal 2025 was $6.7 million or $0.17 per share. This compares to a net loss of $2.5 million or $0.07 per share in the year ago quarter.

Our non-GAAP net income for the first quarter of fiscal 2025 was $11.6 million or $0.30 per share compared with non-GAAP net income of $3 million or $0.09 per share in the year ago quarter. Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.

We ended the first quarter of fiscal 2025 with $213.4 million in cash, cash equivalents and restricted cash. This compares with $85.4 million on March 31, 2025. In June, we completed a public offering, generating total net proceeds of $124.6 million, including the follow-on option. We generated $4.1 million of operating cash flow in the first quarter of fiscal 2025.

Now turning to our financial guidance for the second quarter of fiscal 2025. We expect our revenues will be in the range of $65 million to $70 million. Our net income on that revenue is expected to exceed $2 million or $0.05 per share. We expect our non-GAAP net income to exceed $6 million or $0.14 per share.

With that, I'll turn the call back over to Daniel.

Thanks, John. During the first fiscal quarter, the business accelerated faster than projected, and the results speak for themselves. The business outperformed.

We saw revenue grow sequentially now for the past 5 quarters. We reported our fourth consecutive quarter of net income. We achieved our eighth consecutive quarter of non-GAAP profitability with more than $10 million this quarter, outpacing even our internal scenarios for the quarter. We showed significant gross margin expansion, and our backlog continues to be very healthy. This was a remarkable and exceptionally strong quarter.

We have sustained an average quarterly revenue above $65 million for the past 3 quarters, elevating our business to a higher performing level. And you can see we are bullish about our expectations that this trend could continue next quarter. We are growing. We are ahead of schedule, and we are executing with discipline and focus. These results reflect our progress in scaling the business, diversifying revenue and driving outstanding financial performance.

We see major tailwinds and long-term opportunities across our core sectors. In 2025, Traditional Energy, led by oil and gas, will see over $1 trillion in capital expenditures. Mining projects have over a $1 trillion global pipeline. Defense spending nears $3 trillion. Renewables will attract over $0.75 trillion and global data centers are set to exceed $0.5 trillion in capital investments. Semiconductors driven by AI and Data demand will see approximately $160 billion in investments in 2025.

Our footprint outside the United States, particularly in Renewables, positions us well to benefit from international investments. In India, for example, Wind capacity is set to double by 2030. These are massive durable tailwinds, and we believe we are well positioned to benefit.

So what's next? We see a strong business continuing in Materials driven by semiconductors. This quarter was exceptionally strong because, as I previously have mentioned, one key customer pulled in systems earlier than expected, highlighting our ability to execute. Even with that pull forward, our outlook remains strong with revenue levels over $65 million a quarter. The guide for our second quarter is better than we communicated for our first quarter.

We also see continued strength and a healthy pipeline in Traditional Energy. We're making inroads into data center infrastructure projects, which we believe could become a meaningful growth driver going forward. It is early days for us here.

Looking further ahead to next year, we see increasing potential in the Renewables market, particularly in India, where the ramp is projected to continue. We anticipate continued strength in Materials and expect Traditional Energy to accelerate even further.

We also believe our Military business could expand. As a reminder, we now serve military needs in 3 key ways: protecting ships, powering critical onboard systems and supporting essential manufacturing capacity at shipyards. Stay tuned for some potential progress here.

In summary, the momentum we've generated has set a strong foundation. We're excited about the future, and we're exceptionally well positioned to capitalize on the opportunities ahead.

Our backlog remains robust. Our orders pipeline shows some large potential orders on the horizon. We do feel several tailwinds potentially pushing the business more rapidly. There is a robust pipeline of acquisition targets that we might be able to add to our product portfolio. We're actively looking at how to best expand our business. We've been looking at both our Grid and Military offerings. We are in discussions with several targets, and we plan to remain disciplined in our approach. 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 to you again following the completion of our second fiscal quarter of fiscal year 2025. Chuck, we'll now take questions from our analysts.

[Operator Instructions] And the first question will come from Eric Stine with Craig-Hallum.

So maybe just to start on the gross margin number. I mean, I believe that's your all-time high number. But I mean, it sure seems like from your commentary that while I think you said nearly perfect, there were no onetime items in there that skewed that. So I guess, first, I'd like to confirm that. But then second, kind of your confidence level that this can be, given the momentum in the business, a 30%-plus gross margin business going forward?

Yes. We've been talking about getting to 30% and above. We posted 30%, I think, before, but I think you're right, maybe not this high. We've talked about getting in the mid-30%s. And as you can see with -- at this revenue level, with this mix, it's possible. So my hope is a lot of the times when we have these conversations on what the potential of the business is, having the proof point, I think, is extremely valuable.

John, if you want to dig into any of the puts and takes in the margin, feel free.

Eric, so to answer your question directly, there are no, what I would say, onetime, call it, nonrecurring events like that, special events. We did have a very strong product mix within our product portfolios and our market mix. So we had, for lack of a better term, an ideal mix within our products, but not per se, like, call it, an inventory correction or something unique in an accounting calculation.

But -- so no, I would say this was just a remarkably strong quarter with -- and I gave you the 4 bullets, right? When you have an ideal -- first, you got to have strong revenue, which gets the factories full. Second, you got to have a good mix, and we had both of those. So it was a great quarter all around when it comes to contribution margin of the business.

Yes. No, that's great. Maybe turning to Wind then. I think last quarter, Daniel, I believe the direct quote was that Inox was on the cusp of a historic volume ramp. Curious, I mean, another step-up in Wind? I mean, does this kind of give you the confidence that, that historic volume ramp is underway? Or maybe the trends you see there, I guess, both on the order front and -- but also throughout the remainder of fiscal '25?

Yes. I tried to be deliberate in what I said that this is something that we expect maybe as early as next year. And why I'm saying that is it gets down to the lead time on product and the demand that Inox is seeing from their customers appears to be growing, which should improve their cash position, which should then translate into the demand to us.

But we try to be very careful and not overly optimistic that something dramatically in their behavior is going to change. But their business seems to be doing very well. They have a tremendous amount of backlog that they're able to either maintain or grow, and they're in a really good position to be able to ramp for their customers.

A lot of what their effort right now is in construction. So getting things constructed and then connected and handed over to their customers is important. And we're there trying to support them as the best partner we possibly can be. We love the relationship with them. It's a well-run company, a great family that's involved in it. And we think that they're really in a great position, not just for the next quarters or year, but for the coming years, we hope.

At least that's what it looks like from how they talk about their business. Things can always change, but it feels really strong at this point.

Right. And your -- and just to confirm, when you talk about a potential ramp early next year, are you talking calendar year or fiscal year?

To me, they're almost the same, right? It's only a quarter off. So I try to -- things in general trend. I don't know what specific quarter we're going to start to see the change happening. But we're at a level now. We've been much healthier than we've been and their backlog is commensurate with the potential higher revenue level for us in that business.

But I think the best part of the whole conversation about American Superconductor is they're one of a series of great customers. They're a piece of the puzzle and a piece of the business. It's not the main driver for the business quarter-to-quarter or for growth year-to-year. It's a business that we want to be able to be present with that. We feel a great responsibility to them to help make their business go, and we're in a much healthier position to do that today than we've ever been.

The next question will come from Colin Rusch with Oppenheimer.

As you look at the growth in the business and the fact that you had high utilization rates here this quarter, can you talk a little bit about, how you're thinking about capacity expansion? And the capabilities that you might want to weave into that incremental capacity either from a design or manufacturing flexibility perspective as you look at taking another step function with the business over the next 3 to 5?

Yes. We're looking pretty seriously at how we can expand capacity, and that could be bringing labor in. It could be adding some additional tooling. As we've said kind of consistently, our manufacturing model is pretty CapEx-light. So nothing that we're thinking is a huge capital investment. But I think as we're mindful of the potential targets for acquisition that we look at, maybe there's some leverage there that could be done where we could also think about expanding maybe in a different way than we've done in some of the most recent acquisitions.

Not that, that would be a driver for it, but certainly, we got to look at any and all options. I feel very comfortable, and John, please comment how you feel incrementally expanding labor, we've been able to do it in the markets that we're in. We've talked about expanding beyond this level of revenue in the past. And I think the capability is still there.

Yes. Just to add to that, Colin. So when you look at capacity, you first have, call it, labor capacity and then secondly, you have space capacity. For us, we're still in the labor capacity constraint, not in the space. So we're really -- for most of our plants, we're very well utilized on one shift. And that's an important note. So we stick -- and we carefully monitor that to not go to a second shift because then you hit a different level of utilization if you trip into the second shift. But we're still on one shift in almost all of our plants.

So the good thing for us is we keep on hiring people within one shift, and we're able to keep it in the existing footprint. At some point, we go to a second shift. And then if that second shift become fully utilized, then we would look at, call it, plant expansions.

And it gives us the leverage like we had in this quarter where a customer says, can you do it faster? And we want to service our customers as best we can. So we had that instance here with this quarter. It's something we tried to get ahead as quickly as we could. And I think it's really a testament to the team that they were able to accelerate some shipments of some pretty large systems, which changed the financial profile of the company. But we try to let our customers dictate what they need and our financials are an output as opposed to a driver for these things. So we have a benefit of a great quarter, but it's really because of some great customers.

Excellent. And then as you look at ways to drive revenue growth, could you talk a little bit about the potential for geographic expansion, if that's a consideration or the potential for increased pricing monetization of the value creation that you guys are providing? Because it looks to me like particularly in some of the higher tech areas, you guys are providing power quality solution that saves not only CapEx, but also reduce the risk on operations for facilities.

Yes. I think both of those levers can be pulled on. So to go to the second one, what we're seeing is the value creation of the combined offering post the series of the multiple acquisitions is greater than the sum of the parts. So we're able to do more, I think, today with what we have than we could have done separately as the different entities. So if the value is higher and you can convince customers that it is, then obviously, pricing can scale with that.

So we try to do that as best we can. It's not always the case, but we're finding more and more in projects. We're bidding in a lot more content per order than we were even a couple of years ago.

So -- and then the second one is international, something strategically we look at and examine. We kind of made a purposeful pivot back to the U.S. a long time ago when we were trying to reconstitute the business grid and really focus on execution at home and build a business, get the nascent business in the Military going, and I talked about the multiple shots on goal there with that one.

So it feels like I think there's more expansion potentially in the U.S. and North America. But there obviously is a lot of fertile ground globally that we could go into in Europe or even Latin America or geographies that we participated in, but maybe haven't really had a full offering from an operational standpoint there.

So that's something strategically you look at, but you kind of need the right situation, and that might be something that through acquisitions help kind of get us there quicker. But that all remains to be seen. I don't want to tell you, Colin, definitely, that's where we're going to head, but it definitely is something that we need to look and consider. And it really then continues to expand the markets we can participate in.

But I think the team has done a really good job of proving what we can do here in the U.S., proving how we can be responsive to customers, proving the value of the technical expertise and the technology itself. And if we can expand the market globally, we'll certainly look at that [ right ] in the coming years.

Your next question will come from Justin Clare with ROTH Capital Partners.

So I wanted to just follow up on the gross margin. I wanted to see if you could share maybe a little bit more detail on potentially what end markets or particular product lines might have driven the higher gross margins in the quarter? For example, does the semi business tend to have higher margins than the corporate average?

And then just as we think through, as you scale revenues here, if you are delivering revenues, let's say, at $70 million or above, would you anticipate gross margins at 30%-plus? Is that kind of a fair assumption here? [Technical Difficulty]

I might have lost you guys.

This is the operator. It seems that our speaker line has disconnected. Please hold while we reconnect.

We have our speaker line to reconnect. Please proceed.

That was a fun little glitch. Can you hear us okay, Justin?

Yes, I got you. Did you hear my question?

Yes, I got you all and I started to answering that and I started to hear music again. So sorry about that. I guess it's so good that there's music in the air for everything that we're doing today.

But specifically to the margin, part of it is materials and semiconductor. There was an acceleration in that for some key projects that we had. And to be very blunt, the content, I'll say -- I won't say the pricing is different, but the content that we shipped was things that, as you put in the period, have a higher margin. But on the total project and you look at them, they're similar to the rest of the business. So it was a little bit of a -- maybe an anomaly or a onetime kind of thing from that standpoint.

But I don't want you to feel like the semiconductor business is substantially different. Most of our projects are about the same margin. So the challenge we have sometimes is there'll be either a push or a pull on a part or a full project, and that may change, and that's partly what we put into the range of the guidance there. So we feel really good about the material part of the business, and we feel great about grid.

You want to comment more specifically, John? You said, you talked about $70 million plus in revenue and 30% gross margin?

Yes. I mean you saw this quarter on north of 70%. We were in, call it, the upper low-30s, 34%, right? Given a normal mix, I mean, of course, there's going to be scenarios where, call it, the opposite happens, a really bad mix. We could be in the upper 20s maybe. But I would say when you're looking at -- if we had a, call it, a normal mix, but just normal, call it, run-of-the mill mix, I would say 30% is a number we should be very comfortable with when we're approaching 70% -- $70 million in revenue.

And we purposely didn't put out a target like that because we knew it was going to happen, and we figured for the audience that the proof is in the pudding. It's better to do it than talk about it. So we don't talk about the targets and where we can go. And I know sometimes people get particularly annoyed with me when they ask those questions. And a lot of it is, let's just show you.

The business really has come a long way from $40 million, $55 million a quarter to now and to the -- we're guiding to above the mid-60s. So it's really a robust business and the operating leverage is there. And we don't have to say it will be there. We can show now that it is.

If you just look at last year, we averaged $55 million a quarter in revenue, and we were at 28% gross margin. So all the evidence is there. I don't get too worked over any one quarter. This was a great quarter. We're proud of it. But when you look at the business over a longer period of time, when you look at this business at the end of the year, and if we were pushing $70 million a quarter for all 4 quarters, I mean, we're going to have a good result, no question.

Yes, certainly. And yes, it's definitely good to see. I guess then maybe just shifting over, you had talked about inroads into data center infrastructure projects. Just wondering if you could give us an update on how you're pursuing that market? Are you in conversations with data center developers? Or is it primarily with utilities or EPCs?

And then just trying to think through, would your products be more likely to be suited at the substation? Or do you think there are opportunities within the data center infrastructure within the building that are areas that you could pursue?

I don't want to be trident. So the answer to everything you said is yes, but I think the answer is, yes, and we're trying to figure it out. What we're finding is that the EPCs, the end customers, they're clamoring for capacity. And I think what we figured out is I think we have something that works for them at the substation level.

Do we have something that fits inside? It looks like we might. But you ask me, when we'll see realizable revenue for that? It's not in the coming quarters. So I want to be careful. I don't want people to get overly excited that, hey, this is going to impact you in the next 6 weeks, right? We're now thinking in the next 6 quarters or so, how can we further impact the business.

Could this have some meaningful piece to it? Yes. But again, just like we try to toot our horn with diversity, we're trying to build in all these markets in parallel. I think there is a tailwind on the Grid side with data centers and AI, and we're trying to do our best way to navigate it and try to sell what we think is some value to what customers -- to some critical customers need today. Some of these are EPCs that know us really well, which makes the conversations very straightforward. I'll leave it at that.

Again, don't feel like this is going to dramatically change quarter-on-quarter. The kind of acceleration that we had this quarter is really just trying to help a customer with their immediate demand and getting their projects to meet a certain timetable. So most of our lead times on products are 9 months plus. In some cases, it can be 15 months plus.

Got it. Okay. And then just one more. I wanted to just check in. What do you see as the key factors that are enabling your success in the semiconductor market? Is this proprietary technology? Is it the breadth of the portfolio that you have? Are you able to put together a solution that is unique here given the wider portfolio that you have? Maybe you -- could you just speak to what's enabling you to win there?

Yes. I think, again, just to answer yes to all the different pieces that you're saying there. I think it's more content, it's more valuable content, it's more proprietary content. I think we have something that is unique in the market. I think that we've been able to hone our chops in getting projects and bigger projects and now you're starting to see more significant capital spend in the semi space, but also broader in materials and mining and metals and the processing of all those materials.

So most of those processes are very electrically intensive, which means power quality, power resiliency and power supply are all critical to the operation. So we're now able to sell, what I'll say, a more complete solution, and we're benefiting from that.

The next question will come from Tim Moore with Clear Street.

Impressive execution on your strategy and the profit margin expansion. Part of our investment thesis when we launched [ coverage ] recently was really your operating leverage step-up of absorbing the fixed costs and adding acquisitions helps to really drive higher incremental margin as seen in the June quarter you just reported.

So one question I actually have is, if I back out our rough estimate of possible sales contribution from acquisitions, I mean organic growth just seems phenomenally strong, maybe 35% in the quarter -- the June quarter. What do you think is -- looking at your backlog and the lead times you mentioned and conversion and where they stand, what do you think might be a realistic organic sales growth pace for this year? Is 20% possible on the organic growth side as you [ anniversary ] the acquisitions?

You asked fantastic questions, Tim. So I think your thesis got proved pretty quickly in the leverage. So kind of kudos to you to come in and say that's what you thought could happen to us, and now it's happening. So I -- and then you're doing the reverse math, and I had the answer in case -- and we grew quarter-by-quarter by almost 15%. So I don't want to say I simply don't know.

We've been growing at 20%, 25% when we look at kind of the organic business. Some quarters, it might be 15% -- some years, it might be 15%. It feels like today that we're going into a bigger market. It feels like there's a lot more investment in the areas that we're seeing benefit from, and I tried to go through a bit of that in the prepared remarks. We're just trying to hang in here with key customers and be able to deliver as rapidly as we can. And that's why John can answer the questions about capacity pretty succinctly because these are things that we're thinking about every day.

I don't want to dodge your question totally, Tim, but I don't really know how much it could be, but we've demonstrated we can do 20% to 25%. And organic, I guess, we've now demonstrated we can do 35%. If the markets continue to hold, the business wants to be able to respond with the growth that the customers drive us to. But again, it really comes down to what the offering is, the proprietary nature to it and these key customer relationships. We've gotten designed in with so many industries now that it gives us multiple shots on goal and more diversification in the markets that can drive us.

That was actually very helpful. I appreciate the color. Another question that we have is, obviously, the strengthening of the U.S. electrical grid has been a theme in the last couple of years. But from what we're seeing in some of our coverage, it's really accelerating more since the April executive order, maybe by the administration. Have you seen kind of any more incoming calls or inquiries just for better awareness of your brand and your solutions out there for grid reliability and efficiency? Have you kind of seen an uptick on that in the last couple of months?

Yes. In general, I'll say yes. I think what you're seeing is a signal in the market that maybe there's a bit more stability in the policy that can help drive solve some of the problems that have been with the grid now for us -- for the better part, I'll say, of a decade that are becoming more exacerbated as our general thesis on why we're so relevant is that the grid is not designed to do what we're asking it to do. And in many ways, we try to step in and fix incrementally the existing grid to make the next project work, be it on the power generation side or be it on power consumption side or just in the grid itself, hardening the grid, making it more robust and making it more resilient.

So in a lot of ways, I think the thesis is our time has kind of come here. This is the investment in the grid that people have thought needs to happen, should happen. And I think the demand for electricity is really what's ultimately driving that investment. And as long as that continues to persist for the coming years, we want to be in a position to take best advantage of that, that we can.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Daniel McGahn for any closing remarks. Please go ahead, sir.

This quarter really has been exceptional. Our first quarter performance confirms we're growing faster, more profitably and with greater scale than ever before. Our growth reflects the strength of our business and the market demand for our products and services. We are prepared to capitalize on the growing demand for energy and the need for a stable grid to support it.

We've delivered another outstanding quarter, and we can see that the fundamentals of our business are well grounded. The acquisition of NWL has exceeded our expectations. This is truly an exciting time here at AMSC. We approach the remainder of fiscal 2025 with confidence in our team and business, and thank you all for listening today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.