American Superconductor Corp 2027 Q1 Earnings Call

Please go ahead. Thank you, Amy.

Good morning, everyone, welcome to American Superconductor Corporation's first quarter of fiscal year 2026 conference call. I'm Nicol Golez, AMSC's Director of Communication. 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 first quarter of fiscal year 2026. 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 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 31st, 2026, which the company filed with the Securities and Exchange Commission on May 27th, 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 for 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, 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 30th, 2026, and provide guidance for the second fiscal quarter, which will end September 30th, 2026. Following our comments, we'll open up the line to questions from our analysts. We start off the new fiscal year with our sights set on growth. We have officially surpassed $90 million in quarterly revenue, which represents 30% growth over the year-ago quarter. Our Grid revenue led the way at over 80% of AMSC's total revenue, which grew over 25% versus the year-ago period. Wind was nearly 20% of our business and grew 45% from the same period last year.

Our track record now shows that we have delivered three consecutive years of non-GAAP profitability and two consecutive years of GAAP profitability. We closed the quarter with a strong balance sheet of over $150 million. Our revenue this quarter reflects strong diversification across our core markets. Total revenue came from roughly 30% from renewable energy projects, 20% from traditional energy, 20% from materials including semiconductors, 20% from utility projects, and nearly 10% from military projects. We saw exceptionally strong bookings for the quarter. Total orders now climb to over $130 million, reflecting the strong market tailwinds behind our business. A major orders highlight includes the recently announced $25 million order from a North American utility to support a large mine expansion. I'll share more details on this later. We have a robust 12-month backlog exceeding $300 million, and a total backlog of over $400 million.

I'll turn the call over to John Kosiba to review our financial results for the first quarter of fiscal 2026 and provide guidance for the second quarter, which will end September 30th, 2026.

John? Thanks, Daniel. Good morning, everyone.

AMSC generated revenues of $94.1 million for the first quarter of fiscal 2026, compared to $72.4 million in the year-ago quarter. Our Grid business unit accounted for 81% of total revenues, while our Wind business unit accounted for 19%. Grid business unit revenues increased by 27% in the first quarter versus the year-ago quarter. This year-over-year increase was led by the contribution of Comtrafo. Wind business unit revenues increased by 45% 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 2026 was 26.3%. Included in cost of goods sold in the first quarter was approximately $1.5 million of purchase accounting and non-cash adjustments related to Comtrafo. This had an impact of approximately 160 basis points on the quarter.

We also invested in additional direct labor in Brazil to support the expected revenue growth as a result of the strong bookings over the past two quarters. This investment does lower a factory's productivity until they become fully integrated into the manufacturing process. Lastly, gross margins for the quarter were impacted by an unfavorable product mix. We do not anticipate a similar product mix next quarter. Moving on to operating expenses, R&D, and SG&A expenses for the first quarter of fiscal 2026 were $22.5 million, compared to $18.5 million in the year-ago quarter. Approximately 23% of R&D and SG&A expenses in the first quarter of fiscal 2026 were non-cash. Our net income in the first quarter of fiscal 2026 was $9.5 million, or $0.21 per share. This compares to a net income of $6.7 million, or $0.17 per share in the year-ago quarter.

Our non-GAAP net income for the first quarter of fiscal 2026 was $7.6 million, or $0.17 per share, compared with non-GAAP net income of $11.6 million, or $0.30 per share in the year-ago quarter. First quarter GAAP and non-GAAP net income included an $8.1 million adjustment to contingent consideration. This is not a taxable item. It impacted the recognition of tax expense through the FIN 18 approach required of interim tax provisions. A with and without analysis of the FIN 18 tax provision identified a $2 million non-cash tax expense recognized in the quarter. Any tax expense related to a change in contingent consideration within the quarter is not forecasted or included in our guidance. Please see a press release issued last night for a reconciliation of GAAP to non-GAAP results.

We ended the first quarter of fiscal 2026 with $153.1 million in cash equivalents, and restricted cash. This compares with $147.6 million on March 31st, 2026. We generated $16 million of operating cash flow in the first quarter of fiscal 2026. Within the first quarter, we experienced strong cash milestone collections on several projects, coupled with initial receipts generated from our recent orders. As planned and pursuant to the SPA of the Comtrafo acquisition, we purchased a third factory in Brazil within the quarter for a total cost of approximately $7.4 million. This factory solidifies the capacity necessary to support our growth plans for Comtrafo. I'll turn into our financial guidance for the second quarter of fiscal 2026. We expect that our revenues will exceed $85 million. Our net income on that revenue is expected to exceed $1 million or $0.02 per share.

We expect our non-GAAP net income to exceed $8 million or $0.17 per share. With that, I'll turn the call back over to Daniel.