American Superconductor Corporation Stock

Good morning, and welcome to the AMSC 2026 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, Amy. Good morning, everyone, and welcome to American Superconductor Corporation's First Quarter of Fiscal Year 2026 Conference Call. I'm 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 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 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, 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, 2026, and provide guidance for the second fiscal quarter, which will end September 30, 2026. Following our comments, we'll open up the line to questions from our analysts.

We started off the new fiscal year with our sights set on growth. We have officially surpassed $90 million in quarterly revenue. This 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've delivered 3 consecutive years of non-GAAP profitability and 2 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 climbed 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. We have firmly set our sights on growth. We believe this puts us in great position for fiscal year 2026.

Now 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 30, 2026. John?

Thanks, Daniel, and 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%. Wind 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 2 quarters. This investment does lower our 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 compared 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, but 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 noncash 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 our 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, cash equivalents and restricted cash. This compares with $147.6 million on March 31, 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 SBA 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.

Now turning to 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. Dan?

Thanks, John. $16 million of cash generated in the quarter. That's impressive even to me. It really shows kind of what the business can do. There's definitely a drive here that's happening that we're going to talk through the call. Our revenue results for the first quarter surpassed expectations. However, it does make the second quarter revenue challenging as we accelerated some deliveries due to customer demand in the first quarter.

Our order momentum shows we're well positioned for growth. The $25 million order from a North American utility represents the largest individual order for a mining project in our company's history, setting a new company record. We expect to deliver this turnkey solution during our next fiscal year 2027.

We do have our sights set on other large orders in our pipeline. This order is significant because it demonstrates the financial and operational leverage of our integrated power solutions. Even without this quarter's largest order, we brought in over $100 million in new orders. This outperforms our last fiscal year's average of roughly $70 million a quarter.

Under this contract, our team is handling the design, engineering, installation and commissioning of a system that combines our proprietary modular STATCOM technology, our metal enclosed capacitor banks as well as our shunt reactors, a 138 kV power transformer, the associate switchgear to protect the system from the network as well as additional protection and control equipment.

Just to make a note, if we had sold this as a single product solution, this order would be about maybe $4 million to $5 million. Today, we're able to offer a combined solution that reduces project complexity, simplifies execution and could avoid costly future grid upgrades. This expands our revenue for this type of project [ by ] factor of 5. This is an enabler for potential future growth in materials and utility markets.

This is what I've been talking about when I say more content or more product per project. We believe the long-term visibility of our business has never been stronger. The materials sector, which includes mining and semiconductor projects generated about 1/3 of our total orders. Traditional energy demand followed with about 30% of total orders driving the business, while renewables, utility and other industrial applications each represented about 10% of total orders, and military represented just under 5% of total orders.

We do see major tailwinds and long-term opportunities across our core sectors. In the semiconductor market alone, we're working with a significant project pipeline. Global semiconductor capital expenditures are jumping 20% to $200 billion, led by expansions from giants, including Micron. These global expansions help drive our long-term pipeline.

Simultaneously, the global mining project pipeline has reached $1.2 trillion with over $250 billion actively under construction. Top global mining firms invested nearly $80 billion in 2025, forecasting to grow to $82 billion in 2026, creating more potential demand for our solutions.

Traditional energy investments are expanding. In the U.S., the administration's push on more conventional fuels, which drives demand for many of our core products remain robust. For 2026, projected investment in fossil fuels is expected to be around $1.2 trillion out of a total of $3.4 trillion in global energy investment, rising approximately 3% after a slight dip in 2025. Oil and gas upstream received nearly 50% of these investments with over $0.5 trillion per year.

The renewable energy sector, we see the Indian wind market is expected to double capacity by 2030. And globally, it's projected that wind capacity will nearly double and solar will more than triple by 2030. We are capitalizing on massive expansions in the utility business. U.S. utility capital spending is projected to exceed, again, that number again, $1.2 trillion over the next 4 years. This is driven by accelerating grid demand from data centers, AI, cloud computing and the like. We're already delivering solutions to utilities facing these shifts.

During the first fiscal quarter, the business accelerated faster than anticipated. The business is in a great position and has reached the new level with quarterly revenue greater than $90 million and a very strong cash position. We believe fiscal year 2026 could be even better than fiscal year 2025. We see significant tailwinds in the material space and the traditional energy market.

Strategically, we're going after a number of key markets, all of which have significant capital being invested in them. And at the same time, we're expanding our offerings and capacity in Brazil and South America. The team is very excited about our growth prospects.

Looking ahead, we're excited about what comes next. We see strong demand in the materials sector, where we're pursuing semiconductors and mining opportunities. We also see continued strength and a healthy pipeline in the traditional energy sector. And we're advancing on additional data center opportunities as well. Together, we believe all of these opportunities combined position us well for continued growth.

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 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 2026.

Amy will now take questions from our analysts.

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

So I know -- I mean, you've obviously built this platform to build out those capabilities. You mentioned the multiplier effect in this order in mining in support of the utility. I mean, do you feel like -- or what's your confidence that these types of large orders become more of the norm for you? And then curious, when you think about those large orders, I mean, are they more skewed to this type of application, whether it's mining in support of the utility? Or how should we think about that?

Yes. I think it's early for us to say what frequency they'll come at. We have a number in the pipeline. It's what we've been kind of working towards. It really is the culmination of the strategy of the acquisitions that we've done that we can now offer a combined set of complementary technologies that provide power support and power conditioning support to utilities and the material space.

Those are the 2 main areas that we're marketing into, and that's where we see traction in the pipeline. We talked in the past about average order size. This hopefully can drive that upwards. I don't see these as regular events per se. There'll still be projects like we've done all along where we're doing cap banks and filters together or we're adding in the STATCOM technology with that or providing a power supply for a chemical plant or what have you.

But when those opportunities present us, which is like -- this one -- this is a customer that we know well, that knows us very well. And they really asked us, can we do more for them? They like what we've done. They like the service we provide, and they've kind of pushed us in this direction. They see us combining all this stuff together and say, "Well, can you take on the full project." So this is the first time we're doing that. I hope that we can do that again. But again, I don't see that as where the majority of the business is going to come from. But it is a really nice accelerator that we now have the potential to take advantage of when the customer wants us to do it.

At the end of the day, we're going to be driven what our customers want. In part, that's why the Q1 revenue results is so high. Customers needed product faster. It's really a testament to our capability to deliver on the manufacturing and operations side, and we're able to do that. So much of our business comes from a few handfuls, a couple of dozen key customers from us. So we want to make sure that we're moving in a direction that helps them derisk their projects. And that's what we're doing, and we're benefiting from it.

And when you talk about -- just to confirm, you talk about the customer realizing your capability is one that you know well. Are you referring to that customer as the ultimate mining customer or the utility customer that you are supporting for this project?

In almost every case, it's both, right? There's almost a triumvirate of constituents we have to serve. There's the engineering procurement construction company, there's the utility and then there's the end user of the power, in this case, the mine. So we work very much in conjunction with the mine, but really driven by the utility because what they're worried about is protecting the grid and making sure they have enough power available to the mine as they expand their capacity.

So we'll have projects where 1 of those 3 will contract with us, but all 3 are usually at the table trying to drive what the capability needs to be put in place. And that's where we excel. It's really -- we're an engineer first culture in so many ways that we want to make sure we can conform a configuration of a combined offering that really meets what the customer is asking for.

Okay. And then maybe last one here, just digging into the outlook here by segment. I mean, first of all, a nice step-up again in Wind. I mean is it too early? Or do you think this is potentially a new level? And then can you just clarify or quantify maybe the grid orders that were pulled forward into Q1 from Q2?

So on the Wind side, it feels a little bit like an acceleration, but then that always needs to be told, if they pay timely and get [ sets ] to them. In this quarter, they were pushing very hard to get some extra, and we were able to deliver that. I can't always promise that that's the case, given the lead times that we have on our end and with the supply chain.

But the customer relationship really has never been stronger in India with Inox. And we want to do everything that we can to support them as they ramp. They're really great people. It's a really well-run company, and we want to make sure that we're a good partner in their success. So when we're capable, we certainly will try. It's always, Eric, as we say, it's dependent upon the payment, but it feels like their production level is at a new level, and they still need to ramp that further to take advantage of what they already have in backlog, which is very significant. I think it's still in excess of 3 gigawatts -- 3.3 gigawatts and 3.2 gigawatts of demand that they have. So they're kind of at a high level for that. And as they build their projects out, we want to make sure that we're able to deliver timely.

The other part you were asking about the outlook for the Grid side. Is that right?

Just quantifying what you pulled into Q1.

So there were -- some of these contracts will have multiple units to be built. And sometimes a customer will say, "Well, we need the next one or we need the next few." And our answer is always, sir, yes, sir, that's what we're here to do if we're able to.

So I wanted to kind of telegraph clearly, just do the math, we were quite a bit higher than what we had guided to, and that's going to create a little bit of a dip on the revenue side because you're basically pulling revenue forward. So if you average the guide of what John said for Q2 with the result for Q1, that kind of puts us at a good level that the backlog at least leads you to believe that, that should be sustainable.

But again, it really depends upon customers. If customers are ready to receive and they want things faster, we do everything that we can to be able to make that happen. But the converse is true. Sometimes other equipment hasn't arrived on time and the customer says, can you wait 2 months or something? And we always want to be able to conform to what our customers' needs are. So that sometimes gives us some uncertainty with how we guide business because as we get bigger, there's a lot more customers involved, there's a lot more projects, which means projects can move in and out. I don't know if that was entirely helpful for what you're asking, but I try to give you some color that helps.

The next question comes from Colin Rusch at Oppenheimer.

Can you talk about the performance advantages and some quantification of how we should think about that relative to some of the other offerings with this turnkey solution that you were able to deliver or at least book here for the Utility?

Yes, there's kind of 2 veins for this. One is risk and the other one is data and information. So the risk side is getting everything delivered timely, all coming quality tested, things that work together, things that complement and are compatible with each other. And then ultimately, the controls and have a lot more common data coming from us as a single vendor.

So those are really the 2 main features that the customers like that they can better control their risk. It means that the timetable is derisked to a certain extent for the customer because we're able to deliver on a certain cycle, our products. And then the way things are designed, what we've noticed is that they don't have to then plan for upgrades or certain spare parts or things from multiple vendors. We try to take care of all that with the customer in mind.

From a performance standpoint, like power factor and things like that, there are some things that we can do. I think we're going to learn and get better at that. I just think this is an important inflection point for the company because our scope is vast. And either we're going to make the products or we're going to source some of them, but it also gives us opportunity to understand what other products are out in the marketplace that complement what we do that maybe eventually can be part of the product portfolio, either -- as we've done before, we either develop or we find interesting companies that fit our culture that can fit.

So there's a lot of goodness that comes out of this project, assuming that we're successful. It's very important for us to be successful, but this is a customer that's trusted us for years.

Excellent. And then just in terms of the Comtrafo integration, I had 2 questions here. One, can you give us an update on the qualification for the transformers in the North American market? And then also, just try to give us a sense of how much cross-selling you've been able to do and Latin America so far? And how we should think about that potentially impacting the potential order flow as we go through the next couple of years with the traditional products being sold through their channel?

Yes. I'm not really deviating from what I said upon the acquisition. The first year, we're really focused on growth in Brazil. There's tremendous opportunity there. There's an absence in the market on the sizes that we're now delivering, and that creates a really good opportunity for us to ramp our capability/capacity there to service that market. That's really the reason we like Comtrafo. Besides we like the people, the product works really well.

There are efforts to expand in Latin America. It's more of these projects, maybe not as big as this utility one, but that combine the capabilities of the overall combined AMSC. So I'm hoping that can start to bear fruit, we'll say, in the second year. The third year is, I think, a lot of U.S. investors are really focused on because we get very myopic on our own market. I get that. But to us, profit is profit and a good customer relationship anywhere in the world if managed appropriately, really can be a long-term partnership.

But to finish the question with North America, part of this project is, we designed the specification in a way where we could potentially use Comtrafo in it. So if we're able to do that, we don't want to necessarily take on additional risk, but we're going to understand kind of really where we are as early as next year. There are other projects that customers are pushing us to bid on as a transformer supplier in North America.

But again, for us, the customer comes first, we need to make sure we can deliver the product at the right price, the right performance that they need, because the hope is it becomes a longer-term relationship. These are not one-off. A lot of the cultural change that AMSC brings to its acquisitions is this long-term customer relationship with a lot of service, with a lot of touch to the customer. So they understand we're somebody that they can rely on and count on for years to come, not just for one single project.

So I'm optimistic, Colin, that at some point, we can talk more specifically about project in North America, but that's not going to happen this quarter or next or probably the quarter after. Originally, I said it probably would be in the third year. I still think that -- I think the risk of that is going down, but it's more and more likely that, that's going to happen based upon the efforts. I think the risk of us entering Latin America more in the second year, the risk of that has gone down as well.

The team is really focused on this. It's one of the main avenues for growth is that having the transformer allows you to look at the electrical system at a different point, some cases earlier and that allows us to think about how we can engineer the project in a way where the performance from our products becomes even more valuable. And I think that's really the magic, and that's going to unfold over the next 2 to 3 years.

The next question is from Justin Clare at ROTH Capital Partners.

So just wanted to follow up. Did you disclose the percentage of orders that were data center related in this quarter? And then just given the size of the backlog here, so record backlog, how should we be thinking about the conversion rate there relative to historical trends? Any changes given the order mix? And just curious because there's a meaningful emphasis on speed to power in the data center part of the market. So if you could speak to just how those orders might convert relative to other products in your portfolio?

There's a bunch of things on the data center side that we're looking at, that we're bidding on. I think that there'll be an acceleration maybe as soon as this year in that space for us. However, in this order bucket, there was not a data center order in there. For the backlog, I think simply, the message is we're kind of derisking our plan. We're derisking your model that it just makes the certainty and likelihood stronger, particularly in the near term, we think about the next 2, 3 quarters, given where we are with lead time.

Average lead times are still about the same, about 9 months in aggregate. There's part of the business that's faster. There's part of the business that's slower. I think what we're going to probably see over the next 2, 3 years is our lead times for the entire business probably get longer simply because I think the longer lead time business is going to be where the bigger projects are going to come and more revenue intensity is going to come.

So, again, I think the backlog gives us a good situation where we derisk what we're hoping to do. An order that we generate today typically isn't going to affect the financials for 3, 4, 5, 6 quarters out.

Got it. Okay. That's helpful. And then I may have missed this earlier, been switching between calls, but orders were led by the utility sector mining developments. Wondering if you could speak to kind of what is changing that is potentially driving that uptick in the orders for that sector right now? And then remind us what the solution is that you're able to provide to the customers in that segment.

Yes. When we talk about materials, it could be chemicals, but it's principally mining and processing of mines minerals and semiconductor. So we see significant investment in both. We see deeper and more trusted relationships with mines. And with semiconductor fabs, we see a growing pipeline that's getting, I'll say, less risk to it and more intensity to it, meaning larger orders and larger pipelines.

It really comes down to the trillions that are being invested in mining, this whole premise that the rest of the world needs to invest in a bunch of different minerals because much of that source is coming from China. So it's a risk reduction and it's a capacity expansion that's happening globally that we're taking advantage of. And the same thing with semiconductor. It's just a smaller version of the same story, which there's a drive to reshore manufacturing capability here in the U.S. but also throughout Southeast Asia.

Again, it's really competing with China. So our investment thesis is, as this money gets invested outside China, how do we take advantage because so many of these processes depend upon electricity, either the level of power being commensurate with a design or the power quality being regulated to a level that maybe we're the only ones that could provide. So we see mining, we see utility and we see semiconductor as all areas that have strong tailwinds that should help us deliver future growth.

The next question comes from Tim Moore at Clear Street.

Nice revenue growth in the quarter, and appreciate you clarifying the timing of that pulling up the order in the June quarter, probably out your September quarter that even sets things. So one thing I just want to follow up on was the capital expenditures. I recall, John mentioning the third factory in Brazil, I think it was a little bit over $7 million. Do you expect to spend on another factory this year? Or do you think the bulk of the CapEx is kind of done for Brazil this year when you do the equipment by the end of this month?

Tim, John here. So for the quarter, we invested about $10 million total in CapEx, about $7.5 million of that, give or take, was the building and call it another couple of million on additional build-out to help support Brazil. We don't anticipate any other building-related capital expenditures.

Yes. The building was part of the transaction. It just occurred in a later period because there were certain restrictions and things that had to be examined and removed. So it's really the tail end of a cost that I would say is related to the transaction. It was planned, it was contemplated, and it just happened to happen. The good thing is it happened in the quarter with really strong cash flow.

Good. No, I like it. I was just waiting for it.

Just so we're clear, too, for everybody. There is no additional -- we paid for that building with the cash flow in the quarter. There's no additional liability with that building.

The additional CapEx that would be spent in Brazil really is to focus on tooling and capacity, and we're going to modulate that relative to the demand. And what we're finding now is that the demand is stronger than our capacity, and we need to try to catch up. Part of the math that John went through is, we're hiring as fast as we can, and we're investing in tooling as fast as we can because we believe there's a ramp further coming in Brazil.

That's the main reason we bought Comtrafo. The main reason they were excited to have us involved is because of our demonstrated track record in expanding factories. And we think it's a great cooperation between the now broader AMSC to go after this wonderful opportunity in Brazil.

That was great to see. I'm glad it happened in this quarter. I was just waiting for this fiscal year and glad it was earlier because of the demand there. Just my other question is, you're sitting on nearly $150 million of cash. Are you waiting for -- to get to a certain point on integration of Comtrafo before maybe you pursue another acquisition? And is there any kind of pockets of grid capabilities that maybe you'd prefer in your pipeline or funnel of sensible targets that you're considering?

Yes. I don't want to telegraph targets because we're in discussions with a bunch of different companies. We've become known as a good acquirer. We treat the owners well. We treat the company well. We really try to find a way to get at this cultural thing, which I talked about, which is servicing the customer in an exceptional way.

We have a great cash balance. We need to continue to digest Comtrafo and get all that working before we consider going and doing another one. I don't feel like we have to do another one on a specific timetable. But if we see something that comes up that we think fits, is another piece to our puzzle that we're trying to solve for customers, then we'll go do it. This large utility order gives us a look at other equipment that get built at the substation level alongside ours. They may be avenues we want to pursue.

But I usually don't telegraph where we're going to go because it makes things in the market more expensive to us as they know they're more and more important to us. So at the end of the day, what we're trying to do is build a larger company that's more resilient, has less variability in the profit-making capability, and we think that translates into more stability for our customers and more value for our shareholders.

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

Thanks, Amy. We really see major tailwinds in materials, including semiconductors, traditional energy and utilities. And we're driving to expand our capabilities in Brazil as that market is ramping up as we had hoped. It has been a great and exciting first few quarters in Brazil, and we look forward to future financial impact because of that acquisition. And I hope the tone that we're conveying today is with great optimism. The order book really moves us to another level. And then we look to try to continue to be in a position to grow in the longer term. Thank you, everybody, for your support and your attention today, and I look forward to talking 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 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.