American Superconductor Corporation (NASDAQ:AMSC) Q2 2023 Earnings Call Transcript

John Kosiba: Yes. I mean — so we don’t guide to margins, so I want to be careful on that. But I will say — what I will say is that if you look at what I explained for the gross margins, one of them is we had a — we’re starting to see the impact of our price increases. Well, that’s kind of — in theory, that’s going to continue. We did have a very strong service revenue this quarter. We put a lot of efforts to do that. That wasn’t by accident. So to the extent we can continue to deliver on a strong service component of our total revenue, that’s going to help our margins as we move forward. And then lastly, as our margins overall, our product mix changes, we are seeing strength in our best-performing product lines. So to the extent we can do that, we’re going to continue to see strong gross margins. To comment on your Neeltran, surely, as we shift off that backlog, that surely is having an impact on our margin growth.

Daniel McGahn: I think, though, Eric, to be very blunt with you, we’re going to stop talking about either the acquisitions. They’ve been integrated, they’re working. Everything is behind us that we have. We really like the business, how it sits today, how it complements each other. We like the constituent components and the team is now selling everything as a full solution. So I think that mission accomplish with trying to get both of these pieces of the business becoming part of the main part of the business. So going forward, we’re really just focused on how do we grow grid, how do we help continue to support our wind customers. And hopefully, we’ll see some wins in the future as well on the Navy side and more cities for REG for sure.

Eric Stine: Okay. That’s helpful. And maybe last one for me, just on wind. Obviously, another good quarter. I think last quarter, you had talked about that the — that this is maybe a level to expect for the next several quarters and that the next step would come when you start to get ECS orders for the 3-megawatt platform from Inox. Is that still the way that we should think about things here going forward, both near term and then longer term?

Daniel McGahn: Yes. I think if you continue to see the orders come from Inox, you see steps forward, not backwards. You see the potential for growth. They were very positive on their most recent call about where they are with the 3-megawatt platform. They seem highly excited about it, probably even more than they were 3 months ago. So we will work with our constituency, including you, you’ll see, if we get orders, we’ll certainly look to announce them or mention them on calls or what have you because we know they’re important to people seeing progress. But yes, we are at a different level in wind. And then given, again, with the backlog, it’s able to support the overall business, as I said earlier.

Operator: [Operator Instructions]. Next question will be from Justin Clare, ROTH MKM.

Justin Clare: So I guess the first one I wanted to ask about is you did talk about the gross margins, where if you’re at a level of, say, $35 million in revenue, 25% margins are an expectation or a reasonable expectation. As you move to higher levels of revenue, if you get to 40% or above, can your gross margin continue to expand in that type of scenario?

Daniel McGahn: Absolutely. That’s — we’re trying to get leverage. We want to drive the top line disproportionately to the cost line. So we think there’s a great deal of leverage in the business. We haven’t put out just on any numbers. We’ve kind of put this out. John has mentioned in the time period of it wasn’t that long ago. And we’ve been able to make that. I know probably people are going to now say, well, what’s next and where do you go? I think the overall probably theme what you guys are after is the sustainability. And I think it’s in the backlog. The pricing is there. We’re doing a great job on the service side. We’ve been able to see robust revenue across the product line. So we’re very happy and very pleased with where we are, and I believe where we’re going to go next.