American Superconductor CEO Discusses F2Q2010 Results – Earnings Call Transcript

American Superconductor Corporation (

AMSC

)

F2Q2010 (Qtr 09/30/10) Earnings Conference Call

November 2, 2010 10:00 AM ET

Executives

Jason Fredette – Director, Corporate Communications

Greg Yurek – Founder, Chairman and CEO

David Henry – SVP, CFO and Treasurer

Daniel Patrick McGahn – President and COO

Analysts

Colin Rusch – ThinkEquity

Jesse Pichel – Piper Jaffray Companies

Paul Clegg – Mizuho Securities USA, Inc.

Carter Shoop – Deutsche Bank

Carter Driscoll – Capstone Investments

Vishal Shah – Barclays Capital

Theodore O’Neill with Wunderlich Securities

Ben Schuman – Pacific Crest Securities

Jim Ricchiuti – Needham and Company

Stewart Bush – RBC Capital Markets

John Hardy – Gleacher and Company

Presentation

Operator

Good day, everyone, and welcome American Superconductor’s Second Quarter Conference Call.

(Operator Instructions)

Compare to:
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With us on the call this morning are American Superconductor’s Founder and CEO, Greg Yurek; Senior Vice President and CFO, David Henry; and Managing Director of Corporate Communications, Jason Fredette.

For opening remarks, I would like to turn the call over to Mr. Jason Fredette. Please go ahead, sir.

Jason Fredette

Thanks, Natasha, and welcome to the call everyone. Before we begin, please note that various remarks management may make on this conference call about American Superconductor’s future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by such forward-looking statements, as a result of various important factors, including those discussed in the Risk Factors section of our annual report on Form 10-K for the fiscal year ended March 31, 2010, which is filed with the SEC. These forward-looking statements represent the company’s expectations only as of today and should not be relied upon as representing the company’s views as of any subsequent date.

While American Superconductor anticipates that the subsequent events and developments may cause the company’s views to change, the company specifically disclaims any obligation to update these forward-looking statements.

I also would like to note that we’ll be referring on today’s call to non-GAAP net income, or net income before the amortization of acquisition-related intangibles, restructuring and impairments, stock-based compensation, other unusual charges and any tax effects related to those items. Non-GAAP net income with a non-GAAP financial metric, a reconciliation of non-GAAP to GAAP net income can be found in the press release we issued and filed with the SEC this morning on Form 8-K. All of our SEC filings can be accessed from the Investors’ page of our website at amsc.com.

Finally, I would like to mention that we’ll be taking part in the Citigroup Small and Mid-Cap Conference in Las Vegas and the Jefferies & Company to Clean Tech Conference in London, both of these events will take place on November the 16th, and the Jefferies event will be webcast, more details on that webcast will be available next week.

With that, let me now turn the call over to CEO, Greg.

Greg Yurek

Thanks, Jason, and good morning to all of you, who have joined us on today’s call. Before I begin my comments, I’d like to note that Dan McGahn, who was promoted to the position of President and Chief Operating Officer in December 2009, is with us on the call today.

Dan has done a terrific job in his new position over the last 10 months. In the question and answer period later in this call, I may call on Dan in order for you to get his perspective regarding certain questions.

Now, let me review some of our key results and provide some insights regarding our future directions and forecast. In the past few months, the past few months have been particularly eventful period for our company. Most importantly, the second quarter, we celebrated the coming of age for Superconductors by booking the world’s largest high temperature superconductor wire order.

I’ll discuss this seminal event and other key highlights in more detail in just a moment. But first, here are the high points on the financial results.

The industry continued at solid performance in the second fiscal quarter, achieving its 15

th

consecutive quarter of revenue growth while also generating record earnings. We are the only power technology company in the U.S. market to have grown revenues for 15 consecutive quarters, right through the great recession.

We are one of only three industrial companies worldwide to achieve this level of performance. In the category of, what have you done for me lately? We are positioned to continue revenue and earnings growth for years to come based on our strategy of first focusing on and energy and power grid market, and second focusing on doing business in the growth economies of China and Asia Pacific region.

In our fiscal second quarter, we achieved a record cross margin of 40.7% and an operating margin of 16%. We still have room for growth in both metrics indeed, as our superconductor business reduces its losses and becomes profitable over the next few years. We expect we will achieve operating margins well in excess of 20%.

In the second fiscal quarter, we also increased our total backlog quarter over quarter to a new record level of $956 million. This backlog provides us with great visibility into what we expect will be a strong second half of fiscal 2010 as well as providing a solid base for continued growth in fiscal 2011.

We are raising our financial forecast again for the fiscal year now expect to grow revenues in excess of 36% year-over-year while increasing non-GAAP net income by more than 86% year-over-year.

Our wind powers segment continues to be the primary driver of this strong growth today. However, our second fiscal quarter officially marked the coming of the age of superconductors and the start of our third wave of growth. The timing couldn’t be better. Over taxed power grids around the world are being charged like never before.

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