Q2 2021 American Superconductor Corp Earnings Call
[music].
Good day and welcome to the American Superconductor second quarter fiscal 2021 earnings conference call.
<unk> conference is being recorded at this time I would like to turn the conference over to Mr. John Heilshorn. Please go ahead Sir.
Thank you Christina and good morning, everyone and welcome to American Superconductor Corporation's second quarter of fiscal 2021 earnings Conference call I'm, John Heilshorn of <unk> Investor Relations.
Investor Relations agency of record.
With us on today's call are game again, Chairman, President and Chief Executive Officer, and John just to give us senior Vice President and Chief Financial Officer and Treasurer.
American Superconductor issued its earnings release for the second quarter of fiscal 2021 yesterday. After the market closed for those of you who have not yet seen the release academies available in the investors page of the company's website at Www <unk> com.
Before I started the call I would like to remind you that various remarks that management may make during today's call about American superconductors future expectations, including expectations regarding the company's third quarter of fiscal 2021.
Performance plans and prospects constitute forward looking statements for 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 set forth in the risk factors section of American Superconductors annual report on Form 10-K for the year ended March 31, 2021, which the company filed with the Securities and Exchange Commission on June two 2002.
'twenty one as updated in the company's Form 10-Q for the period ended September 32021, and the company's other reports filed with the SEC.
These forward looking statements represent management's expectations only as of today and should not be relied upon as representing management's views as of any date subsequent to today.
While the company anticipates that subsequent events and developments may cause the company's views to change the company specifically disclaims any obligation to update these forward looking statements.
Also on today's call management will refer to non-GAAP net loss, a non-GAAP financial measure.
<unk> believes that non-GAAP net loss assisted management and investors and comparing the company's performance across the reporting periods on a consistent basis by excluding these noncash nonrecurring or other charges that he does not believe are indicative of its core operating performance.
Reconciliation of GAAP net loss to GAAP net loss.
Non-GAAP net loss can be thought of in the second quarter of fiscal 'twenty. One earnings press release, the company issued at furnished to the SEC last night on form 8-K.
All of American Superconductors press releases and SEC filings can be accessed from the investors page of its website at www <unk> com.
With that I will now turn the call over to Chairman President and Chief Executive Officer, Daniel look at Daniel Thanks, John and good morning, everyone I'll.
I'll begin today by providing an update of our grid and wind business units.
John Casteen, but will then provide a detailed review of our financial results for the second fiscal quarter, which ended September 32021.
And provide guidance for the third fiscal quarter, which will end December 31 2021.
Following our comments, we'll open up the line to questions from our analysts.
We are executing on our growth through grid strategy.
We continue to diversify our business.
Total revenue for the second quarter of fiscal year 2021.
Came in above the top of our guidance range and grew more than 30% versus the year ago period.
We grew our entire business by over 30% last year.
We hope that we can continue on a trajectory of growth.
Okay.
Our second quarter revenue of nearly $20 million $28 million sorry.
With our recent record quarter.
Our grid segment revenue for the second quarter of fiscal year 2021 grew by more than 50%.
Versus the year ago period, and accounted for nearly 90% of Amc's total revenue.
In fact, this was the largest grid quarter, we've ever had.
This exceeded our own expectations and is a testament to our team's execution.
Particularly during these challenging times.
Since the start of this fiscal year, our bookings momentum in the grid business has been very strong.
Extending our grid visibility well into fiscal 2022.
This certainly is a very different and stronger business than it was even a few years ago.
In the second quarter of fiscal 2021, our grid business was primarily driven by strong new energy power system shipments.
We have integrated <unk> nicely into the business and are integrating Neil Trent.
We are starting to see leverage between the product lines as evidenced by the recent $22 million of orders, which were announced.
Which was driven by the industrial and semiconductor markets to give you. Some color on these orders nearly half of the new orders came from industrial applications.
About a quarter come from semiconductor fabs.
We're getting leverage across the product lines selling into a number of industrial markets, including mining metals and chemicals.
As you can see from our revenue guidance for the third quarter of fiscal 2021.
We are anticipating continued strength in our business.
Our revenue backlog is more than 80% higher.
Than this time a year ago.
And we ended the second quarter with more than $57 million in cash.
We are managing our way through the global crisis and its evolution, we are experiencing inflationary pressures on our supply chain and some delays in sourcing materials needed for products.
These disruptions have negatively impacted our cost and gross margins.
We continue to work on reducing supply chain risks.
Throughout the past year, and a half we've been able to adapt and continue to deliver to customer demands.
The team has done a great job at managing this.
These disruptions during these difficult times.
We continue to assess the impact of the COVID-19 pandemic to best mitigate risks and continue the successful operation of our business and for our customers.
We see product cost on the ride specifically around commodity metals.
We are proactively changing prices, where we can to include these additional costs.
In fiscal 2020, one we expect year over year revenue growth again in our grid.
And our overall business.
Our team along with combat recently energized the resilient electric grid or Reg system in Chicago.
We are manufacturing ship protection systems for the San Antonio Class ship platform L. P D.
With our first delivery expected this year.
We are supporting IMAX with commissioning in the field and providing electrical control systems or ECS as they need and pay for them.
And we are actively supporting our south Korean wind partner and erecting offshore wind turbines utilizing <unk> five five megawatt turbine design and ECS.
Okay.
Let's take a moment to review our grid business grid is driving revenue for the company.
We continue to be focused on building, a more predictable and diversified business.
Our new energy power system supported by our strong base of projects and renewable and industrials has gained notable momentum.
We expect it will drive growth and diversification for our company. This fiscal year, our new energy power systems are focused on addressing renewable energy and industrial installations like a semiconductor fab mine or chemical plant.
We are presenting more content to customers as we leveraged the strong combination of our new energy power systems.
We are growing and diversifying revenues by geography and by market. We are working with top tier wind turbine manufacturers and wind farm developers to provide wind farm connectivity to the power grid around the world. This quarter, we supported renewable projects in Hawaii, Texas.
Go home and Colorado.
With the increasing demand for chips, we're supporting the semiconductor industry in the U S, Singapore, Taiwan and Japan.
Our solutions protect the semiconductor facilities against power quality problems that originate from the transmission grid. These disturbances if left uncorrected can affect their plant process of tooling caused significant downtime scrap material and loss of profit.
We also have delivery systems.
We also have delivered systems to a variety of industrial applications from chemical plants, So paper mills and compromise.
The diversification into industrial is what we predicted with the acquisitions our growth through grid strategy is working.
Our ship protection systems or Sps are also part of our grid business as you know our ship protection system has become the baseline design for the San Antonio class amphibious warfare ship or LPG platform.
The San Antonio Class is our first design win with the U S. Navy, we announced in January our fourth ship protection system contract for the San Antonio Class.
This contract is for an Sps for Elpida 29 also known as the U S S. Richard Amber Cove Junior.
Our Sps for the San Antonio Class represents approximately $10 million in revenue per vessel and our current Sps orders now include Elpida 28, Elpida 29, LPG 30, Mlps 31.
Our team is very busy and focused on continuing to expand the business. While we expect to deliver our first systems from a capacity perspective, we've been planning for the concurrent manufacturing of multiple Sps orders and here we are.
Our team has been focused on the delivery of these first systems.
And delivery doesn't always correlate with revenue we've talked about the expected size of the opportunity many times in the past.
In total there were 15 future San Antonio class ships that the Navy plans to build after we had our design win we.
We now have won four of these 15 or $40 million of the potential 150 million for this class of ship.
We are actively engaged with the navy pursuing additional classes of vessels for deployment of our Sps.
Their potential platforms include but are not limited to carriers fragrance destroyers and literal ships.
We have done some engineering.
For the potential deployment of our Sps.
For what we believe are the next several classes.
<unk> ships.
In each case, we have to do engineering work prior to procurement.
We have to fit our carbon components that make up our ship protection system and show all of the changes to the build of the ship.
Sps contributed to our strong grid segment revenues in the second quarter of fiscal 2021.
Now turning to our resilient electric grid system or Reg in August we announced the successful integration of Reg in Chicago, which became fully operational on comments power grid.
I'm very proud of all the comment and MSC employees that worked very hard to make this happen.
The Reg system utilizes <unk> proprietary and periods of high temperature superconductor wire.
A wire capable of limiting fault currents. The feature that has made interconnecting substations, which are power assets on the grid possible for a more reliable robust and resilient grid.
We believe many utilities are interested in seeing the performance of our product in Chicago.
We're also developing opportunities to deploy our reg product and other utilities across the country and we believe the amortization and operation of this first Reg system in Chicago could be a catalyst for exelon and other utilities to begin deploying our state of the art solution.
With the first system deployed we believe that the future deployments of Reg will be derisked.
U S utilities are focused on the execution of this first Chicago project as are we.
Turning to wind during the second quarter of fiscal 2021, we.
We shipped two megawatt ECS to our onshore wind partner IMAX wins.
We stand ready to support our partner in India, as they commissioned new turbines or need new stock of two megawatt ECS.
<unk> continues to promote and sell their two megawatt wind turbine.
In fact, IMAX recently announced.
But it will supply its two megawatt wind turbines to a 150 megawatts newly won wind project order from a repeat customer.
We are encouraged by Imax's stated desire to lower the level of <unk> cost of energy further by way of a new wind turbine to that end. We have designed an IMAX is now in the process of constructing a prototype of a new three megawatt class turbine for the Indian market <unk> three macro.
What class turbine will expand their wind turbine product line portfolio.
The three megawatt class wind turbine appears to be a great fit for the competitive tariff environment in India.
IMAX is working towards completing construction they will commission the three megawatt class prototype turbine that we design.
Once commissioning is complete IMAX will seek type certification for the operating terminal, we expect to work with IMAX to build a three megawatt class production supply chain.
Put in place an initial ECS production border and.
And support the already growing demand for their three megawatt class turbine.
<unk> stated that they intend to launch the three megawatt class at the end of this fiscal year.
We are hopeful that fiscal 2022 will be the year that IMAX begins transitioning to our three megawatt class ECS platform.
This transition will be signaled by a three megawatt ECS supply contracts.
We service the offshore wind market through our partner Doosan heavy industries in South Korea, we the exclusive supplier of ECS units produced five five megawatt offshore wind turbine South Korean wind market presents a potential long term opportunity for us as does the global offshore wind market.
We have completed the initial production order a five five megawatt ECS reduce arbs offshore turbines.
He was thought there are erecting their first series of production five five megawatt offshore wind turbines utilizing a M. A c's ECS.
And we are actively supporting them.
With the commissioning of these turbines our team is working closely with Doosan.
And we look forward to potentially penetrating the global offshore wind market with this partner.
Now I'll turn the call over the John Kosiba to review our financial results for the second quarter of fiscal 2021 and provide guidance for the third quarter of fiscal 2021, which will end December 31 2021.
John.
Daniel and <unk>.
Good morning, everyone.
MSC generated revenues of 27 9 million for the second quarter of fiscal 2021.
Compared to $21 1 million in the year ago quarter.
Our grid business unit accounted for 88% of total revenues, while our wind business unit accounted for 12%.
Great business unit revenues increased by over 50% in the second quarter versus the year ago quarter, which now includes the addition of Pepsi and Neil trends.
When business unit revenues decreased 31% in the second quarter versus the year ago quarter as a result of fewer ECS shipments during the period.
Looking at the P&L in more detail gross margin for the second quarter of fiscal 2021 was 12% compared to 26% in the year ago quarter.
Q2, FY 2021 has.
As a abnormally high change in gross margin versus the year ago quarter, I will take a moment and walk you through this quarters gross margin change.
Let me start off by reminding everyone that when we announced our acquisition of Neil trend restated.
Expected Neil trend to be accretive to earnings per share within 12 months of closing, which closed on may six 2021.
One of the main drivers of this expectation was we acquired approximately a year's worth of Neil trend backlog at closing and that backlog had leading gross margins.
So as you would expect this has been a drag on our consolidated gross margins, both last quarter and into this quarter.
We are working our way through this backlog and have started to replace that backlog with what we expect to be more profitable projects as we head into FY 2022.
We see this drag on gross margins as temporary.
Yeah.
Second as we discussed on previous calls there are additional costs related to purchase accounting adjustments associated with acquisitions.
These costs tend to spill over into several quarters after acquisition.
We are finished with any significant purchase accounting adjustments impacting cost of goods sold for NFC and.
And we believe that we are finishing up on these adjustments impacting cost of goods sold related to the <unk> acquisition.
Q2, FY 'twenty one.
Was the last quarter, we expect any significant costs impacting cost of goods sold related to these purchase accounting adjustments.
Again, we see this we see this drag on gross margins as temporary.
The third the third issue impacting the quarter over quarter decrease in gross margin is less about this quarter's results and more about the strength we experienced in the same period last year in.
In Q2, FY 2020, we experienced strong D var shipments and the contribution from those projects were particularly robust.
Some of the strength was a result of anticipating the potential impacts of Covid on our supply chain and as a result, we accelerated raw material coming into our factory.
And scheduled to work aggressively to stay ahead of schedule.
This had a two pronged benefit.
One is we were able to control our manufacturing costs and maintain heavy loading on the factory.
Two we were able to accelerate D var shipments in Q2 of FY 2020.
Now we're always forward a year, we have experienced a little rebound effect of Covid, we announced back to normalized factory loading and we have experienced raw material cost increases and this most current quarter.
In both cases, we see this as temporary and we have already priced these raw material increases into new projects, where we can.
So to summarize we expect many of the drugs that we experienced on gross margins this quarter starting to subside as we move into the second half of fiscal 2021 and into fiscal 2022.
Okay.
R&D and SG&A expenses for the second quarter of fiscal 2021 were $9 4 million. This was up from $8 6 million in the same period a year ago.
The year over year increase was primarily the result of absorbing the operating expenses for both acquisitions.
Approximately 14% of R&D and SG&A expenses in the second quarter of fiscal 2021 were noncash.
Our non-GAAP net loss for the second quarter of fiscal 2021 was $5 $1 million or <unk> 19 per share.
Compared with $2 7 million or <unk> 13 per share in the year ago quarter.
Our net loss in the second quarter of fiscal 2021 was $4 4 million or <unk> 16 per share. This.
This compares with two $3 7 million or <unk> 17 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 second quarter of fiscal 2021 with $57 million in cash cash equivalents marketable securities and restricted cash.
This compares with $63 1 million on June 32021.
Our operating cash burn in the second quarter of fiscal 2021 was $5 9 million.
Included in that cash burn is approximately 2 million of working capital investment to support future revenue growth.
We believe that the current working capital levels are sufficient to support our expected revenue growth and working capital will normalize for the remainder of fiscal 2021.
Now I'll turn it into our financial guidance for the third quarter of fiscal 'twenty 'twenty. One we expect that our revenues will be in the range of $25 million to $28 million.
Net loss on that revenue is expected not to exceed $7 million or 25 cents per share.
Please note that our net loss guidance assumes no change in contingent consideration not any purchase accounting adjustments associated with the <unk> acquisition.
Our non-GAAP net loss is expected not to exceed $5 5 million or <unk> 20 per share.
The company expects operating cash flow to be a burn of three to 5 million in the third quarter of fiscal 2021.
We expect to end the third quarter with no less than $51 million in cash cash equivalents marketable securities and restricted cash.
With that I'll turn the call back over to Daniel.
Thanks, John.
The integration of our acquisitions is going well and it's helped augment revenue as the wind business positioned for a potential rebound next fiscal year.
Please remember that specifically with Neil Trent, we're working on enhancing margins as we build new backlog.
Across the business, we're seeing some impacts on margins because of increased cost and supply chain challenges.
We are working diligently with our suppliers and partners to mitigate supply chain risks for our customers and we are raising prices where possible.
We continue to meet customer commitments and believe this is a temporary situation, which should be fixed over the next several quarters as we ship orders that were priced with supply chain inflation built in.
We were very pleased to report that grid revenues are at a recent record high.
The business is scaling and is supported by a strong balance sheet.
We commissioned Reg.
We are supporting the commissioning of the five five megawatt class turbine in Korea.
We are supporting the upcoming commissioning of the three megawatt class turbine in India.
We look to begin delivering our first Sps systems next quarter.
But remember that revenue was taken during the life of the project not simply on system delivery.
These are all transformative events for our company, even if they do not immediately impact near term revenues.
We saw strong bookings for our new energy power systems, we believe.
We are going to grow through the leverage that exists in our business through the expansion of total market.
Expansion of content per order and expansion of sales channel for the entire new energy lineup.
We are in a position for growth through the reimbursements of our wind business, which we see coming as early as next fiscal year.
We are positioned for growth through the acquisition of additional ship platform wins, which we are currently doing engineering work on.
We would expect to grow through the emergence of Reg as a critical product for critical infrastructure in this country.
We are keenly focused on the critical operation of the system in Chicago.
And as we have demonstrated we have the opportunity to continue to expand inorganically, where it makes strategic sense.
I've personally been able to have a lot of engagement with employees throughout the pandemic.
Our workforce is vibrant.
Committed to our mission and growing.
I continue to be impressed with how well we create opportunities step up the customer challenges and deliver on our commitments.
I'm very grateful for the people that I have the privilege to work with.
We expect to grow grid revenue again, this fiscal year 2021.
This quarter, our grid business grew by over 50% compared with the same period last year.
Our backlog has grown by over 80% since a year ago.
We grew our total business by over 30% last year, and we hope to continue on a trajectory of growth.
I look forward to reporting back to you at the completion of our third fiscal quarter of 2021.
Kristina will now take questions from our analysts that have queued up.
Yeah.
Our first question from Philip Shen with Roth Capital Partners.
Hi, everyone. Thank you for taking my questions first one is on backlog Daniel you mentioned that your.
Our backlog I think is up 80% year over year.
A quarter.
And so I was wondering if you could talk through.
How how bookings are trending are clearly up but I was wondering if you might be able to share. For example, you know what's the mix of international orders might be in that backlog I saw in the Q that you know your international growth or revenues are better than they were a year ago and is that a trend that we should expect.
And on the on these international orders for example.
And how does that how does that margin profile look.
Is it.
Difference relative to the U S. Our bookings.
Bookings and as it relates to when you know how much wind isn't that backlog in and given the challenges that the wind market is experiencing how insulated might you guys be from from those challenges.
All good questions, Phil I think that's it.
Importantly, as at this point as we see some changes positively coming into the business. So one of the benefits of the business last year.
We had a preponderance of the revenues coming from North America, specifically the U S. So it was kind of as Covid hits, we're able to tend to wear knitting being able to deliver locally to a lot of projects that we have field staff deployed it what we're now starting to see is a reimbursement of some of the foreign markets. We listed some specifically.
Called out a bunch of countries that we're now working in SEBI. When we talked about the last order book and you can see that orders appear to be accelerating.
That acceleration is coming in large part due to industrials.
Due to kind of the next order of magnitude coming specifically from semiconductor.
And then kind of thirdly from renewables.
In general so we're seeing order intake up across the business and from.
A host of international projects not U S. So the hope is that's going to build it more diversity.
Throughout our business we've commented in the past that semi margins tend to be very healthy.
We've commented that industrial if I get into the Altria and specifically.
We're working to improve those margins over time, so net net when you look at the general trends you see an acceleration in bookings.
You see a lot of things that we're working on to make sure that our gross margins gross margins continue to expand so we're really trying to telegraph that not just over the next quarter, but over the next several quarters, we see things improving.
Please be reminded though when we look at our backlog on grid some of the backlog could be as much as a year out some of it could be as short as say 345 months.
Specifically with when we don't have a lot of backlog in there related to win because we basically have to project, what we think that our key customers, we're gonna take over time.
As I mentioned, Phil in the remarks that we're really seeing the potential for a nice rebound in wind in India. We hope will be getting next year listening to the words that they are using outwardly to their constituents. It looks like the business is in very good position, they've been able to weather the storm and they've been through.
And as I mentioned in the remarks, they even announced another order for two megawatts at the to the tune of I think about 150 megawatts of new product. So we've tried to focus on growth through grid that seems to be working Jon I think really eloquently laid out kind of where you are with margin and how those issues are temporary and we see.
The future quarters, coming being a better and brighter and then as we get into next year, certainly we mentioned with our last orders, but our backlog is now started for 2022 that we hope puts us in a good situation for 2022, not only with grid, but potentially with wins as well.
Great. Thank you for all that detail I'm shifting gears to margins I know you've spent a lot on that are already and that things should be getting better I. Just wanted to see if we could get a bit of more granularity around perhaps the quarterly margin cadence as we get through the coming next.
Four to six quarters now should we think about this.
The most recent quarter F Q2, as the trough and then steadily things get better from there or do you think that that level of comp.
Continues for a little bit just because of the supply chain challenges.
And the input costs, increasing and so forth and logistics.
So do we expect to kind of be at this level, maybe for a little bit I know you gave guidance for next quarter.
Then you know.
When do you think perhaps we can get back to for example to the low.
Low to mid Twenty's type margins does it take a few quarters does it take us well into fiscal 'twenty two.
I think the first thing to notice in the guide the guide is showing improved bottom line results quarter to quarter on we will stay similar revenue, maybe there's a potential for some growth, but I think what John had said were basically calling for some improvement in the financials quarter to quarter, we do believe particularly when it comes to Neil Transco.
Several quarters to get everything behind US, we think we will see probably improvement quarter to quarter.
You know how the master all of those are how break those are that's really kind of to be seen.
But I hope as we get into 2022.
Kind of reset where we think margins will be relative to revenue and our team is working on a lot of different things not just with suppliers, but with overall cost of the different product lines as well to see can we use this as an opportunity now not only to maybe compete better and better understand our customers better price the value of what we deliver.
And I think that's the key thing is can this become a competitive advantage in our business that we can price the value stronger than we have historically at least that's what the team is being challenged to do.
Great. Okay, well. Thank you Daniel Thanks for all the color.
Thank you our next question from Colin Rusch with Oppenheimer.
Hey, guys. This is Joe on for Colin Thanks for taking my questions.
Hey, Joe.
Can you provide a little bit more color on progress with the navy ship budgets and share any sort.
Indicators of interest that would point to growth in demand.
Yeah, I think Joe the first thing is realized that the team really is focused on principally on digestion of the orders that we have.
We're very optimistic that in the coming quarter here, we'll begin to deliver our first system. So again another seminal moment.
For the company.
I did say as regards to growth the potential growth in S. Yes. This is the first time that I use the plural that we are doing engineering work on multiple ship platforms. So we see the interest increasing I think it makes the work even harder because.
Because we basically have to go through it and diagnose all the changes in the print that has to happen to be integrated into the.
The ship how.
How much that will cost.
On a nonrecurring basis, how much that would be profitable.
So the team here is very busy in delivery mode and also delivery of luminary design, which eventually we hope would be turned into a procurement I think it's a challenge for me to say today, how long that will take the good news is we're talking about multiple ship platforms, which I think increases the odds of getting the next one over.
The gold line, let's say sooner rather than later, but we really want to make sure. We're inserting at the right point with the Navy that we understand their costs, we understand pricing fully.
And that we price in what we see as the future for supply chain into these potential future orders as well.
Got it and then one more with with progress on Reg.
What else can you share on utility.
Utility scale interest and any potential for additional demonstration projects.
I think you know the word demonstration I think is important from the utility standpoint that they need to demonstrate on their own before they can see wide adoption within their own utility.
We don't see the projects as demonstrations because we believe the technical risk the financial risk has all been retired.
It's really up to the utilities to be able to manage the construction and the regulatory aspects of it which can be unique to the utility.
We have said and be consistent about we know we've been told by Exelon and know a certain words, we need to operate the sportswear or at least a year.
Everything that they've done in their work leans forward towards the implementation of more Reg in the city of Chicago, I think everything that we've seen even with the work we've done with Exelon is they have a strong desire to be in a leadership position. When it comes to this technology not only in Chicago, but as it.
Across their entire utility we have seen an uptick in I'll say a renewed interest around.
Similar or related projects to we've identified in the past with other utilities, we have seen an uptick in.
New projects with do demand a lot of it is kind of the timing of where they are in their capital cycle and the regulatory cycle. So I think we have an opportunity here to market Reg differently to utilities, because we have the existing asset that's that's doing well in operation. So.
I think that that helps us think about what the order book is going to look like in the future and as I said, we have a number of utilities that really show significant interests were.
There is a strong consideration to look at the purchase but I think the thing that always is challenged with their utility businesses. This doesn't take weeks. It doesn't take months just takes quarters. This takes years of work to be able to get a procurement.
And that's certainly something that we're working on.
Thanks, so much.
Go to our next question from Chip Moore with E F Hutton.
Good morning, everybody. Thanks.
Welcome to our great. Thanks.
Thank you.
I know you called out some of the momentum in the semi fab channel rabies.
I think when your customers it's out there talking about spending 150 billion over the next decade, maybe you could expand a bit on what you've seen in the pipeline are you seeing this investment cycle start to translate into more opportunities or just how should we think about that.
I think what you're seeing immediately chip here is that there was an attempted capital expand that was based upon market demand that was planned.
Two or three years ago, and we're benefiting in semi today because of the factory expansions or new capacity, that's being put in place.
We did highlight that we're doing this around the world. We mentioned four different countries, we don't mention the different customers unless they exceed the 10% threshold are there's one of our larger customers that are bigger field through that way. So we've tried to look at this as a key market for us we're trying to look at a way to diversify through it.
You know long term the types of chips that are.
Needed for the new energy economy that we're getting into the new digital economy that we're getting into are really what we satisfy.
I know I've read some things he sees things from customers you know a lot of the constraints in the supply chain or from legacy chips.
We've been bitten by that here and there and we found other replacements to be able to move forward and meet customer demand.
But we're really trying to look forward on where is the semiconductor industry going from its capital allocation standpoint and.
How do we make our money and how do we create installations that will help oh semiconductor fabs in the future. So this only a few years ago was in order and I think we've turned it into a business sandwiches.
Great and we've been able to do that not only for D var, but for the acquired products as well.
Yeah.
That's helpful.
And the only other question I had is really on the infrastructure Bill that's quite a bit of investment in grid reliability. Obviously, you know devils in the details of the timing and things like that but just.
High level about.
Potential benefits to the platform there.
Yeah, when I look at it by my read of it Theres billions of dollars of potential spending drip.
Driven by the federal government to our customers around grid resiliency exactly what we do so.
I see that certainly is a very strong potential tailwind coming through the business I don't expect us to necessarily be doing government contracts per se, but I do expect the influx of money support and focus in grid resiliency of helping me.
Being able to boost future growth as a company. So we hope that we have are all commercial things that can be bought in commercial terms.
With utilities, but we certainly work with work with utilities to find different ways to have funding sources available to them through the federal government certainly when you dig into the details in the bills and stuff that we have it's certainly is pointing to us and <unk>.
A different way so it's hard for me to prognosticate when will that affects the business. That's usually the follow up question on identification of an opportunity that's something we're trying to work through but we think it really benefits the markets that we serve with grid resiliency and hopefully that translates into benefits stuff as well.
Yes.
Alright, thanks, guys.
Well go to our next question from Eric Stine with Craig Hallum.
Yeah, Hi, its Aaron the hall on for Eric Thanks for taking the questions.
Hey, Eric.
Good morning.
Maybe first just following up on the SPS you know congrats on the engineering work I'm. Just curious if you can give any high level details or potential content.
Size of the opportunity you know anything on.
The number of ships or just you know I know that the engineering, but just trying to kind of frame that opportunity.
Got it.
Yeah, just kind of simplify it we used to talk about the small ships medium ships with large ships.
You know we set for a small ship it was on the order of $2 billion to $5 billion of content.
But for a medium ship it was somewhere between five and 15 of content and then for a large ship, which to us is like a carrier.
It could be 2025 plus million.
Content, so we see that as kind of roughly where it fits most of the ships in the fleet or what I, just called US a medium sized ship.
And that's really where our focus has been.
I gave the litany, though of all the ships that are kind of in the relative near term.
Prepared remarks.
So we will see what is the next door to where we're able to price it out.
But right now the team is really focused on the engineering work.
To have it be considered to make the design change right now.
The approval for the design change happens then we go down the path of negotiating a procurement.
Understood, we'll stay tuned there and then just second for me on V. B O keeps.
Can you just maybe give an update on some of the pilots that are underway. There and you know next steps and kind of how that how that pipeline shaping up.
Yeah, maybe I'll start it's done quite well for US you know it's been a great calling card to distribution utilities as Reg is you know if you think about the types of problems, we're trying to solve to break war.
Distributed power into the distribution grid, you know <unk> is a great tactical solution in Reg is a great system wide.
Change for for the utility operator, we've seen continuous superbug.
To repeat orders from utilities.
We see you know probably the largest fraction of those come from.
You know rooftop or large installations of solar.
We do see it complementary to what we're doing in the other parts of the business on an industrial setting.
When the size matters. When you can put it on a poll and you only need to be able to boost or manage power I'll say a bit but I think the long term vision that this is we're looking to help create a two lane highway for power.
Certainly resonates with the utilities being able to control manage their vote. Their voltage certainly does I've tried to in the prepared remarks try to speak a little more high level I'll just call. It new energies are things that we do.
You know on the grid.
But you know V. B O is certainly a a bright shining light among the product lines for sure we're very happy with.
And how customers have received it we've been able to learn a lot and you've been able to add this learning into the product and potentially can set the stage for future products as well.
Great. Thanks for taking the questions and congrats on the progress.
Okay.
This concludes today's question and answer session I'll turn the call back to Mr. Mcgill for any additional or closing remarks.
Thanks.
So yeah, we're trying to turn the challenges of today as the market advantages, where we cast our teams are fully engaged in working well together.
We're working very closely with our customers and suppliers.
We do see some temporary impacts on the financials.
We went through.
But these may have a long term benefit on revenues and margin the climate for what we do driven by climate change in government policy is creating potential tailwind for our business. So when we look out several quarters, we see a lot of positives coming to the business.
We're very proud we were able to meet a record near near term record level for revenue, we're very proud of what the team's been able to do to integrate these two acquisitions into the company and you know things are are only getting better here at American superconductor. So thank you everybody for your attention and we'll talk to you hopefully soon.
Today's call. Thank you for your participation you may now disconnect.
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