Q1 2022 American Superconductor Corp Earnings Call
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[music].
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Good day, everyone and welcome to the American Superconductor first quarter 2022 earnings conference call.
Today's call is being recorded.
Now at this time I'd like to turn the call over to John Heilshorn of L. H, a investor Relations. Please go ahead.
Thank you April good morning, everyone and welcome to American Superconductor Corporation's first quarter of fiscal 'twenty Two earnings conference call I am John Heilshorn of <unk> Investor Relations <unk> Investor Relations agency of record.
On today's call are J M again, chairman, President and Chief Executive Officer, John <unk>, Senior Vice President Chief Financial Officer and Treasurer.
But I can superconductor issued its earnings release for the first quarter of fiscal 'twenty two yesterday. After the market closed for those of you who have not been able to see the release of copies available at the investors page of the company's website at Www Dot <unk> Dot com.
Before starting the call I'd like to remind you that various remarks that management may make during today's call about American superconductors to beat your expectations, including expectations regarding the company's second quarter of fiscal 'twenty, two financial performance plans and prospects constitute forward looking statements for purposes of the safe Harbor provisions under the private Securities litigation.
<unk> Reform Act 1995 actual results may differ materially from those indicated by such forward looking statements as a result of various important factors.
And those set forth in the risk factors section of American Superconductors annual report on Form 10-K for the year ended March 31, 2020 to which the company filed with the Securities and Exchange Commission on June one 2022, 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 subsequent date 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 and non-GAAP financial measure the company believes that non-GAAP net loss to assist management and investors and comparing the company's performance across reporting periods on a consistent basis by.
Excluding these noncash nonrecurring or other charges.
I believe are indicative of its core operating performance.
A reconciliation of GAAP net loss to non-GAAP net loss can be found in first quarter of fiscal 'twenty. Two earnings press release that the company issued and 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 Dot <unk> Dot com.
With that I will now turn the call over to Chairman President and Chief Executive Officer, David look at Daniel Thanks, Chuck and good morning, everyone.
I will begin today by providing an update on our grid and wind business units.
John <unk> will then provide a detailed review of our financial results for the first fiscal quarter, which ended June 32022, and provide guidance for the second fiscal quarter, which will end September 32022.
Following our comments, we'll open up the line to questions from our analysts.
I'm happy to say, we started a strong fiscal year 2022.
Established an order book of over $100 million.
We are now selling into next fiscal year.
This all happened during our first fiscal quarter.
This is well ahead of our historical pace to the business.
Our backlog is growing the business is growing.
We see an acceleration of bookings due to some of the tailwind we discussed last quarter.
We see a diverse set of orders from renewables for semiconductor materials and mining to industrial.
We even have some orders from the U S. Navy to continue some research and development work on new products.
We see continued tailwind in multiple markets and believe 2022 will be an important year in the maturation of our business, we see projected growth in the renewables market driven by the move to energy independence and carbon reduction.
For example, the recently proposed U S. Senate inflation reduction Act of 2022 contains significant spending and tax breaks which are poised to boost the clean energy industry in the United States.
We see investments in the semiconductor capacity increasing for the next several years to address 2030 ore demand for memory and key materials for the green economy.
The U S chips and Science Act of 2022 as a recent example of government substantially incentivize and the growth of the sector of the economy in the United States.
The tailwind to our business seem to have become a stronger just in the past few days.
We see strong demand for mining metals and materials, driven by automakers and their move to electric vehicles in response to the global pressure to reduce environmental impact.
We see our current foreign policy challenges demand sustainable security.
These tail winds are expected to benefit our business.
During the first quarter of fiscal 2022, we reported revenue just below $23 million.
We are seeing challenges of project timelines with customers as well as the availability of parts from our supply chain, we expect a stronger third and fourth quarter.
Yeah.
We had over $50 million of new orders booked during the first quarter of this fiscal year.
You can see and John will discuss that we're carrying elevated inventory levels.
Are all indicators of growth.
Now I'll turn the call over the John Kosiba to review our financial results for the first quarter of fiscal 2022 and provide guidance for the second quarter of fiscal 2022, which will end September 32022, John .
Thanks, Daniel and good morning, everyone.
<unk> generated revenues of $22 7 million for the first quarter of fiscal 2022.
Compared to $25 4 million in the year ago quarter.
Our grid business unit accounted for 87% of total revenues, while our wind business unit accounted for 13%.
Rich business unit revenues decreased by 16% in the first quarter versus the year ago quarter.
When business unit revenues increased 49%.
In the first quarter versus the year ago quarter.
Looking at the P&L in more detail gross margin for the first quarter of fiscal 2022 was 10% compared to 13% in the year ago quarter.
Gross margin for this quarter was adversely impacted by a particularly unfavorable product mix coupled with the continued drag on margins associated with the Neal Trey on backlog.
D var product shipments came in below recent quarterly averages and as many of you are aware D. Var has historically produced one of our highest contribution margins for the company.
We anticipate D var shipments to rebound back to normalized levels for the remainder of fiscal 2022.
As Daniel has mentioned we are working our way through the acquired Neil trend backlog. In fact, we expect to have shipped off most of that backlog by the end of this Q3 fiscal 2022.
As we see D var sales rebound and the acquired <unk> backlog become less meaningful in the overall financials, we anticipate gross margins to approach our recent historic average.
We also priced in current material costs on the new orders received this quarter and anticipate those orders to have a positive impact on our rural gross margins as they ship.
Now moving on to operating expenses, R&D and SG&A expenses for the first quarter of fiscal 2022 were $10 $2 million flat compared to a year ago results.
Approximately 11% of R&D and SG&A expenses for the first quarter of fiscal 2022 were noncash.
Our non-GAAP net loss for the first quarter of fiscal 2022 was $6 8 million or 25 cents per share compared with $2 7 million or <unk> 10 per share in the year ago quarter.
Our net loss in the first quarter of fiscal 2022 was $8 7 million or <unk> 32 per share. This.
This compares to a net loss of $5 4 million or <unk> 20 per share in the year ago quarter.
Included in our Q1 fiscal 2021, GAAP and non-GAAP net loss was a 2.1 tax benefit associated with the New York Tri Ed acquisition.
Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.
We ended the first quarter of fiscal 2022 with $43 1 million in cash cash equivalents and restricted cash. This compares with $49 five on March 31 2022.
Our operating cash burn in the first quarter of fiscal 2022 was $5 9 million.
Let me take a minute to talk about our inventory position.
As Daniel mentioned earlier, we booked over $50 million in new orders during the first quarter of fiscal 2022.
We have increased our inventory to support the surge in demand, particularly within our new energy product lines.
We increased our inventory by over $9 million in Q1 to nearly 33.
Million of total inventory.
Almost all of the inventory increase is earmarked for projects within our new energy product lines that we booked during the first quarter many of which are expected to ship in this fiscal year.
This has put some strain on our working capital in Q1 and is expected to continue into the second quarter.
We do not anticipate this strain on working capital lesson beyond the second quarter as we expect to start to ship on this new backlog in Q3 and beyond.
With all that said, we anticipate strong revenue in the second half of fiscal 2022.
Now turning to our financial guidance for the second quarter of fiscal 2022, we expect that our revenues will be in the range of $23 million to $27 million.
Our net loss on that revenue is expected not to exceed $8 5 million or <unk> 31 per share.
non-GAAP net loss is expected not to exceed $6 5 million or 23 per share.
The company expects operating cash flow to be a burn of $4 million to $6 million in the second quarter of fiscal 2022.
We expect to end the second quarter with no less than $36 million in cash cash equivalents and restricted cash.
With that I'll turn the call back over to Daniel.
Thanks, John .
Our business is strengthening and we're beginning to see the initial benefits of our recent acquisitions.
Experienced a robust order booking during the first quarter of fiscal 2022, we have a diverse set of powerful tailwind emerging in our business.
The World is quickly moving towards de carbonization to slow down climate change and create a path for a more sustainable world.
This transition to a low carbon economy raises demand for semiconductors, as well as metals mining and critical materials.
Our new energy power systems business is expected to play a central role in this transition.
Our business is benefiting from the tailwind created by global de Carbonization efforts. In fact, we are seeing booking strength in all three of these areas renewables semiconductors and materials.
We anticipate the emergence of additional demand for our new energy power systems from the semiconductor materials markets coming in the subsequent quarters.
We believe we are well positioned to take advantage of these tail winds and expect to continue to grow and diversify our business.
Now turning to our ship protection systems, we delivered our Sps system for the U S S Fort Lauderdale.
We are focused on the successful installation of this system.
We have established and demonstrated our capabilities to deliver the Sps systems.
And our backlog, we have the USS Harrisburg, which is scheduled to be delivered this fiscal year.
The USS Richard recall and the USS Pittsburgh.
Sps contributed to the grid segment revenues in this first quarter of fiscal 2022, and that's been a very consistent source of good revenue for the past several quarters.
Our team is very busy and focused on continuing to expand the Sps business, while we deliver our initial systems.
Although it is hard to predict exactly when we would see an uptick in Sps related revenues signs point to and what we expect to be a larger and brighter future with the navy hopefully in the very near future.
To give you an update on our resilient electric grid or Reg system in Chicago. The system continues to perform well it's already served as a great learning experience for the utility.
We continue to see strong desire for this utility as well as others to further deploy reg into the power grid.
Turning to wind, we're supporting IMAX induced out in the field with the initial prototype of a three megawatt class turbine and an initial wind farm of five five megawatt wind turbines respectively.
During the first quarter of fiscal 2022, we shipped two megawatt electrical control systems or ECS to our partner in India IMAX win just yesterday.
<unk> wind announced an order from a repeat customer and TPC renewable energy limited four.
For a 200 megawatt wind project to be commissioned in the state of Gujarat with two megawatt wind turbines.
We expect demand for the three megawatt ECS sometime later this fiscal year and the demand to continue into next fiscal year.
The design certification of the three megawatt class wind turbine prototype for the Indian market is complete.
We believe IMAX is in a good position to start expanding its business. This year with the three megawatt class wind turbine, which should translate into an expanded order book for us.
The three megawatt class wind turbine is designed to be a great fit for India's robust wind market, which is expected to add three five gigawatts in 2022. According to global data going from a total cumulative wind capacity of 42 Gigawatts at the end of 2021 to nearly.
46, gigawatts by the end of 2022 here at AMC, we are preparing for IMAX to transition to a larger three megawatt class wind turbine for deployment in India.
<unk> is now erecting their first series of production five five megawatt offshore wind turbines in South Korea, utilizing Msc's ECS, we believe southeast Asia as a geography, well suited for our five megawatt class wind turbine and for our partner New Saab.
South Korea tends to become one of the world's top five offshore wind power producers and we believe <unk> is well positioned for a very high market share due side represents a long term prospect for the offshore wind market in South Korea, and we look forward to potentially penetrating the global offshore market.
With this partner.
On the supply chain front.
There are still effects, which have impacts on our supply chain due to the global pandemic and the conflict in Ukraine.
We are seeing pressure in the supply chain due to component cost and availability.
Supply chain related cost increases continued to be a drag on our business, but we expect this to stabilize.
We are constantly being challenged by availability of components and the lead times for deliveries.
We're working with our vendors across product lines to maintain stocks.
The team is doing a great job of managing the supply chain challenges and pricing it into proposals where possible.
Please be reminded as we said on the last call. We continue to work through the acquired <unk> backlog. Some of these projects have moved out due to customer situations and as a result, this is expected to impact the business next quarter and into the third quarter.
To conclude.
Our backlog grew by approximately 30% during the first quarter of fiscal 2022.
Our orders outpaced revenue this first fiscal quarter, and we expect revenue to grow in the coming quarters. In fact, we had a book to bill ratio of over to this first fiscal quarter, meaning orders received were more than double units shipped for the quarter.
This is something the team has been working on very hard to accomplish and is a testament to their work ethic and dedication as well as the great customer service, we provided our customers.
The business is performing well.
We expect revenue to grow in the coming quarters with a stronger second half to fiscal 2022, driven by new energy shipments.
Increasing in the third and fourth quarters of the fiscal year.
As we experienced since revenue growth and new energy shipments.
With the working off of the acquired <unk> backlog.
We do anticipate meaningful gross margin expansion in the quarters ahead.
We have a ship protection system orders for deployment on the U S is Harrisburg USS Richard from cool in the U S. S. Pittsburgh, we're supporting Toussaud's effort to penetrate the offshore wind market with our five five megawatt turbine and we're preparing for our onshore wind partner IMAX to transition to a larger three megawatt class wind turbine.
Deployment in India, we do see continued demand, though for the two megawatt.
We are executing against our goals.
And that is to the credit of our employees due to their hard work to know we have more than 3000 open positions.
Mostly for direct labor to build our fantastic products, which are built.
Into the cost of those products.
I look forward to reporting back to you at the completion of our second fiscal quarter of 2022.
Of 2022.
April will now take questions from our analysts.
Thank you if you would like to ask a question simply press the star key followed by the digit one on your telephone keypad.
So if you're using a speaker phone. Please make sure. Your mute function is turned off to a later signal to reach our equipment.
Once again star one at this time.
Pause for a moment.
And we'll first hear from Eric Stine of Craig Hallum.
Good morning, Daniel Hi, John .
Hello there.
So first maybe with the orders last weeks, you've got $100 million or so in orders.
You take those with the first quarter.
No.
Maybe if you could just break those down a little bit or talk how those.
Take out.
In the various grid areas and then just thoughts on how the breakdown or your expectation how that flows between second half 'twenty two in 2023.
Sure. So it's a diverse set of orders as we mentioned in the prepared remarks. So there's an there are renewables semiconductor materials general industrial and even some orders to continue work at R&D for the Navy. So it's kind of across the board and everything that we do today.
Grid.
We talked about the timing and we've set up a few different things to kind of help you, but really the uptick of the these new orders really started in the third quarter.
We set other than the announcement that most of the business is going to be within the fiscal year, which means that there's obviously a tail that's pretty substantial but less than half that we'd go into the next fiscal year.
I think if you got it and you look at our timing and where we've been historically or.
The things were saying on the call today in August we typically say in November we're sold out for the year right.
The business has accelerated we predicted it was going to accelerate and we see that and we're showing you all the indications of that acceleration.
Yes, no got it understood and when you think about the specifically I guess semi conductor and correct me, if I'm wrong, but I think that that's been pretty.
Pretty customer concentrated.
Maybe where that stands and do you feel that the industry is becoming more aware of your capabilities and the value you bring for that application.
I think it's less concentrated than you imagined.
We're working on multiple fabs with multiple chip makers at this point.
Remember that part of the reason that we were looking to acquire these other great companies were to help to expand our content. It's also going to help to expand the customers and alleviate customer concentration. So we feel really good about the partners that we work with so far we think theyre presents another or further on.
Opportunity for further diversification in semi coming to the U S. Obviously, we work with some fabs in the U S. Today, we've kind of said that directly before.
But with this drive to reassure semi manufacturing here at home, it's really for the generation of chips that we serve hopefully with the partners that we've either served before or we have marketed too. So we're really optimistic that the semi part of that of our business today will continue to grow and that there are these tailwind to help break.
More of that business to the U S.
Got it and then maybe last one for me just on Reg I know you're limited as to what you can say, but can you just remind us.
I believe that was put into service I think it was last August September Chicago wanted to operate for a year.
At least and then would think about next steps would think about the second.
Project, you know, where we stand how closer are we to that year, Mark and then do you expect.
Yeah, you know do you think that the next Reg data point is a follow on with Chicago or do you or would it be with another utility who's watching this.
You know the handicap, but I think where we are with Chicago is they clearly are looking to the future I think if we look at how they behaved on the first project, it's been really really well the product has been very accepted at the utility the number of people that they've gotten involved within the utility to understand the technology to understand the.
And maintenance of it clearly indicates to me in my opinion that this is a technology that they want to see deployed.
All over the country not just in their own grid and they want to go help us do that as much as they can.
The fact that we've gotten to this milestone really has reopened reenergized and move forward a lot of the other conversations that have been going on in parallel. So it's hard for me today to handicap kind of where the next one is going to come from you.
You can clearly here in my town, you know I'm really focused in the next quarters on growing new energy, we have great indications coming from Sps.
I think Reg certainly as part of our long term future, but it's not something that we're looking to generate more revenue on let's say in the next few quarters.
But we do think it's a big and important part of our future business.
Understood. Thanks.
Yeah.
And next we'll hear from Justin Clare of Roth Capital Partners.
Hey, thanks for taking our questions.
Hey, Justin good morning.
Morning.
First off you know given the size of your order book, you talked about seeing stronger sales in the second half of this fiscal year. Just wondering you know are you expecting to see sequential growth.
In fiscal Q2, Q3, and Q4 of this fiscal year and then does that put you on track for a year over year growth for for the full year.
To answer the first part of the question, obviously, we're guiding with the second quarter for growth right. So given the results of the first quarter versus the guide we're seeing an improvement in the top line and the bottom line of the cash as well relative.
Relative to the first quarter.
In a lot of what we're saying today, we're talking about the third and fourth quarter I think it's hard for me, where I sit today to speculate.
Will Q3 be stronger than Q4, Q4 stronger than Q3, but we have to do as you know minor knitting with our partners to make sure we're delivering our product on cost on time.
Two to this backlog that's grown for this year to help our revenue for this year, but also into next year as well.
So what we're trying to do is get the pace of the business now up to this new level and that's why you see a lot of the commentary that were coming in you can see that the financials. It's clear in the commentary that the business has accelerated but it's hard for me to predict project by project definitively you know I'll be blunt I don't worry so much quarter to quarter, what I worry.
About the larger macro trends in the markets that we're serving.
Do we see ourselves winning more in markets that are growing and I say, that's yes across the board.
Okay got it great.
And then just shifting gears to margins here with the Neal trend backlog rolling off I think largely in fiscal Q3, you talked about approaching kind of historic average margins does this suggest that you could be nearing maybe a 20% level.
<unk>.
Q4 of this.
This fiscal year or is that a level that you could potentially reach as we move into the into next year.
It's really going to depend upon the revenue level, it's going to depend upon the mix in the quarter of the project, but I would say kind of general Directionally.
You know if we look at our trailing gross margin over the past quarters, we've been in the teens. If we go back a year or so more kind of before we start digesting the backlog.
You know in the high teens into the 20 <unk>. So that's kind of what we're trying to signal is that the potential is there depending on our ability to have the people in the parks and execute on all of the projects and programs.
Which we're very good at but.
In this economy I don't want to promise it because you know something could change with a supplier tomorrow and we start struggling so.
Mhm mhm okay.
Maybe just one more for me you know that the chips Act was signed into law. The subsidies for domestic chip manufacturing. Just wondering you know what kind of potential there is for this legislation to support growth in your business and any sense for timing you know have you all.
Already had any conversations with customers about.
This is bill driving an increased order flow.
It's just I'll answer really only the last part which is yes. So we saw this coming.
We are very active in Washington, we kind of understood wherever we're headed we've been reaching out trying to trade on our track record both American superconductor NFC.
In the semiconductor space. So we believe it will help I think its hard to dial in how much and when but.
Certainly has shown that the sales team is having a lot more conversations a lot more names and really focused on the growth in America, which we think is great.
And so many different levels thats great.
Okay, Great I appreciate it.
And it is star one to ask a question, we'll now hear from Colin Rusch of Oppenheimer.
Thanks, So much guys could you talk about some of the opportunities for designing cost out.
And some of the the power management solutions that you've got particularly those that you recently acquired.
Yeah, I think you know when we.
Part of why the team has done a good job calling in my opinion of trying to respond to the increase.
In component costs.
We were already working on ways to better manage those costs going forward. So I think the team has done a good job kind of quarter by quarter trying to price and what we know I think that I don't want to say, that's all behind us, but it certainly seems like the inflationary pressures that were there a couple of quarters ago one quarter.
[noise] ago, I'll say are lessening, but doesn't necessarily mean that next year and after we get through the midterm things change again, I I don't really know, but the first problem is just kind of keeping up with the supply chain. Then the second order was going to be what can we do to kind of change the product offering and a way to help.
Continuing to drive those margins up and.
I've kind of Telegraphing that we had a program to do exactly that before all this inflation started I'll just kind of leave it at that that's something that we work on.
<unk>.
You know when things are ready to make changes in costs will deliver them to the market and hopefully help the same outcome.
Outcomes, we've had in the past you know great customer success.
Thanks, So much and then just sticking with that business could you talk a bit about the opportunity to expand the geographic footprint from a sales perspective.
You know power quality, it's gonna be a substantial issue on you know basically everywhere ive gone forward and Theres an opportunity for you guys to be more active, particularly in central and South America as well as Europe I'm just curious what your thought process is around that sounds different.
Yeah, no it's exactly that we have.
Our historical business with D var.
In the U S and the U K and.
In Australia, we've expanded that over the years into continental Europe , a little bit into.
Into Africa, and South America, you know that is ripe for the <unk> products as well and I think starting more with Pepsi because there's a direct path there.
You know already so that's what I'm, hoping that we'll see over time, we'll see growth coming from new energy not only from the addition of the products, but the reach the global reach all of the product lines and then kind of go back to your previous question. We do look for ways. You know how can we get better leverage between the pre.
Alex lines, both from a feature function standpoint, and from a cost standpoint so.
I think you've got it right it's a problem.
Okay. Thanks, so much guys I appreciate it.
Thanks Colin.
And it appears there are no further questions at this time I'll turn the call back over to Daniel for any additional.
Our closing comments and actually chip Moore with E. S. Hunting just sticking up for a question Oh sure we'll take that from chip.
Yeah.
Hey, Thanks can you hear me.
Yeah, Great. We're glad we got you.
Right.
So I wanted to follow up on that very strong order flow great to see.
I'm wondering maybe if you can help us handicap the risk in the back half, whether it's supply chain or labor I think you've talked about.
You didn't hire a bunch of folks.
Any risks there is it something that gets.
Push out.
Were just how to think about that.
Yeah, Theres always risk projects the projects some of them kind of moves from a you know a week.
And the one quarter from one quarter into another.
But I will say you know where my mindset today with the businesses I'm starting to think about a year from now and beyond there.
Because the backlog starting to extend that far out so what we want to do is we think the business has accelerated or on a kind of a different pace here. We wanted to make sure that we have the people and parts to be able to deliver on that pace.
But it is hard to predict.
Customer says you don't have access to our labor to commission the <unk>.
And then the commissioning events delayed and those typically are revenue bearing so.
You know that we just have to manage it we always start with the customer in mind, whatever the customer needs.
We're going to focus on and if they need us there earlier with you there used to be there later, we just wanna be there when we need it and I think because we take that attitude with everybody. Our customers know that we're there to meet their objectives and not our own we want everything to work well for them, we want them to come back and be repeat customer, which.
We've seen a lot of the business.
You know if we're a good partner and a good service provider, we think that's going to translate into more of us in the future.
Perfect.
If I could switch gears maybe on.
David You mentioned.
Hi, Syed.
Getting favorable there.
Potential uptick can you maybe just remind us.
The annuity like dynamics there for those systems and then you also mentioned in R&D order with the Navy would this be.
Another shift where are we talking about something else.
We can be talking about anything could be for another shift that could be another part of the product.
They're all in existing programs and what we're trying to do is extend the capability to protect.
Protective power fleet, so I'll leave it at that.
But it's for for that to remind you kind of a revenue breakout for it for typically for an LPG ship. The revenue profile is about $10 million for.
We've delivered on the first one we're delivering on the second one now.
Remember that the revenue as a percent complete accounting on it. So it's not something that bundles up then occurs upon delivery it really kind of finishes upon the final delivery. So.
You know what our team is really focused on right now in the Navy part of our business is the successful integration of the first system into the first ship that.
We think a backfill as well we patrolled and no. One is certain words from the Navy. If that goes well then you guys better be ready to deliver so.
I like feeling that from the Navy. It makes me feel like we're doing the right thing investing in this in this product for a while.
Got it thanks, and maybe just one last one I.
I guess specifically in ECS.
Any more visibility on many more so near term it sounds.
Like you've still seen to.
Two megawatt shipments, particularly given the market impact.
You don't have to think about that.
In the rest of the year and that obviously will lead the three megawatt.
Yeah, I'll, let John talk to the margin impacts I think the thing we wanted to make sure people understood is that the two two megawatt is alive and well and theyre getting orders for it and that may not everybody, maybe just focusing on three megawatt not realizing that demand for two could come as well.
Hey, chip on the win margin you know again when wins running at scale.
What we've said is the wind product line in D var product lines tend to be I its contribution margin.
Product wise.
Wednesday that scale today, so it's not fall, it's not quite into that category.
So as.
As we start to see wind business ramp back up we will see a positive impact on margins.
Okay great.
Appreciate it thanks everybody.
And there are no further questions at this time I will turn the call back over to Daniel for any additional or closing comments.
Thanks April .
You know to harken back to my childhood and Watson Sesame Street growing up the word of the day focuses acceleration.
If you look at all the indicators and everything we said in the prepared remarks from hiring of people bigger backlog bigger inventory.
And we're trying to navigate quarter to quarter, what's going to happen, we're guiding to growth from Q1 to Q2.
Talking about revenue continued to strengthen throughout the rest of the year and we're really focusing already on 2023.
You have not heard this kind of of enthusiasm from the team here probably in a long long time, we felt we were trying to be as.
As clear as we could last quarter were talking about the potential for the business to accelerate given the number of tailwind that we have in the business those tailwind today seem to be broader and deeper than they even were one quarter ago. So.
We're going to work our way through being able to handle the execution as we accelerate and we look forward to be able to talk to you guys.
In about a quarter's time when we have the next quarter's results really thank you for your attention and support and good day.
That does conclude today's conference. Thank you all for your participation you may now disconnect.
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