American Superconductor (AMSC) Q4 2018 Earnings Call Transcript
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American Superconductor (NASDAQ: AMSC)
Q4 2018 Earnings Call
Jun 06, 2019, 10:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Welcome to the ASMC fourth-quarter fiscal 2018 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Sanjay Hurry, the LHA investor relations.
Please go ahead, sir.
Sanjay Hurry -- Investor Relations
Thank you, operator. Good morning, everyone, and welcome to ASMC's fourth-quarter and full fiscal year 2018 earnings conference call. I am Sanjay Hurry of LHA investor relations, ASMC's IR agency of record. With us on the call today are Daniel McGahn, chairman, president and COO; and John Kosiba, senior vice president and CFO.
AMSC issued its earnings release for the fourth-quarter and fiscal full-year 2018 yesterday after the market closed. For those of you who have not yet seen the release, a copy is available in the investors page of the company's website at www.amsc.com. Before starting the call, I'd like to remind you that various remarks that management may make during today's call about AMSC'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 set forth in the risk factors section of the company's annual report on Form 10-K for the year ended March 31, 2019, that was filed with the SEC; other reports that the company has filed with the SEC and factors that are outlined in the fourth-quarter and fiscal full-year 2018 earnings press release.
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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 AMSC 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 certain non-GAAP financial measures, non-GAAP net loss or income and non-GAAP operating cash flow. Non-GAAP net loss or income is defined as net loss or net income before gain on sale of minority investments, gain on the Chinese investment, net stock-based compensation, net amortization of acquisition-related intangibles, consumption of zero-cost basis inventory, change in fair value of warrants and contingent consideration, noncash interest expense and the tax effect of adjustments.
Non-GAAP operating cash flow is defined as operating cash flow before the gain on our settlements net of legal fees and expenses, the tax effect of the settlements net of the other unusual cash flow or items. The company believes that these non-GAAP measures assist management and investors to compare results of operations of the current period to prior period results on a consistent basis by excluding these noncash, nonrecurring or other charges that it does not believe are indicative of the company's performing -- core operating performance. A reconciliation of the non-GAAP to GAAP measures can be found in the fourth-quarter and fiscal full-year 2018 earnings press release issued and furnished to the SEC on Form 8-K and on Form 10-K for the fiscal year ended March 31, 2019. With that, I'd like to turn the call over the chairman and president, CEO, Daniel McGahn.
Daniel?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Thanks, Sanjay, and good morning, everyone. I will begin today with a recap of fiscal 2018, which ended March 31st, 2019. John Kosiba will then provide a detailed review of our financial results for the fourth-quarter and the full fiscal year 2018. He will also provide guidance for the first-quarter fiscal 2019, which will end June 30th, 2019.
Following our remarks, we'll open up the line for questions from our covering analysts. We're pleased to report strong operational improvement for fiscal 2018. Full-year revenues increased 16% year over year driven by growth in both our grid and wind segments. Our move to a smaller footprint in Massachusetts, our diversification of our grid business and our work to stabilize our wind business have resulted in cost savings and improved gross margins in fiscal 2018.
During the fiscal year, we reached a settlement agreement that secured a crucial win in the ongoing battle to protect American intellectual property globally. Having closed this chapter in our history, we look forward to growing AMSC from a position of financial and operational strength. We generated positive operating cash flow in two of four quarters in fiscal 2018 and ended the year with a cash balance over $78 million and no debt. We finished the fiscal year with a strong balance sheet and the resources and flexibility expected to support our long-term growth strategy.
We believe we are well-positioned for sustained revenue growth driven by our proprietary smart material and smart software in our key markets and in new larger markets. Fiscal 2018 reflects the continued successful execution of our multi-year plan to shift AMSC's strategic direction, and establish what we expect to be a more predictable reoccurring business. Our strategy is working. In fiscal 2018, we grew and diversified our grid business.
Our D-VAR product recorded a fifth year of consecutive revenue growth. We began placing commercial units of our Volt/VAR Optimizer in multiple U.S. utilities. We received orders for two ship protection systems for the U.S.
Navy. And we agreed with Commonwealth Edison to deploy a resilient electric grid system in Chicago. During fiscal 2018, our D-VAR team performed again, not only D-VAR team record a fifth year of consecutive revenue growth but we also concluded the year with a record backlog of D-VAR projects to execute on in fiscal 2019. We are connecting wind turbines to the transmission grid across the world.
We are growing our presence in the distribution grid market, as well as providing clean and reliable power to industrial facilities domestically and abroad with our D-VAR solution. Our growing list of repeat customers is a testament to the quality and performance of AMSC's products, and to AMSC's team. The introduction of our Volt/VAR optimizer, or VVO, solution brings enhancements and reliability to the electric distribution grid, which is experiencing increased use of renewables and distributed generation. We believe our VVO solution expands our addressable market significantly.
We began placing commercial units with multiple U.S. utilities during fiscal 2018, and we expect to expand VVO sales in fiscal 2019. Our Ship Protection System, or SPS, is now the Navy's baseline system for the San Antonio class platform, LPD. The Navy's goal is to have our advanced HTS-based degaussing systems designed into additional vessel platforms, and we are aggressively working to that end.
In fiscal 2019, we expect to establish our manufacturing and product delivery capabilities for our current SPS orders. We are anticipating additional SPS orders for the San Antonio class. Our Resilient Electric Grid or REG business move forward in 2018. REG was chosen by the Company of Chicago, ComEd, and is expected to become a permanent part of Chicago's power grid.
Pending approval of the DHS contract modification, we intend to begin manufacturing of the first REG system for ComEd. We are also developing opportunities to apply our REG product in a number of other utilities across the country. We are working closely with utilities to deploy our REG solution in many other cities. In fiscal 2018, we grew our wind business revenues as a result of improved electrical control system shipments to Inox, and secured orders to bring the latest wind turbine designs to Asian markets.
We are starting a new chapter with Inox wind in India as we work together to bring a new high-performance three-megawatt class wind turbine to the Indian wind market. Inox first license are two-megawatt wind turbine design for the Indian market over 10 years ago. Since that time, we have generated over $200 million in revenue as a preferred partner to Inox wind. Our license agreement for a three-megawatt class turbine design signaled a continued strong partnership with Inox.
In fact, Inox announced they are working on orders from two developers for the installation of approximately 160 units of the new three-megawatt class turbine for projects won in the SECI auctions. We are prepared to support Inox as they work to expand their product offering, and enhance their competitive position in the Indian wind market. But we're not stopping there, we're designing even larger wind turbines. We're focused on expanding our addressable market to additional offshore applications.
We expect our five-megawatt class wind turbine to enter the offshore market in fiscal 2019 with our Korean partner, Doosan Heavy Industries. Our five-megawatt class offshore turbine design is expected to be our most efficient high -- highest performance wind turbine to-date, driving down the levelized cost of wind energy for our partners. We believe Korea, as well as Southeast Asia our geography is well-suited for our five-megawatt class wind turbine. Now I'll turn the call over to John Kosiba to review our financial results for the fourth-quarter and full fiscal year 2018, and provide guidance for the first fiscal quarter of fiscal 2019, which will end June 30th, 2019.
John?
John Kosiba -- Senior Vice President and Chief Financial Officer
Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $14.6 million for the fourth quarter of fiscal 2018 compared to $13.5 million in the year-ago quarter. wind business revenues of $3.6 million decreased by 5% versus the year-ago quarter. grid business revenues of $11 million increased by 13% versus the year-ago quarter.
Moving on to recap fiscal 2018. Revenues grew by 16% to $56.2 million. This is up from $48.4 million in fiscal year 2017. Wind business revenues increased by 53% in fiscal 2018 primarily as a result of improved electrical control systems shipments for Inox.
Yet even with the year-over-year growth in wind revenue, our grid business unit accounted for 61% of total revenues and marked the fourth consecutive year of revenue growth for grid. Gross margin for the fourth quarter of fiscal 2018 was 19% compared to 22% in the year-ago quarter. And for fiscal 2018, gross margins increased 17 basis points to 25%. This is up from 8% in fiscal year 2017.
A year-on-year improvement in gross margin was driven primarily by strong grid product margins as a result of favorable revenue mix, less depreciation and reduced fixed factory overhead associated with our move to a smaller footprint, grid factory, in the U.S. Research and development and SG&A expenses totaled $8 million in the fourth quarter of fiscal 2018. This was down from $8.5 million in the year-ago quarter. For fiscal year 2018, research and development and SG&A expenses decreased by 7% to $31.9 million.
This is down from $34.2 million in fiscal year 2017. The year-over-year decrease was driven primarily by reduced research and development expenses in both our wind and grid business units. Approximately 16% of R&D and SG&A expenses in the fourth-quarter and full fiscal year, respectively were noncash. Included in operating expenses in fiscal 2018 was a $52.7 million gain net of legal and other direct costs reflecting the cash payments received from the Chinese settlement.
Our net loss in the fourth quarter of fiscal 2018 was $8.4 million or $0.41 per share compared to $6 million or $0.30 per share in the year-ago quarter. Included in this net loss was $1.1 million non-cash expense associated with the change in the fair value of ores, and $1.9 million of additional taxes and other expenses associated with the settlement. Our non-GAAP net loss in the fourth quarter of fiscal 2018 was $4.6 million or $0.23 per share, compared with a non-GAAP net loss of $5 million or $0.25 per share in the year-ago quarter. The combination of higher gross margins, lower operating expenses and a gain on the settlement resulted in a net income of $26.8 million in fiscal 2018 or $1.32 per share.
This compares to a net loss of $32 million or $1.73 per share in fiscal 2017. Our non-GAAP net loss for fiscal 2018 was $13 million or $0.64 per share. This was down from a non-GAAP net loss of $32.2 million or $1.70 per share in fiscal 2017. We ended fiscal year 2018 with $78.2 million in cash, cash equivalents and restricted cash.
This compares with $80.2 million on December 31st, 2018. The end of the year cash balance includes $52.7 million of net cash proceeds received in fiscal 2018 from the settlement. Our non-GAAP operating cash burn in the fourth quarter of fiscal 2018 was $3.1 million. This excludes $2 million in legal expenses paid associated with the settlement.
Now turning to our financial guidance for the first quarter of fiscal 2019. We expect to our revenues will be in the range in the range of $10 million to $13 million. Our net loss on net revenue is expected to be no more than $9 million or $0.42 per share, and our non-GAAP net loss is expected to be no more than $7.5 million or $0.35 per share. We anticipate an operating cash flow burn of minus $5 million to minus $7 million in the first quarter of fiscal 2019.
This guidance does not include any tax payments or other costs related to the settlement. We expect to end the first quarter of fiscal 2019 with no less than $73 million in cash, cash equivalents and restricted cash. Our end of quarter cash balance guidance includes a final payment of $3.1 million in proceeds from the the sale of the Devens building which was received during the current quarter. In closing, fiscal 2018 was a year where we achieved double-digit revenue growth, increased our gross margins by 17 basis points, and lowered our operating expenses by 7%.
The combination of these events positively impacted our bottom-line results by over $19 million. This concludes my review. And I will now turn the call back over to Daniel.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Thanks, John. We entered fiscal 2018 with the right team and cost structure for success. We delivered on our five stated business objectives, two objectives were growth focused, to grow grid revenue and to grow wind revenue. We believe the other three objectives served to advance our transition to a more predictable, reoccurring business.
These objectives were to complete a long lead time order for LPD 28, to begin a REG system project and to deliver five-point-five-megawatt ECS units to Doosan for offshore wind. We executed on all five of our stated business objectives for fiscal 2018. Now we enter fiscal 2019 with the right resources and rigor expected to advance our long-term growth strategy. In conclusion, the initiatives we have undertaken over the past several years have changed the company.
We believe our new products are leading a shift in revenue mix toward a more predictable, reoccurring revenue base led by our business with the U.S. Navy. We are successfully diversifying our revenue mix across and within our grid and wind segments. We're beginning a new chapter in the progression of our company.
We are executing across all our products and transforming AMSC into what we expect to be a more sustainable and diversified business. Our new chapter is being written by our employees who are guided by the values for which AMSC stands for. At AMSC, we are constantly collaborating. We are always accountable to our customers.
We strive to hire the best and brightest. Our culture is inherently innovative. We listen to and learn from the markets we serve. I am grateful for our employees commitment and delivery on a successful fiscal year 2018.
I also thank you for your continuing support. I look forward to reporting to you again following the completion of our first-quarter fiscal 2019. Operator, can we now open up the line to questions from our covering analysts?
Questions & Answers:
Operator
Sure, sir. Thank you. [Operator instructions] We'll now take our first question from Eric Stine from Craig-Hallum.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Hi, Daniel. Hi, John.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Hello Eric. Good morning.
John Kosiba -- Senior Vice President and Chief Financial Officer
Good morning.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Good morning. So I just want to start with a couple questions in the grid segment. So in D-VAR revenue, you clearly had a noticeable deceleration of that business. You know a couple of months ago, you had two orders within a couple of weeks.
And that kind of breaks from your typical pattern of a couple of orders a year. Just curious you know what -- maybe more detail of what you attribute that to. I mean, is it the expansion to the industrial? You know, is this something that you see as sustainable going forward?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah, I think it's twofold there. Because I think, one, we have seen beachhead orders in the new markets for renewables. And then, as you said, industrial customers as well. It does appear to be sustainable in that the geographies we're going into with renewables have policies in place for the next several years that will keep wind moving in the right direction.
And then, with industrial customers, kind of the macro trends in the industries that we're serving there, all seem to be at least for the near term, very favorable to us. So we anticipate that good feeling in the D-VAR part of the grid business to continue we hope, for some time.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
OK. Got it. Then maybe just turning to Navy. You know LPD 30, just looking back at some past transcripts.
YOu know, I think you were expecting the second piece of LPD 30 on the order front to come later in fiscal '19. And I know that it came quite a bit sooner. So just curious, I mean, maybe does that change your view of how growth plays out in that segment? And then just as a reminder, how many more ships are part of this, you know kind of next gen platform?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Sure. So I think you're accurately kind of describing the tenure and the temperament we have probably a few calls ago. And to remind you and everybody, LPD 30 is really our introduction into the shipbuilder. As we're doing LPD 28, we are doing that directly with the Navy.
LPD 30 is with the shipbuilders. So we have two active ships right now. LPD 29, we're coming due for at some point hopefully in the next year or so, as well as LPD 31. So we should continue to see doing, you know basically two ships at a time for the next few years.
We called out the revenue -- I think last call, we talked about revenue mostly into 2020 and into 2021 for the ships. We look at the total tale, there's another I believe 13 ships beyond LPD 30, when we talked about it originally, I think we're talking about 15 ships in total. So there's you know a many-year series of orders, and then hopefully continued revenue there. And then, we mentioned on the call that we're not just working on LPD we are looking to expand and some other platforms, and when we have some good news in that area, we'll certainly reporting that to everybody.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Got it. Understood. Well, maybe last area for me, just on wind. Year-over-year revenue is up.
I know that you were down slightly in the quarter. And just curious, because I know Inox, their order book has grown. It sounds like things are back on track in the Indian market. You know maybe thoughts about near term and maybe that goes into the sequential lower revenues expected in 1Q.
And then how does the transition to the three-megawatt turbine play into that? I know you don't have an order yet for that, but that's something that you anticipate.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. I think the challenge was what we've -- we kind of looked at the key indicator in the Wind market is where are they with the first project under the new rules. So where are they with SECI-1. And after listening to them on their call, they have not yet completed connecting those turbines to the grid.
So we're focused on making sure we're there to support them as they go through that. I think that's a big milestone for them. Our understanding is for SECI-2 and potentially some of the other projects, they will interconnect at the same point in the grid. So that opens up, hopefully, I'll say, you know a low degree of difficulty to see those revenues expand.
The words Inox have used in their call is plug-and-play. Once they have this substation built that they'll just keep adding more capacity at the point in the grid. If that turns out to be true, which is what Inox has indicated, it should mean that their business returns to a nice peak here in the relatively near term. We know that's something that everybody is looking at that are watching our company as well.
For the transition to the three-megawatt, at this point, you know we're doing work on the design, and we intend to deliver a prototype. We don't yet have a contract or an instruction, as you said to deliver electrical control systems or three-megawatt turbines. But we see that coming sometime in the future here. We need to keep doing the work we need to get done for Inox.
We need to support them in the field. We need to support their customers and that's where our immediate focus is for our activity.
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Got it. OK. Thanks.
Operator
Thank you. [Operator instructions] We will now take our next question from Philip Shen from Roth Capital Partners.
Philip Shen -- ROTH Capital Partners -- Analyst
Hi, guys. Thanks for the questions. Hey, Dan. Just wanted to follow up on question that Eric had.
As it relates to D-VAR, you mentioned that the industrial segment trends appear to be favorable. Can you give us a little bit more color on what those trends might be?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. Kind of the main trends we look at, you know increase in kind of heavy manufacturing jobs and work. We're focused more on the mining of heavy materials, certainly things like batteries and the move to electric vehicles help demand in that segment. We also see things like semiconductor fabs in areas like volatile memory, there is a lot of expansion going on in building semiconductor fabs across the globe, and they're kind of in a cycle now where they are adding capital expenditures.
So those are some of the trends that we look at as kind of proxies for future growth.
Philip Shen -- ROTH Capital Partners -- Analyst
Great. That's helpful. And then as it relates to the Navy, you talked about, you know you guys are looking to expand into a new platform. I know, you know you can't tell us and it's tough to give us color on that.
But can you try to give us some degree of color as to any timing around that, perhaps near term, medium term or something else altogether? Is it something that we could expect to see in the next 12 months? Or is it more likely in the medium-term time frame of two-plus years?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. Philip, it's hard for me to kind of speculate because I don't have something on my desk that we're working to get over the goal line at this point on new platforms. We've worked a lot with Congress on the budget cycle, worked a lot with the different platform owners. Because if you remember, we've done qualification on a bunch of different platforms already.
So what we're trying to identify really is the insertion point into some of these other platforms, and you know that's something that we're focused on. To look at LPD as an example, you know where we got insertion is when they were looking to change the platform to the next design, and then we were able to kind of [Inaudible] fit existing design. So I don't know if that's a good indicator for some of these other platforms. But the good news is most of the ones that we're talking about are either more ships per year or more value per ship per year.
So we think those are good indicators. And we do know that the sooner we can report out that we've established additional business beyond the beachhead, we know that will generate some excitement for the Navy but also among the audience here on the call as well.
Philip Shen -- ROTH Capital Partners -- Analyst
Great. Thanks, Dan. And then in terms of the VVO business and they're -- in your prepared remarks, you talked about how you expecting to expand VVO sales with utilities this year. Can you provide us a little bit more color on this? Because I think this is an interesting and nice opportunity that doesn't necessarily have to go through the PUC as it relates to utilities, which makes it a faster, you know, sale.
So if you can talk about the pipeline funnel, where you are on the sales cycle? Have utilities approved you guys as a vendor and what kind of acceleration could we see this fiscal year as this category develops?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. What we're starting to see in 2019 is repeat business already. So customers that were pilot customers now buy units, plural. What we want to move to is where they can do significant volume blanket orders on us and it becomes kind of a standard product.
What I've said in the past is I want to make sure in 2019 we get this right. This is a make-to-stock order. We want to make sure we have the feature set that allows us to address the largest market possible with, you know, a cost basis that doesn't require a lot of configuration of the product to be able to ship it. So we see '19 -- we're calling for growth.
We're actually calling for growth in the grid and across all the product lines. We -- at least since I've been doing this, we've never come out that strong about growth for the year, specifically for grid. So we're trying to make sure that we get VVO right. We should see revenues be greater this year than last year, but there's still a small fraction of the total.
I hope in 2020, we start to see maybe a bigger breakout in growth from VVO.
Philip Shen -- ROTH Capital Partners -- Analyst
Can you talk about the number of utilities you're in as it relates to VVO? And you know, you talked about ships being perhaps two a year. Can you quantify anything as it relates to these utilities?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. At this time it's hard given we've only been able to announce the two so far. To give you a little color, I mean, we're working with a couple a few handfuls at a time to try to get initial product and then recurring product from them. So again, we want to get it right in '19 with the couple of handful of customers that we have, and then can we then get some of these customers to accelerate through larger, more blanket style ordering, which is the objective and the goal for the product.
Philip Shen -- ROTH Capital Partners -- Analyst
Great. Thanks, Dan. I'll pass it on.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Thanks, Phil.
Operator
Thank you. We'll now take our next question from Colin Rusch from Oppenheimer.
Colin Rusch -- Oppenheimer -- Analyst
Thanks so much guys.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Hey, Colin.
Colin Rusch -- Oppenheimer -- Analyst
Can you talk about you know opportunities for cost reduction particularly with the supply chain? Obviously, you're getting some growth and you may not be reaching critical breakpoints in terms of volumes. But now that you've shifted the facilities and reorganized the company, you know, what are you able to do here in terms of driving cost out of the products?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. I think if you kind of bifurcate the business, the existing product lines, ECS and D-VAR, we continually strive for ways to reduce cost in both those product lines. We're at volumes that you have enough business with the supply chain that you can start to see some reduction in there. You see some benefits perhaps in the numbers even this year on that.
But to kind of give you some pause there, do realize that we're going from a high-volume production and two-megawatt ECS to the beginning of low-volume production for three- and five-megawatt, so it's almost a reset to try to get leverage in those, which means you know additional revenue in those areas probably won't have exactly the same pull-through on the first units as it will as they get the volume. Similarly, as we look at VVO as a new product, SPS as a new product to REG as a new product, we're introducing a lot more revenue that's new that doesn't have that history with the supply chain. So I think your point is right on that, over time, Colin, we'll be able to manage cost better. We've demonstrated that in D-VAR.
We've demonstrated that in the two-megawatt ECS. That if we start to see volume growing in these products, we will continue to strive to work on improvement of margin. It's something, I think, we've demonstrated internally that we're pretty good and we want to be able to continue that with the new products as well. But the caveat always is volume.
You need to have the volume present to be able to work with the supply chain to get the benefit of that volume.
Colin Rusch -- Oppenheimer -- Analyst
Great. And then particularly on the voltage management solutions, you know how price-sensitive are the customers at this point? Is there an opportunity for you guys to drive some cost out and then enable a larger pool of demand should you reach a, you know certain price point?
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Yeah. We're literally testing that exact hypothesis. And what I don't know today is by reducing pricing by 10% or 20%, does that double the market or something like that. The direct answer is we don't know.
This is a new class of equipment. It doesn't directly compete with an existing class. There are voltage regulators that do some of the features that we do, but not what we need to get done for residential PV or electric vehicles. So we're trying to test that.
There's a couple of different use patterns with VVO, be it solar, be it electric vehicles, be it industrial, and they may have different price points that open up different markets. So again, that's work that we're going to more learning in 2019. And I apologize, Colin, I don't have a definitive answer at this point. But hopefully as we go into 2020, we can be more clear and have more clarity on how do we see leverage coming from that business, and how do we see growth unfolding for that part of the business as well.
Colin Rusch -- Oppenheimer -- Analyst
That's incredibly helpful. Thanks so much, guys.
Operator
Thank you. It appears there are no further questions, sir. At this time, I would like to turn the conference back to you for any additional or closing remarks.
Daniel McGahn -- Chairman, President, and Chief Operating Officer
Great. Thank you. I appreciate it. I appreciate everybody's attention and support of the company.
If you look back over the past year in our fiscal 2018, you know we grew and we diversified our grid business. That was a major focus of what we were trying to achieve, and we were able to achieve it. We finished the year with a record grid backlog going into '19. We look at the grid business as something that we can bring effort and try to control.
That's the part of the business that we think we can direct to drive growth. For fiscal 2019, we anticipate significant growth in our grid business. And we see that driven by higher revenues from all the products, from D-VAR, from VVO, from SPS and from REG. We do expect to support Inox Wind as they look to enhance their competitive position in the wind market, but our ability to deliver growth in that segment is really going to be dependent upon Inox's ability to deliver growth in their market.
And we see even from their numbers that their business is starting to come back. As we look at fiscal 2019, we look forward to growing AMSC from a position of financial and operational strength. I think the key is as we get to the end of '19, we're going to have capabilities to deliver on these new products that we did not have, specifically with SPS. So as you heard from the remarks that John provided, you know we're guiding to a cash balance of $73 million, it's a very strong position that we would look to be coming out of the June quarter.
So as we turn to the future, we expect our five-megawatt class wind turbine to enter the offshore market with our Korean partner, Doosan. Pending approval of the DHS contract mod, we intend to begin manufacturing the first parts of the system for Commonwealth Edison. We hope to talk more about this very soon. So this is something that we're working on literally on a day-to-day basis, so we hope we can come out with some news very quickly for you all on that part of the business.
We expect to establish our manufacturing and product delivery capabilities, as I just said, for our current SPS orders. But we do anticipate additional SPS orders for the San Antonio class, as I mentioned, and we are doing work on a bunch of different platforms. So we think as we transition here into 2019, you see the potential for more revenue coming, more diversified revenue and more opportunities for growth for the company, and that's what we're trying to build from. We look forward to being able to report back to you on the end of the first quarter, and we can talk more at that point about what we see as prospects for 2019 as well.
Thank you, everybody, for your attention. We appreciate it.
Operator
[Operator signoff]
Duration: 1 minutes
Call participants:
Sanjay Hurry -- Investor Relations
Daniel McGahn -- Chairman, President, and Chief Operating Officer
John Kosiba -- Senior Vice President and Chief Financial Officer
Eric Stine -- Craig-Hallum Capital Group -- Analyst
Philip Shen -- ROTH Capital Partners -- Analyst
Colin Rusch -- Oppenheimer -- Analyst
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