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American Superconductor CEO on the renewable energy market

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Daniel McGahn, Chairman, President and CEO of American Superconductor (AMSC) joins Yahoo Finance Live to discuss what policy changes he expects under a Biden administration, and how his company is focusing on delivering resilient products for a sustainable future.

Video Transcript

JULIE HYMAN: Shares of American Superconductor have just about doubled so far in 2020. This is a company that services various energy firms as well as the US Navy. It's gotten some new contracts this year. And, of course, there has also been some interest in renewable energy with an incoming Biden administration.

We're joined now by Daniel McGahn. He is the CEO of American Superconductor. It's good to see you, Daniel. So I want to talk to you about that Biden transition, first of all, before we dig down into your business because I'm curious what, if anything, you think is going to change for you under a Biden administration and what kind of policy changes you expect that might affect the renewable-energy market in the United States.

DANIEL MCGAHN: Hi, Julie. It's great to be back again. I think some of the changes ahead, you know, relating to Paris and climate accords and further focus on sustainability-- that our company really is trying to help enable the super grid of the future to bring more renewables to bear and also to bring more inherent resiliency to that system as that system evolves over time.

So politically, it looks like there's some emerging tailwinds that are coming, but I think we still have to figure out where we're going to be with the Senate and what policies are going to dictate. But only a piece of our business is in the US, but we're looking very optimistically at 2021 and beyond.

MYLES UDLAND: And so then Daniel, thinking about some of those tailwinds for your business and thinking more broadly-- and, you know when your business comes up, I think about the trends in ESG that we've seen from a lot of investors and the way that the investment community now sort of thinks energy is going, as you mentioned, around the world where a lot of your business is. I mean, have you been sensing that in conversations and seeing those trends in your business as well? Because on the investment side where, you know, we tend to focus our energy, everyone talks a lot about ESG and especially the E as that part of the equation. Is that something you're seeing as well in your business?

DANIEL MCGAHN: Yeah. I think, you know, where our challenge is, a lot of times ESG, they're focused on the operation of a company, which we certainly are very clean and green in what we do. But we're unique in a way where our products are inherently environmental and sustainable. I mean, we're ultimately trying to become, you know, a resilient company financially delivering resilient products for a sustainable future. That's, at the essence, what our company is about. So I think the more things move in that direction, I think the more people are going to understand that it's not just the operations of companies but it's the operation of the world, and we're hoping at the tip of that.

JULIE HYMAN: And Dan, you also work with various power companies around-- as you said, around the globe and also around the country. You signed a contract with the Chicago utility provider.

Where are we in smart grid penetration? Obviously there's going to be a lot of focus on municipalities saving money right now because a lot of them are running short, especially after the pandemic. And how are they to sort of weigh the cost equation, right, of putting in the smart grid systems, which presumably are expensive to put in, but then save money in the long run?

DANIEL MCGAHN: We're really trying to look at it maybe a different way where we're trying to make the grid itself actually more resilient and more sustainable and more smart. We're trying to make it inherently smarter. It's really part of our mission. We're not trying to work against utilities. We're trying to work with them.

So the way we see the future is we're going to compete against traditional capital spend. The way we bring smarter energy to the grid is by enabling more renewables on, be it large-scale wind, be it residential solar coming to the grid.

There's a play as well coming with us with electric vehicles, both in connection to the grid but also in the mining of the raw materials. There are power issues there that we think we can help mitigate.

But in every case, we look at the utility as our customer base and our advocate. We're not going to try to change the way that the edge of the grid works. We want to change inherently how the grid across the entire system works. And if we can make that smarter and enable more clean energy, I think we're going to be better off.

BRIAN SOZZI: Daniel, how or is your business impacted if a President-elect Biden cuts back on military spending compared to the Trump administration, or is what you're selling essential to the Navy?

DANIEL MCGAHN: Well, we've been an essential operation. We've been, you know, open in business here. We're very much manufacturing focused, so that's-- really, we've tried to keep product and people moving so that we can deliver high-quality products to our customers on time.

We do have a ramp in our business already coming with existing contracts for existing ships that have already been procured. We just received this summer an order for a third ship. So we think, you know, smarter ships are going to be part of the future. I think thinking also about operating costs and environmental impact of the operations I think also fit in very well with what we do.

So we're not trying to be cutting edge and trying to come up with the next-generation ship. We're trying to make the current fleet more secure and more safe from harm's way.

JULIE HYMAN: And, Daniel, finally I want to ask you about profitability because right now you guys are posting losses. What does the trajectory look like on that front?

DANIEL MCGAHN: Yeah, we've had-- we've had a few quarters here where we've been close to positive operating cash flow. If we go back past the-- maybe past two years or so, we've had a couple quarters.

We've never guided to we're going to have positive operating cash flow until this past earnings report. So we actually guided to revenue levels that were within our model that we said we could potentially be operating cash flow, and we did indeed guide to be positive operating cash flow for the first time, at least over the last decade or so that the company has been through.

So I don't want to say we've fully turned the corner, but we have a lot of tailwinds behind us. Revenue has grown. We really focused on our grid, our smart grid growth. We've been able to grow the past five years running. We expect to grow as well as this year ends for us at the end of March.