Good day, everyone, and welcome to the AMSC Conference Call. This conference is being recorded. [Operator Instructions] With us on the call this morning are AMSC President and CEO, Daniel McGahn; Senior Vice President and CFO, David Henry; and Vice President of Communications and Marketing, Jason Fredette. For opening remarks, I would like to turn the conference over to Mr. Jason Fredette. Please go ahead, sir.

Thanks, Anthony, and welcome to the call, everyone. Before we begin, I'd like to note that various remarks management may make on this conference call about AMSC's future expectations, 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 discussed in the Risk Factors section of our annual report on Form 10-K for the fiscal year ended March 31, 2012, which we filed with the SEC on June 6, and subsequent reports that we filed with the SEC. These forward-looking statements represent our expectations only as of today and should not be relied upon as representing our views as of any subsequent date to today. While AMSC anticipates that subsequent events and developments may cause the company's views to change, we specifically disclaim any obligation to update these forward-looking statements. I also would like to note that we'll be referring on today's call to non-GAAP net loss or net loss before amortization of acquisition-related intangibles, restructuring and impairments, stock-based compensation expense, change in fair value of derivative liability and warrants, noncash interest expense, and other unusual charges. Non-GAAP net loss is a non-GAAP financial metric. A reconciliation of non-GAAP to GAAP net loss can be found in the press release we issued and filed with the SEC this morning on Form 8-K. All of our press releases and our SEC filings can be accessed from the Investors page of our website at amsc.com. And now, CEO, Dan McGahn, will begin the quarterly review. Dan?

Thanks, Jason, and good morning to you all. There's been a lot of news out there recently that impacts our business prospects, perhaps in a very positive way. We'll touch on these topics throughout the call today. But before getting to the first quarter highlights, similar to the past few calls, let's begin our discussion this morning with an update on Sinovel. For those of you that are new to AMSC, Sinovel is a former AMSC customer who, without prior notice, rejected substantial contracted shipments from us in March of 2011 and was eventually found to have stolen intellectual property from us. As evidenced by the confession and imprisonment of Sinovel's co-conspirator in this crime, the merits of our case really can't be any stronger. In recent months, the political focus on our conflict with this former customer has been intensifying. With roughly a quarter of our workforce located in Austria, our European ties are significant. Leaders from the European Union have been focusing their attention on ensuring that AMSC receives equitable compensation. In the United States, leaders such as Senator John Kerry; former Secretary of Commerce and now Ambassador to China, Gary Locke; Secretary of State Hillary Clinton; and Vice President, Biden, have been personally pressing our case with their counterparts in the Chinese government. Meanwhile, we are continuing to press our case through the Chinese courts. The legal proceedings include 3 civil suits and a commercial arbitration case which, in total, amount to about $1.2 billion. Two of our civil cases deal with Sinovel's copyright infringement. The first is in Hainan, a southern province in China, and the second is in Beijing. Sinovel had made motions to dismiss both of these cases saying that they should be added to arbitration. The Hainan courts sided with Sinovel, dismissing our…

Thanks, Dan, and good morning, everyone. Let's get right to the numbers. AMSC generated $28.7 million in revenue for the first quarter of fiscal year 2012. This is up from $9.1 million in the year-ago quarter. As Dan discussed, this growth was driven by both of our divisions. Our wind revenues grew to $16.5 million in the first quarter of fiscal 2012 from $4.3 million in the first quarter of 2011. And our grid business grew to $12.2 million in revenue from $4.8 million in the year-ago quarter. Our backlog on the 30th of June was approximately $269 million, down from $291 million as of March 31, 2012, but up from $225 million on June 30, 2011. Our gross margin for the first fiscal quarter was 41.1%. As we advised on last quarter's earnings call, this figure was positively impacted by the recovery of adverse purchase commitment liabilities of $7.3 million due to settlements with certain vendors. Excluding this recovery, gross margin for the first quarter was 15.6%, which compares with a negative gross margin for the year-ago quarter. Please note that this figure also includes approximately $3 million in cash payments from certain Chinese partners for fiscal 2010, product shipments that fell through at 100% margin. Our R&D and SG&A expenses for the first fiscal quarter were $17.7 million, down from $30.1 million in the first quarter of fiscal 2011, and in line with our guidance for annualized R&D and SG&A expenses of around $70 million. We incurred $2.7 million in interest expense associated with our recent debt financings, of which $2.3 million is noncash. The noncash interest is an accounting phenomenon under U.S. GAAP that results from the requirement to discount the debt. The discount on the debt arises from the allocation of a portion of the value…

Thanks, Dave. I'd like to touch on a couple of key points before opening up the call to your questions. From a macro perspective, we like what we're seeing from the T&D market. Spending remains stable, and solutions that make the power grid smarter and more resilient continue to garner greater attention and a bigger piece of the pie. In fact, we're already beginning to see a renewed call to action in the T&D market following the historic blackout in India earlier this week that has left more than 600 million people without power. Our AMSC India team has been serving this market for several years on the wind side of our business. Most recently, they've begun working hard to establish roots for our grid business. Now is the ideal time. But this blackout also has brought the need for T&D investment to the forefront, worldwide. An article in this morning's Washington Post discusses recent outages in cities like New York, San Diego and Boston, and it talks about the threats that exist throughout the grid here in the United States. Multiple billions of dollars of investment are needed in the U.S. alone to modernize our power network. And we could help make this happen with our Gridtec Solutions. In the renewable space, meanwhile, the headlines have taken on an increasingly negative tone with the production tax credit set to expire here in the U.S., competition from Asia increasing, and dumping cases heating up in various countries. Also, the China wind market is not the growth engine it once was. Turbine manufacturers there must meet rigid new standards and fight for market share in a flattish environment. Given this environment, why is there cause for optimism? For one, Asia is where most of our wind partners are located and they…

[Operator Instructions] And we'll take our first question from Jim Ricchiuti with Needham & Company.

I was wondering if you would comment on the -- your view of the second half of the year. You're suggesting stronger growth, second half over first half. And I was wondering if -- Dan, if you might just comment on where you see that coming from in terms of the 2 segments, wind versus grid.

Yes, I think it's a good question, Jim. As you look at what we've done in Q1 and we look at the guidance we put out for Q2, I think a lot of the attention of you all and certainly ourselves are on the second half. We said consistently that we anticipate growth year-over-year for the year. And that would mean that the second half would be certainly stronger than the first. And we believe this simply from how -- when we talk to our customers and we look at the order book and how the shipments lay out over the next months. You know quite well that our ability to book new orders takes some time. So we have long-term contracts with some of these customers. We have shipments schedules for those contracts and the growth we see coming from is from both the wind side and the grid side. On the wind side, we see growth coming in, in each of the 3 major regions: in China, in India, and Korea. And on the grid side, hopefully we see a real good third quarter and fourth quarter as well. So we think that the prospects are quite bright here in 2012, and it's a very different year, for sure, than 2011.

So is the grid -- you're expecting, it sounds like, a pickup in bookings this quarter in grid that would get you to some stronger growth in Q3?

Yes, we see that coming in the grid segment as well as in the wind segment. And some of it is on orders that we have and also when we look at the pipeline and the visibility on orders, we see that quite strong as well for the second half of our year.

We'll take our next question from Ben Schuman with Pacific Crest Securities.

Dave, it sounds like if we adjust for the one-timers, we get to something around a low single-digit gross margin for the quarter. I know you guys aren't giving guidance, but is that a good way to kind of look at the business going forward for the next couple of quarters?

I think as we look ahead for the second quarter, I think you can expect that normalized gross margins you calculated to be kind of in the ballpark. But I think as we move forward, we've talked in the past about cost reduction opportunities that we are working on, ways that we can cost-reduce the electrical control systems. We continue to execute to those plans and we would look to, hopefully, improving gross margins as we move forward to the rest of 2012 and into 2013.

If we look at 2011 as the year of OpEx control, think of 2012 as the year of cost of goods sold control. It's a major effort among the company, the people in the different geographies and in the different product lines to contain costs of the product and continue to improve the gross margin. I think, Dave, in the prepared remarks, you actually have a number that you...

It was 15% gross margin then when you paced out the $3 million of revenue that was at 100% margin, that he was doing, you get a normalized 5% to 6%.

All right, great. And then, Dan, we've seen a decent amount of M&A and consolidation as conglomerates and maybe see a little bit more strategic value in some of these energy technologies than the public markets do right now. Can you just talk to how you feel about AMSC as a potential acquisition candidate and if you guys have put any thought or effort into maybe trying to sell the company?

To directly answer the question, when we look at the whole set of solutions that we have, we have a very nice offering in how we touch the customer and the fact that we touch, at least for power and electricity, we touch really the whole range from power generation all the way through the distribution. Our intent is to continue to operate as a stand-alone company. Our intent is to try to drive revenue growth, get back to profitability and really make sure that we return equity value to our shareholders. That's Dave's responsibility and my responsibility, and that's how we operate the company. As for any consideration on M&A, as a general policy, we don't comment on those things. But we're very happy and bullish on the prospects that we have. We see events in the overall market changing, we think, to our positive. And we position the company in a way where we can grow not only within China, but outside China as well. And we see this as a very attractive business year in the next quarters and many quarters in the future.

[Operator Instructions] We'll take our next question from Aaron Chew with Maxim Group.

I understand the limitations in discussing some of the contract details, both from a competitive and disclosure perspective. Just given how critical the Shenyang, JCNE and other Chinese contracts are to your current outlook and profitability, just wondering if you could just offer some level of update on how the 2 big contracts are really tracking versus their gross dollar amount and maybe versus your expectations. And the reason I asked is it just seems, though you don't obviously disclose any specifics in a given quarter, just from the back of envelope suggest that Shenyang contract in particular may be tracking well behind where you think it'd be, just given the 2013 end of the contract? I mean, am I doing the math right? Is that part of the terms of the contract or is it just sort of a quarter-by-quarter phenomenon that we have to just let Shenyang guide? Or are you getting any insights from this customer as to the timing and expected ability to fulfill it?

Sure, let me try to bring it as back up a couple levels and then try to answer the detailed questions that you put in there. When we originally entered into the agreements, and you're asking to focus specifically on JCNE and Shenyang Blower, both in China, they established with us a shipment schedule that at the time they thought was rather conservative. So the idea of giving forward orders -- usually a customer, if they're willing to do that, will only do that with numbers that they believe are certainly going to be met and, perhaps, exceeded. I think the fundamental challenge in the market has been in 2011 with LVRT and it's now leaked, I think, in 2012. When we went through the update on the different customers, what you're seeing is only recently, XJ and Shenyang have received LVRT certification for the 2 megawatt, and we continue to work with JCNE here in the coming weeks and months to get them to LVRT certification. That really is a price to entry. At the time these contacts were established, I don't think anyone really foresaw what was going to happen around LVRT in 2011 and 2012. That, for certain, has impacted both of their businesses. Good things about Shenyang and JCNE are that both have arms of their business that go out and develop projects. So their ability to control when they ship, control costs and, ultimately, control value to their customer, which is not seen in wind turbines, but as it's seen in electricity, really gives them good visibility on their future. Overall, China has slowed down. The growth is not what it once was and the overall numbers for the market are seem to be relatively flat. We believe, and our partners are telling us first hand that, through the differentiated technology we provided to them, that they believe and their forecast show that we're gaining market share quite rapidly. As we said in the prepared remarks, I think now we all focus on China and the execution of these partners to their plans. We remain optimistic because we see that optimistic -- optimism and share that optimism with our partners, but I think the belief will be in seeing it and we hope and we anticipate seeing that here in the next quarters coming forward.

We will take our next question from Pavel Molchanov with Raymond James.

You referenced the terrible Indian blackout. Realistically, what's the opportunity there? In particularly, as in foreign company in a country where there is a degree of economic nationalism with respect to the utility grid, how do you see your competitive positioning there as compared to some of the indigenous suppliers, perhaps?

I think the thing that you got to remind yourself is our business model. We don't go to market in the way that GE or ABB does. We localize our people, our content, our technology and ultimately work with local partners to deliver a local solution at local cost. So some of the power we think that exists within our brand in India is the fact that we would work through and with partnerships. We've established that with Inox on the wind side. We kind of foreshadowed what we saw happening in India. We talked the last call a lot about AMSC India and the fact that we've started in wind, we're now moving to grid. We believe that both of the principal solutions on the Gridtec side, be it the D-VAR for utility stabilization or grid interconnection, and also the superconductor cables we see, have a bright and promising future in India. The interest level is quite high and I think we've seen just in the past days here, the interest skyrocket in India. The number of people that we need to send now there to support and really try to help build this market, given this new window of opportunity, really is something that we've gotten good at doing. We're very adapt and adept at being able to come into these markets and support our local AMSC India staff with support from Europe and America and even China. So we think that opportunity in India really presents something nice for the company. We now have to go develop that opportunity a bit and deliver on that opportunity. And as we said, really foreshadowing in last quarter's call, we see AMSC India playing a big role in our business in 2012 and beyond.

[Operator Instructions] We'll take our next question from Philip Lee with Mangrove Partners.

Can you go through that $3 million cash payment you received during the quarter? Just what was it for? Who is it from and things like that?

Well if you go in, you got to go back a little bit to the -- when we had to restate and changed our revenue recognition for certain of our Chinese partners for shipments that we made back in the fiscal 2010 time frame. At the time that we did that, we basically, since they had not paid and hadn't, in retrospect, met the conditions for revenue, basically, anything related to those customers from a balance sheet standpoint was written off, any receivables or any inventory and, despite the fact we actually ship product to them. And that we would ultimately then recognize that revenue once we were paid. So we received payments for some of those shipments from back at that time in the first quarter. As I mentioned, that was about $3 million. And because of the accounting, it was at 100% margin.

And I think it's important if you think about that as being indicative of the status of our partners in the Chinese market, the fact that these guys are now finally paying for the past puts them in a position to grow in the future. And I think you can see this as an important inflection point in their business. They're obviously getting orders and getting cash flow that they can get up-to-date on the past, which puts them in a good position to grow here in the next quarters and beyond.

Got it. And then one on -- one last question on the backlog, can you comment on a -- in the backlog transits up nicely year-over-year but they're trending down on a sequential basis?

Yes. I think that the thing you got to pay attention to the backlog is the way orders come in. Sometimes they are in bunches, so the backlog is supported by a number of longer-term contracts. We burned off some of the backlog on those longer-term contracts, which means that as we get a series of smaller orders, it's a bit of noise in the overall number. We see the health of the business in the short term as being there. The feedback we're getting from the markets and from our partners are that they're seeing an uptick in their businesses. So we would anticipate, we believe that we'll see additional orders here in the third quarter, the fourth quarter and beyond. And at some point, we have to start to see larger orders. When we think about the wind business, we've seen that in China, we've seen some of it in India and we've seen a little bit of it in Korea. As the Indian and Korean partners further establish their business locally, and then probably Korea, as they continue to establish their business globally, they're going to need to place additional orders on us, and it's our job to deliver that in the backlog. On the grid side, it's always been a bit of hand to mouth 6 to 9 to 12 months out. The thing that I think that's changed in 2012 is the visibility, on not just 2 quarters, but now 4 and 5 quarters out. And we see good health on the grid side of the business. So although you can say in the backlog, it hasn't translated to a higher backlog, that the pipeline and the visibility on additional orders is there. It's quite healthy. Now we need to go realize that and make those orders happen.

It appears we have no further questions in the queue at this time. I would like to turn the conference back over to President and CEO, Daniel McGahn.

I want to thank everybody for taking the time to listen. I think given the news that's just out in the past days, the opportunity for our company continues to brighten. The news out of India presents us with an opportunity to utilize our business model there. Fortunately, we've made the strategic decision to be in India a time ago and we're ready to be able to take advantage of that opportunity today. The news out of Brazil, I think, similarly, puts our company in a position to repeat what we've done in Korea and India, perhaps in Brazil. There's a market there that requires the solutions that our company has, and our company has -- is gearing up first with dealing with this litigation. But second, there may be a business opportunity for us there. And then the news out of the Washington Post today, really calling for action for investment in the U.S. grid, is a good sign for our company. The fact that they're singling out major metropolitan areas within the U.S. is great news for our company and particularly our superconductor cable business. So we see the prospect's bright. We believe that we've turned the corner in the business. Now it's our job to go execute on that and be able to deliver value to our partners to keep our employees energized and focused on the mission ahead, and ideally, be able to provide value to shareholders as well. So thank you very much for your time and we'll talk to you in a few months.

That does concludes today's conference. Thank you for your participation.