Good day, everyone, and welcome to AMSC's 3Q '15 Earnings Conference Call. This call is being recorded. [Operator Instructions] With us on the call this morning are AMSC's President and CEO, Daniel McGahn; Executive Vice President and CFO, David Henry; and Manager of AMSC's Investor Relations, Brion Tanous. For opening remarks, I would like to turn the call over to the Brion Tanous. Please go ahead, sir.

Thank you, Tanisha, and welcome to our call to discuss our third quarter of fiscal 2015 results. Before we begin, I would 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 year ended March 31, 2015, which we filed with the SEC on May 28, 2015, and subsequent reports that we have 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 date subsequent 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 will be referring on today's call to non-GAAP net loss or net loss before stock-based compensation, amortization of acquisition-related intangibles, restructuring and impairment charge, consumption of 0-cost-basis inventory, change in fair value of derivatives and warrants, noncash interest expense and other unusual charges, net of any tax effects related to these items. Non-GAAP net loss is a non-GAAP financial metric. A reconciliation of our 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 SEC filings can be accessed from the Investors page of our website at www.amsc.com. And now I'd like to turn the call over to CEO Dan McGahn. Dan?

Thanks, Brion, and good morning, everyone. I'll begin today by providing an overview of our accomplishments and financial results for the third quarter of fiscal 2015, which ended December 31, 2015. Dave will then provide a detailed review of our financial results and guidance for the fourth quarter of fiscal 2015, which will end March 31, 2016. Following Dave's comments, I will provide an overview of our activities and future expectations. After that, we'll open up the line to your questions. In the third fiscal quarter, we increased revenue more than 20% year-over-year as a result of strength in both our wind and grid businesses. We also delivered significantly improved gross margin versus the previous quarter and year ago results. In fact, in the third quarter, we generated our highest gross margin in more than 4 years since the events of 2011. In wind, we shipped a record number of sets of our Electrical Control Systems, or ECS, to Inox in the third quarter. Additionally, we entered into a set of strategic agreements with Inox in December valued at approximately $210 million, which we expect to realize over the next 3 to 4 years. These agreements also include a provision for AMSC to be Inox's preferred supplier for 2-megawatt ECS for the subsequent 3 years. During this subsequent 3-year period, we expect to provide a majority of Inox's 2-megawatt ECS requirements. In total, these agreements are expected to provide well in excess of $210 million of value to AMSC over a 6- to 7-year period and a solid foundation to pursue our longer term growth objectives, particularly on the grid side of the business. Speaking of our grid business, revenues from our D-VAR product were very strong in the third quarter of fiscal 2015 and represented our strongest quarter for D-VAR shipments in nearly 3 years. In addition, I am pleased to report that AMSC generated cash during the third quarter of fiscal 2015. With that, I'll turn the call over to Dave Henry to discuss our financial results for the third quarter of fiscal 2015. Dave?

Thanks, Dan, and good morning, everyone. AMSC increased its revenues by 21% to $25.8 million for the third fiscal quarter compared to $21.2 million in the year ago quarter. Wind revenue increased 14% year-over-year driven by record ECS shipments to Inox, while grid revenue grew almost 40% year-over-year due primarily to increased D-VAR revenues driven by a large shipment to an industrial customer in Asia. 12-month backlog as of December 31, 2015, was approximately $82 million compared with $62 million as of September 30, 2015. The sequential increase in backlog is primarily the result of a long-term supply agreement we completed with Inox during the third fiscal quarter. Looking at the P&L in more detail. Gross margin for the third fiscal quarter was 25.3%, which compares to 14.9% in the prior year quarter. As Dan mentioned, this was the highest gross margin quarter for the company since prior to the events of 2011. A year-over-year increase in gross margin was realized despite having a lower gross margin benefit as a result of using less previously written-off inventory compared to the prior year. The year-over-year increase in gross margin resulted from higher revenues, favorable product mix on our ECS and D-VAR shipments and improved factory utilization. Third quarter gross margin was achieved despite a continuing negative gross margin associated with our superconductor product line. To give you an idea of the opportunity, if our superconductor gross margin was 0 in the third quarter, gross margin for the company would have been an excess of 30%. This is why we are so focused on achieving commercial success for our REG and Ship Protection System products. R&D and SG&A expense for the third fiscal quarter was $9.8 million as compared with $10.3 million for the same period a year ago. The decrease was…

Thanks, Dave. I'll start today with our Windtec business unit. As I mentioned earlier, during the quarter, we announced what we believe is a seminal business arrangement for the company. AMSC entered into long-term strategic agreements with Inox valued at approximately $210 million. These agreements include a multiyear supply contract. Under the supply contract, we will manufacture and deliver a specified number of 2-megawatt ECS to Inox about $200 million worth. We expect to complete specified deliveries under the supply contract over the next 3 to 4 years. The pace of deliveries will be dependent on how Inox fares in the market, but there is more. Once the specified deliveries under the supply contract are completed, further revenues are expected for at least an additional 3-year period, during which AMSC will provide Inox with the majority of its 2-megawatt ECS requirements under a preferred supplier arrangement. The value of those future deliveries is not included in the $210 million figure for the supply contract. What that means is that we will be supplying 2-megawatt ECS to Inox for what we expect to be the next 6 to 7 years at least. This is a long-term partnership. Because we still have backlog with Inox under the previous supply contract, we expect that deliveries under this new supply contract won't fully begin until the first quarter of fiscal 2016. We also entered into an agreement to allow Inox to manufacture on their own, as a second source, the 2-megawatt ECS we provide to them today. For the transfer of this technology, Inox will pay us $12 million; $6 million upfront and the remaining $6 million is expected to be paid as milestones far completed during the succeeding 15 months. Once Inox sets up its new manufacturing operation, they will be allowed to…

[Operator Instructions] And we'll go ahead and take our first question from Colin Rusch with Oppenheimer.

This is Kristen, actually, on for Colin. Dan, you touched a little bit on the Nexans. Can you walk us through the time line for the design process of that and when you expect to be able to deploy that wire?

Yes. Let's talk a little bit about what we're doing with Nexans to give you some more background. So we have a relationship with Nexans that goes back many, many years. And you may recall we've done a series of projects globally with Nexans, mostly focused on transmission cables. We've worked with them and we've developed distribution cable products. The gap in their product portfolio today is they don't have an offering specifically for REG. So the news that we're making is that Nexans is investing in the development of that product, and we're at a qualification stage. That qualification stage will take several months, several quarters to go through. And at this point in time, what we feel comfortable with is we have additional monies for the program with DHS that take us through at least the remainder of the U.S. governmental year. So we announced that back in a few months ago, about $3.7 million of additional funding that has been let against the $60 million contract. These activities are planned activities against some of those milestones. So this is a key piece of the product development process, and it'll take up some of our time this year in 2016.

Okay. Great. And then if you could also talk a little bit more about the Chicago project and what you're expecting in terms of what the other utilities are looking at and are they deciding to work on their own projects? And sort of an update, too, on the Pepco and Eversource studies.

Sure. So what we've attempted to do with the program with DHS is to really broadly open up a pipeline of opportunities for the REG product. We've announced the program with Chicago being the first. I think we clearly have a program that's set up to get a lot of important things accomplished here in 2016. As I mentioned, with that $3.7 million of spending let against the contract, we're going to start to procure long lead time elements for the project. It doesn't mean that we're ready to go into construction, but certainly, DHS is pushing us to make sure that we have all of the risk reduced to be ready to go into construction as soon as possible. We have to continue to work with the utility and work on their timetable on how they allocate budget and how they ultimately get cost recovery for the project and for the hardware. We mentioned in the remarks, more than a dozen utilities in the U.S. we've had conversations with. Some have done studies that we haven't yet announced. The 2 that we have announced are Boston and Washington, D.C. To talk specifically about Boston, we know there's a need. We know where there's a need, and we know how to fix the problems that have existed in Boston for many, many years. Boston is changing. There's been a lot of investment in the Seaport area in Boston, and a very small company that we know and we like very well called General Electric is coming to Boston. So we know that there are challenges on the grid today. We know that a very large company like GE is coming to bring additional employment into areas of the city that are challenged by the electric grid. So we think that…

[Operator Instructions] We'll go ahead and take our next question from Amit Dayal with Rodman & Renshaw.

In regards to the business coming from Inox, will we need to move around resources to accommodate that demand? And how should we expect the grid side of the business to fare in this environment?

So specifically with Inox, we've moved a lot of the production capabilities from China to Romania. We set up the Romanian operation to be scalable to meet the near-term demands of Inox. I think the good news with the Inox deal is we don't then have to go set up -- we do not have to go set up an operation in India to manufacture. So we're going to be manufacturing out of a Romanian facility and exporting from there. We're able to expand that, I'll say, relatively easily when you think about capital standpoint. The tested assembly operation that exists in Romania is very capital light when compared with our superconductor operation here in the United States. It's really test-equipment- and general-assembly-type operation. So we are in constant communication with Inox about their demand, and we need to make sure that we can deliver all those sets that they need, and we look forward to being able to do that in this quarter and the coming quarters. What we feel with having stability in that Inox relationship, knowing that we have backlog, knowing that we understand their growth plans that they're looking to really potentially double their output here over the next coming quarters or years, so as they bring more manufacturing capability to bear, they're in a market that's growing that we think we can build the rest of the company, particularly the Gridtec piece, around what we're doing with Inox. So we reported for this quarter, really, the best quarter in D-VAR in a long, long time. The pipeline and the activity that we see in our sales team, we've been able to expand the conversations that we're having, the number of conversations, the number of people out selling the product, and that is helping the business and to deliver growth on the Gridtec side. But I think what everybody's ultimately waiting for is how do we show additional traction with the Navy. So we have the $8.5 million contract that we are procuring against. We said in the remarks that we would start delivering revenue against that in 2016. And I just gave what I hope was a pretty thorough update on REG. So the growth from Gridtec is going to come first from growing D-VAR, adding the Ship Protection product and then really kind of blasting off with REG.

Understood. Just a follow-up on the backlog. You, I think, mentioned, backlog is around $82 million. Can you comment on the timing for this $82 million? And why we are not including the $210 million from Inox in this?

Amit, it's Dave Henry. The $82 million of backlog covers 12 months. We report a 12-month backlog. So the $82 million is the amount that we expect that we will be shipping on the -- over the next 12 months, and that does include a portion of the $200 million supply contract with Inox that would go out through the first 9 months of the next fiscal year.

And remember that $210 million is really over a 3-year period, maybe a 4-year period, depending upon how they fare in the market. So you're basically taking the first, as Dave said, the first 9 months of that contract and putting that into the 12-month backlog.

[Operator Instructions] We'll take our next question from Jeff Osborne with Cowen and Company.

Just a couple of questions. On the REG side, you certainly have given all the detail on the call, but I just wanted to get a sense, Dan, in terms of the DHS appropriations process. Can you just touch on how much of the $60 million has been utilized at this point? What your discussions are with them about additional funding? Do we need to wait for a new President to be elected? Or what's the process there in terms of timing? And then also, you alluded to, but didn't give much detail, on rate base approval and kind of the process there. You mentioned you met with numerous politicians in the state of Illinois. Can you just touch on how those meetings went and what the likelihood of a PSC approval, how quickly it would be?

Okay. Yes. Let me try to backtrack all those things. So what's been appropriate, the first piece of it was $1.5 million, the second piece was $3.7 million, so that means you got $5.2 million of the $60 million that's been released. What we then have to do is year-by-year, go with DHS, it's just part of their budgetary process, and allocate monies and milestones together. So every year, we will do that, and hopefully, we can continue to report more monies being let against the $60 million. Historically, we've been very successful in not only being able to make sure that the funding that's been described, meaning the $60 million, but as additional funding, if it's necessary, or if it seems important on the fact of the government side, in many of our programs, we've needed additional money, we've been able to secure those. Now I'm not saying that we're actively doing that now, but I'm trying to give you some color and, therefore, some confidence that, although all $60 million doesn't get let, that's -- even if they're going to build a large ship, all the dollars aren't let for that ship. Whatever's let is whatever is in that fiscal year only, then you have to go back and get reappropriated each year. The thinking is, once the government is started to appropriate funds towards a program, their intent would be to continue appropriations through the duration of that program. And typically, and in our case, I think without exception, that's happened. So that was the first part. I think the second part was about the governmental meetings in Illinois?

Exactly. And the likelihood of a swift PSC approval process. And when would that need to be involved? Is there -- is that one of the milestones that DHS is requiring? So add up any of those...

No. It's really a ComEd milestone. I think, in life everything is a double-edged sword, you can see it as being very positive. You can also see it as being somewhat negative. The utility hasn't really blinked at how they're going to get recovery for this. And I think that's very positive. I think that they're -- clearly, there's a strong desire at the top to make this program go forward. If you speak to specifically the meetings that they've had around the program that are public, they're very supportive. They're very overwhelmingly supportive of this product, that it's something that needs to be done. They're very happy that the federal money is involved to help reduce some of the risk. So at the top, the utility is very much acting like this is definitely going to go forward. I think the challenge is in doing the work, going from, hey, we can get recovery through a variety of ways, to actually choosing a way and getting that done. We've had a series of different incarnations of the design. We've settled on one that we know will work and we know what the cost of that will be. So we think that's all positive. But I can't tell you with any certainty when are they going to go to get recovery, will that be on the distribution side, will it be on the transmission side, will some assets be transmission, some assets be distribution. At the end of the day, those are going to be ComEd issues, ComEd decisions, and we want to be able to support them as they make those decisions. We want to make sure that everything we do allows the program to go forward as quickly as possible. But we do have to be respectful to our partner in ComEd. They're trying to be the real first major implementation of this project in a grid for a real need, for a permanent placement of the product in the grid. So we have to constantly be respectful of their process, their timetables. And we do get feedback from them. We think this is going to happen. We think that's going to happen. And what we've chosen to do with you all is to not talk about what we think but talk about what we know. What we know is we have the $3.7 million let against the $60 million contract. We know the milestones we need to go deliver over the next several quarters to realize those revenues, and that's what we're focused on in addition to supporting ComEd with their needs and with their process.

Got it. Last one is just sort of relatively quick one. Can you just touch on the wind side? Is there any other discussions that have perked up beyond Inox given the magnitude of the...

Sure. Every quarter, there's somebody and there's interest in trying to license technology. We get inquiries about products that we don't have. And we have to look at is, is there an opportunity to develop a product or a solution that can meet a market need. What we're trying to articulate to the market is we're focused on getting this company to grow to a size where we can habitually generate cash. The good news is that we said that we would do this for the December quarter, and we're now reporting that we did it. In the remarks, we talked about that as well for the March quarter, and we'll all check back in the spring to see if we've done that again. So we're in good position. We're focused on the things that are going to deliver the growth and get the company to -- revenues to grow to the size that's necessary to generate cash. That does not mean that there aren't additional opportunities. We tend on these calls and when we're out speaking in public to not talk about those because we don't want to confuse investors or make investors believe that something dramatic is going to change in the next 1 to 2 quarters. The things that we work on for new product development, for new partnerships, these things take year to years. And the good news is, given the stability in the company, that becomes more and more the focus of the team, is how we grow and how we get there.

[Operator Instructions] And speakers, it does appear we have no further questions at this time. I will now hand it back over to you for any additional or closing remarks.

Thanks, Tanisha, and thanks, everybody, for their attention. This was a great quarter. I don't want to undersell it. I mean, we thought it was going to be good. It turned out to be great. A bunch of things happened that turned up to be very, very good for the company. I think the balance sheet is in a great position today. We're getting -- looking at the March quarter, we're saying it's going to continue to be in a great position. What the company is now focused on is supporting Inox with their growth, making sure that we are doing our best job in selling and installing and commissioning D-VAR units across the globe but really making sure that we birth properly these new offerings, the Ship Protection System product, which we do have a contract for; and the Resilient Electric Grid product, which we do have a contract for. So we're in a really good position. We're looking forward to come back to you in the springtime and report again, hopefully, making more progress in the company. But things are really haven't been in this position in a long, long time. I think and one could argue that this is probably the best position the company has ever been in terms of revenue diversity globally and revenue diversity from business unit or product line standpoint. That's what we're trying to build. The basic pieces are in place. Now we look forward to continuing to look to grow revenues over the coming years. Thank you, everybody. We appreciate your time and attention, and we'll talk to you soon.

And that does conclude today's program. We'd like to thank you for your participation. Have a wonderful day, and you may disconnect at any time.