Good day, everyone, and welcome to the American Superconductor Fourth Quarter Fiscal 2020 Earnings Conference Call. Today's call is being recorded. And now at this time, I'd like to turn the call over to John Heilshorn. Please go ahead.

Good morning. Thank you, April. Good morning, everyone, and welcome to American Superconductor Corporation's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. I am John Heilshorn of LHA Investor Relations, AMSC's Investor Relations agency of record. With us today on the call are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer. American Superconductor issued its earnings release for the fourth quarter and full fiscal year 2020 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 would like to remind you that various remarks that management may make during today's call about American Superconductor'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 set forth in the Risk Factors section of American Superconductor's annual report on Form 10-K for the year ended March 31, 2021, which the company filed with the Securities and Exchange Commission on June 2, 2021, and the company's other reports filed with the Securities and Exchange Commission. 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 certain non-GAAP financial measures, non-GAAP net loss and non-GAAP operating cash flow. Non-GAAP net loss is defined by the company as net loss before stock-based compensation, amortization of acquisition-related intangibles, acquisition costs, changes in fair value of contingent consideration of warrants and other noncash or unusual charges and the tax effect of the adjustments calculated at the relevant rate for the company's non-GAAP metric. Non-GAAP operating cash flow is defined by the company as operating cash flow before the China settlement, net of legal fees and expenses, tax effect of adjustments and other unusual cash flows or items. The reconciliation of the non-GAAP measures to the mostly directly comparable GAAP measures can be found in the fourth quarter and full fiscal year 2020 earnings press release that the company issued and furnished to the SEC last night on Form 8-K. All of American Superconductor's press releases and SEC filings can be accessed from the Investors page of its website at www.amsc.com. With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, John, and good morning, everyone. First, I hope all of you and your families are safe and healthy. It certainly has been a challenging year for us all. We're going to cover a lot of ground today, so I guess, buckle up, and we'll try to go through the highlights as best as we can. And hopefully, people will understand this is really a company that's headed in the same direction with more critical mass and more scale than we've had in a very, very long time. I'll begin today with a recap of fiscal 2020, which ended March 31, 2021. John Kosiba will then provide a detailed review of our financial results for the fourth quarter and full fiscal year 2020. He will also provide guidance for the first quarter of fiscal 2021, which will end June 30, 2021. Following our remarks, we'll open up the line to questions from our analysts. The team here at the company really handled a difficult year very, very well. In fiscal 2020, our Grid business grew by more than 40%. This is our sixth year in a row of growth in our Grid segment. D-VAR grew, SPS grew and the prospects here seem great. VVO grew and continues to gain traction. Our NEPSI acquisition contributed to revenues, and REG is expected to come online this summer in Chicago. The growth exceeded our own expectations and is a testament to our team's ability to execute. Full year revenues for the entire AMSC business increased by over 35% year-over-year, driven by growth in Grid. In October 2020, we announced the acquisition of Northeast Power Systems Inc., or NEPSI. The acquisition of NEPSI directly aligns with our strategic priorities to accelerate profitable growth independent of our wind business, broaden our product offerings and expand…

Thanks, Daniel, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2020 were $21.2 million. This is an increase of 17% compared to the year ago quarter of $18.1 million. Grid business revenues of $19.4 million increased by 49% versus the year ago quarter, while wind business revenues were $1.8 million for the fourth quarter of fiscal 2020. Moving on to the full fiscal year. Our total revenues for fiscal 2020 were $87.1 million. That is a 36% growth in revenue from the previous year. The revenue growth was led by our Grid business, which experienced a 42% year-over-year increase, thanks to growth from our D-VAR, VVO, and SPS product lines. Additionally, our NEPSI product line contributed to our revenue growth in both our third and fourth quarters of fiscal 2020. Grid business revenues represented 81% of our total fiscal 2020 revenues. This marks the sixth consecutive year of Grid revenue growth. Wind business revenues increased 16% in fiscal 2020, primarily as a result of increased shipments to Inox and growth to our spare parts and service business. Gross margin for the fourth quarter of fiscal 2020 was 13.9%, which was flat compared to the year ago quarter. For the full fiscal year 2020, AMSC generated gross margins of 20%. This is up from 14.8% in fiscal 2019. The year-over-year increase in gross margin was primarily a result of a favorable product mix and improved overhead absorption driven by higher total revenues for the year. Additionally, during fiscal 2020, wind revenue experienced a favorable shift in product mix with growth in both Inox ECS shipments and our spare parts and service business, which positively impacted both revenue and contribution margins for the year. Moving on to operating expenses. Research and development and SG&A expenses totaled $9.5 million…

Thanks, John. In fiscal 2020, our Grid team performed again. Grid revenue grew by over 40%, driven by our new energy power systems and our ship protection systems. Our new energy power systems, which includes D-VAR, VVO and NEPSI and going forward in fiscal year 2021 Neeltran, is supported by an expected strong base of projects in the renewable and industrial segments. We are growing and diversifying revenues by geography and by market. The diversification into industrial is what we planned with the acquisitions. Our growing list of repeat customers is the testament to the quality and performance of AMSC's products and people. We're focused on supporting our customers' needs and maintaining a timely flow of product from our factory to the customers' site. Our manufacturing team is performing very, very well. We anticipate that the new energy power systems should provide a strong base of grid revenues. This expectation is driven by our strong Grid backlog. Fiscal 2020 was a strategically important year for REG. We broke ground on Chicago's first resilient electric grid system in July 2020. We completed the fabrication of the REG cable and system for ComEd, which utilizes AMSC's proprietary Amperium superconductor wire. And we delivered the REG hardware to the site in Chicago on time. We anticipate the REG system to be energized this summer. We believe many utilities are interested in seeing the performance of our product in Chicago. We're also developing opportunities to deploy our REG product in other utilities across the country, and we believe the energization and operation of this first REG system in Chicago could be a catalyst for Exelon and other utilities to begin deploying our state-of-the-art solution. With the first system deployed, we believe that future deployments of REG will be derisked. U.S. utilities are focused on…

[Operator Instructions] And we'll first hear from Colin Rusch of Oppenheimer.

With the integration of a couple of new businesses with complementary solutions, can you talk about the potential to optimize the design of those products and simplify some of the interoperability, some -- derisk the supply chain and some of the cost savings that you might see and what the timing might be on seeing some of those benefits?

Sure, Colin. Let me unpack the different pieces to it to kind of go -- kind of what our priority order are. One of the differentiators of the D-VAR or a VVO or a NEPSI product or a Neeltran product is energy density. So in almost every type of market that we serve, we sell the ability to do less civil engineering, to do less overall cost on construction because the footprints of the product are significantly smaller than a potential alternative. And that's true across all those classes of products. Frankly speaking, it's true of ship protection systems as well. It's about density and about being able to do more than what an incumbent can do. So I do see the potential for some supply chain leverage. There are some commonality in components. There are certainly some commonality in suppliers. There's definitely, on the front end, commonality in customer base, which is where we think we'll see most of the initial leverage coming from. So I can imagine integration of the supply chain should potentially yield benefit. We don't have on the books a program in R&D to look at a new class of product that combines the functionalities. That's obviously something that we could consider in the future but would come at a cost, right? So given where the business is, we're trying to be able to grow through the front-end leverage, be able to produce and continue to produce good margins and improved margins over time through engineering really of the supply chain. And you do get on a potential leverage in the future of combination of some of the functionality of the product. Now that being said, we do have a few customers that are interested already in seeing integration of what we do with D-VAR and what NEPSI does with filters and the cap banks. So when you think about the way that these products are constructed, it's very much the same. There's a mechanical closure or a metal closure that puts it all together. If we could imagine, basically having a series of phase where you have the different components fit and depending upon what the customer wants, that may be a pathway that doesn't involve a lot of R&D. But I want to say, clearly, we're not looking to invest further in R&D to further hone or develop next-generation products in these classes. Today, we're focused really on growing this business getting the leverage that we can, particularly on the front end of the sales channel.

That's super helpful. And then on the business, obviously, you guys are going through the process with the implementation and the next steps, but can you give us a sense of the pipeline of interest level? Obviously, as we move towards the net-0 economy and increased reliability on -- or reliance on electrical infrastructure, reliability can become a very important element of what happens here. And so I'm curious like how those conversations are evolving? And any incremental interest that you're getting on that product?

Yes. I think what we're seeing are some early indicators that the economy is really positioned well for a rebound in the coming, call it, year. You can see our ability to convert pipeline into orders demonstrated. We just put out a release yesterday where we have $19 million new orders in the new energy power part of the business. That doesn't include anything for Neeltran. Going forward, certainly, it will. So our pipeline continues to expand. We do see the beginning of cross-selling leverage, meaning basically, we were presenting a NEPSI product and we're able to sell the D-VAR product alongside it or presenting Neeltran or NEPSI product and be able to sell the other piece of the business as well. So those are all great prospects in the short-term given the fact that we're only into this a few months in the case of NEPSI and really [indiscernible]

Next we'll hear from Eric Stine of Craig-Hallum.

So just -- maybe just coming back to NEPSI and Neeltran. And I know it's early with Neeltran, but I'd love to hear just some thoughts or feedback you've gotten from the market regarding them being under your umbrella and then are there other areas that would be logical to add to your offering given you've done these 2 and to further expand, I guess, into -- well, both renewable energy, but more so in industrial?

Yes. So I mean, let's go back to kind of how all this came into being. We had a relationship where we had done work with NEPSI. We realized that we were both going into the same either kind of project or same exact project. It seemed to make logical sense to expand our market and expand content by bringing NEPSI in house. As we sat down with the guys at NEPSI, and we asked them the same kind of question, do you see companies that are doing the same kind of thing with you, they may not necessarily need a D-VAR, but they need what you guys do and obviously the customer needs what the partner company would be offering as well. And that's really where we were introduced with the ideal of Neeltran. We know them because they've been around a long time. We know that they're very respected in the market. They have a very well-controlled niche. A lot of what they do is similar, as I said earlier, in the packaging and making it smaller. So it just kind of all fit nicely together, right? And then it continues to push into industrials. You can see in the press release we highlighted there's expansion with the orders in semiconductor, which is great; expansion of orders in renewables, which includes also orders for NEPSI there in areas that they weren't fully focused on. But now today, combined, we certainly have a great channel to market there. So that's kind of where we stand today. To add other pieces, sure. I think right now, what we're focused on is we want to make sure that the organization on the Grid side can deliver the growth that we think is potentially here in this part of the business. Certainly, we have an offering inside the wind turbine in our Wind business, and we have offerings inside ships -- the ship protection part of our business. We can expand in any of those dimensions. But I think for right now, what we're going to focus on is the integration of the industrial part of the business and the front end overall on the front end, continue to focus on getting the next SPS platform, continue to focus on servicing our wind customers at least for now.

Yes. No, understood. Very helpful. Maybe just turning to VVO. I know that was a component of the order announcement yesterday. Can you just give us an update where things stand maybe in terms of number of utilities that you are shipping to? And I know the ultimate goal is that this would just be part of regular order patterns. It'd be a stocked item for utilities. Maybe where you stand in that process?

Yes. I think, frankly, speaking VVO is the one part of the business that may have seen some order flow and some pipeline development limited by COVID, simply because of the access to labor and the ability to do these projects. Typically, how a utility looks at it is they want to do -- wonder a few on their own, get some operating history [indiscernible] and then look at replicating. So we've been able to do that with a number of utilities. We've been able to expand the number of utilities that we have additional products with as well. But it's hard to attribute things to COVID or not because you don't know the world without it, right? But certainly, we've had projects that have gone through some delays in VVO specifically just simply because of access to labor and prioritization [indiscernible] That being said, if you go back and look at the order book, we just put it with the 19 order -- $19 million of orders, there's a nice chunk of that for VVO. It's really revalidating the application for rooftop solar. And it really seems like the guys at NEPSI and we'll see with Neeltran are excited about the industrial prospects for VVO, which we've done some business today. So that's about as much color as I probably could provide you with today.

Okay. Got it. And maybe last one, just for John. Just on the margin side, maybe just some of the puts and takes, fourth quarter was down? And just some details there. And obviously, your guidance implies a rebound in the first quarter, so maybe just some details there in the thought process and that outlook?

Sure. So you're right. In Q4, our gross margin was down at around 15%. There was a fair amount of revenue associated with the progress we made in ComEd and DHS. And as you recall, that's a cost share project. So that will have a drain on the gross profit. And quite frankly, our business quarter-to-quarter -- I mean, you can see the fluctuation in our gross profit quarter-to-quarter because of the nature of our business, we're project-based. There was nothing in there that alarms us. When we look at the total backlog and the total revenue profile for the year and when we look ahead, we did come in at 20% for the year. So we feel pretty good about that we hit that threshold of 20% gross profit. So as we finish the ComEd project off this year, that drain will go -- that drain on the gross margin will subside. And so that could smooth out gross profits in the future a little bit. But realized accounting [indiscernible] revenue profile, Eric. So there's a whole created, and we don't see -- we're basically done with the project from a billing and from a delivery standpoint. So that means we don't have planned revenues really for REG going forward for this year because we don't have the next project set up yet. So if you do look at year-to-year growth, we're kind of starting down in a whole without that additional REG revenue.

And that does conclude the question-and-answer session. At this time, I'll turn the call over to Daniel for closing comments.

Thanks, April. In fiscal 2020, we grew Grid more than really what we had anticipated. We're executing on our vision to create a super grid and a super ship. A super grid that enables more renewables on and resiliency for power grid and a super ship that allows for greater resiliency and operational capability for our fleet. We provide a control technology that helps orchestrate the rhythm and harmony of power on the grid and protection expands the capability and resiliency of our Navy's fleet. We will continue to work hard to deliver resiliency to our power grid and Navy fleet, and hopefully, that's music to the ears not only of our customers but the markets that we serve. John and I look forward to reporting back to you at the completion of our first fiscal quarter of 2021. Thank you, everybody. Have a good day, and stay safe.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.