Good day, everyone, and welcome to the American Superconductor First Quarter Fiscal 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Heilshorn. Please go ahead, sir.

Thank you, Sharon. Good morning, everyone, and welcome to American Superconductor Corporation's First Quarter of Fiscal 2021 Earnings Conference Call. I am John Heilshorn of LHA Investor Relations, AMSC's Investor Relations agency of record. With us on today's 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 first quarter of fiscal 2021 yesterday after the market closed. For those of you who have not seen the release, the copies are available at 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, including expectations regarding second quarter of fiscal 2021 financial performance, 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 subsequent reports filed with the SEC. 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 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 non-GAAP net loss, a non-GAAP financial measure. The company believes that non-GAAP net loss assists with management and investors in comparing the company's performance across reporting periods on a consistent basis by excluding these noncash, nonrecurring or other charges that it does not believe are indicative of its core operating performance. The reconciliation of GAAP net loss to GAAP net loss can be found -- to non-GAAP net loss can be found in the first quarter of fiscal 2020 earnings press release that the company issued and furnished to the SEC last night on Form 8-K. All the 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. I'll begin today by providing an update on our Grid and Wind business units. John Kosiba will then provide a detailed review of our financial results for the first fiscal quarter, which ended June 30, 2021, and provide guidance for the second fiscal quarter, which will end September 30, 2021. Following our comments, we'll open up the line to questions from our analysts. At the top, I just want to say, I'm very excited about the progress we've been making on the REG installation in Chicago. Both teams have been working very well together, and I hope that we'll be able to update you soon. We are growing and diversifying our business. Our Grid segment revenue for the first quarter of fiscal year 2021 grew by more than 30% versus the year ago period and accounted for over 90% of AMSC revenue. In fact, this was the largest grid quarter we have had ever. Since the start of this fiscal year, we have been building momentum while further strengthening our backlog and extending our grid visibility well into fiscal 2021 and also a glimpse into fiscal 2022. This certainly is a very different and stronger business than it even was a few years ago. Our Grid business was driven by strong new energy power shipment -- system shipments as well as higher ship protection system revenues. Total revenue for the entire business grew by nearly 20% versus the year ago period. In fact, our first quarter revenue of approximately $25 million was our highest quarterly revenue in some time. Just so people understand the numbers a bit better and the impact of Neeltran. Remember, we said that we expected that Neeltran would be accretive to earnings per share within 12 months from closing, not…

Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $25.4 million for the first quarter of fiscal 2021 compared to $21.2 million in the year ago quarter. Our Grid business unit accounted for 92% of total revenues, while our wind business unit accounted by 8%. Grid business unit revenues increased by nearly 33% in the first quarter versus the year ago quarter. The year-over-year growth is due primarily to the revenues generated from both of our acquisitions, NEPSI and Neeltran. Additionally, we experienced growth within our SPS product line. Wind business unit revenues decreased 45% in the first quarter versus the year ago quarter as a result of ECS shipments to Doosan during the year ago period. Looking at the P&L in more detail. Gross margin for the first quarter of fiscal 2021 was 13% compared to 24% in the year ago quarter. The year-over-year decrease was due to an unfavorable product mix and additional costs related to purchase accounting adjustments associated with the Neeltran acquisition. I realize that with the 2 acquisitions being incorporated into our financial statements over the last 9 months, it may be difficult to get a sense of what normalized gross margins may look like after the full integration of both NEPSI and Neeltran. To help you understand what a normalized consolidated gross margin could look like on this revenue profile, I've modeled AMSC's consolidated gross margins, assuming that Neeltran and NEPSI have gross margins consistent with similar product lines like D-VAR. In that scenario, consolidated gross margins for the company would be between 20% and 25%, depending on product-specific mix. As a reminder, when we acquired Neeltran, we mentioned it would take up to a year from closing when Neeltran to be accretive to earnings. As we ship off existing Neeltran backlog and…

Thanks, John. The emergence of COVID-19 has created both operational challenges and macroeconomic concerns for all businesses. And now just after it seems we're getting back to business as usual, we see a surge in COVID cases due to this new virus variant. Throughout the past 18 months of the pandemic, AMSC has demonstrated it can operate effectively through times of crisis. We were early to implement physical separation at our manufacturing sites and did not miss a beat in production. We instituted cleaning protocols for our offices to help keep everyone safe and healthy, which is paramount. We are focused on our people and the parts to make our products as well as on strong customer service and product quality. Our factories remain open and have been operational throughout the pandemic. We have started fiscal 2021 on a very strong note. Grid represented over 90% of our revenue in the first quarter of fiscal 2021 and was our strongest grid quarter since we began reporting the Grid segment. Our new energy power assistance business is very strong, and we are beginning to see the initial benefits of our 2 recent acquisitions. Bookings are off to a strong start for the year. We have Shipped Protection System orders for deployment on LPD 28, LPD 29, LPD 30 and LPD 31. We are supporting Doosan's efforts to penetrate the offshore wind market with our 5.5-megawatt turbine. We are preparing for our onshore wind partner, Inox, to transition to a larger 3-megawatt class wind turbine for deployment in India. We are executing against our objectives, and that is to the credit of our employees due to their hard work and dedication. And I'm very proud of all the AMSC and ComEd employees that have worked very hard to make REG happen. We have delivered the REG hardware to the site in Chicago on time, and we believe many utilities are interested in seeing the performance of our product in Chicago. I look forward to reporting back to you at the completion of our second fiscal quarter of 2021. Sharon, we'll now take questions from our analysts.

[Operator Instructions] We'll now take our first question from Eric Stine from Craig Hallum.

Great. This is Aaron Spychalla on for Eric. Maybe first on REG, it sounds like we'll look for details there on the energization of that. But can you just kind of talk about the impact when that happens on maybe Phase 2, and you mentioned other utilities that are kind of interested in seeing how that performs. Can you just remind us of the opportunity there with other utilities as we look over the next couple of years?

Yes. I think it's an important step for the product being in a permanent installation, working with a world-class utility like ComEd and Exelon. We know there are other opportunities within the city of Chicago and within the broader Exelon utility. We know, as per our discussions with ComEd, they really want to see this thing operate at least a year before they go forward and make additional decisions. But the number of people that have been involved, the level of training, the level of deep conversations with such a broad group within the utility, gives me strong comfort that this is really a product that's needed now for the grid and solves a lot of those problems. We're seeing, I'll say, an uptick in demand and identification of specificity of products -- sorry, projects for the product in other cities that we've talked about in the past. I think the team has done a very good job canvassing the United States to look for potential opportunities to deploy REG. But I do think it's now all gated by successful operation for at least a year in Chicago.

Great. We'll stay tuned there. And then second question, with the infrastructure bill, can you just kind of talk about thoughts on that and how you might see that impact your business?

Yes. I think they all represent tailwinds. I think a lot of what we're doing is back in vogue. It's the type of infrastructure that needs to be spent on but there seems to be funding being allocated for clean and renewable energies as well as the systems like the grid that support them. So I think it's a very good time to be American Superconductor.

We will now take the next question from Philip Shen from ROTH Capital Partners.

Just as a follow-up on the REG project. I think back in June, Daniel, at our virtual London event, you talked about -- made a comment in just a few weeks away and just I was wondering if you could give a little bit of detail as to -- if you're seeing any bottlenecks or challenges as you guys kind of get to the final stages. Or is mostly everything kind of running smoothly? And I know your original target was to get this done in the summer but I wanted to just check in to see if there's more detail you could share.

Yes. I think that still targets on track. I see all green lights. And I hope that we can report back to you guys soon with some news.

Okay. And then I think in your prepared remarks, you talked about mining and semiconductor end markets has been a nice source of steady demand ahead. Can you give us a little more color on what you might be seeing there? Are you seeing kind of more orders from the same customers you've had in the past? Or do you see the diversity of customers increasing or possibly both? And then would you say that these are key end markets to drive towards your target of $30 million per quarter run rate for grid?

Yes. Everything you said and the answer is yes. So we're seeing diversification of customers. We're seeing repeat customers. We're seeing expansion of content per sale given the acquisitions. But just to kind of talk briefly, when we think about doing semi, there is a fit to add NEPSI content to what we do traditionally with D-VAR. We are seeing an uptick in orders to do exactly that. So that part of the acquisition certainly is working. Similarly, in mining, we see a lot of opportunities that have been coming through Neeltran, lot of opportunities coming through NEPSI. We're able to combine content on most of those opportunities, which again translates to even more revenue growth. We think that these acquisitions are a great fit to diversify our business. We love what we do in renewables and in wind, but we think we've added a few more markets here that we can go penetrate and deliver additional growth.

Great. And on that thread, in Q1, I think I heard you said that Neeltran did $5 million of revenue in the quarter. I was wondering if you could give us a more specific split of what your core revenues were for grid, and sorry if I missed it, and then perhaps what it was for each of the other recent acquisitions.

So we do break out wind. We don't break out the details within the grid. We did say that we added in Neeltran the $5 million, but we did say that the Ship Protection Systems grew. And that's kind of the length of the color that I can give you.

[Operator Instructions] We'll now take the next question from Colin Rusch from Oppenheimer.

In the Grid business with these integrations, can you speak to the cadence of the sales process? Are you seeing any shortening of the sales cycle? And then also, if you could give us an update on your conversion rate from pipeline into actual sales, how that's trending.

Yes. Those are really good questions, Colin. So I think what we're seeing is the cadence being kind of what we have thought. Typically, we think about our existing products closing anywhere around 6 to 9 months out. We see kind of similar timetables for NEPSI for some projects, maybe a bit shorter. We see similar timetables for NEPSI, but I'd say usually a bit longer, maybe as much as 9 or 12 months out. We do have some things that we're starting to book now that are 15 months out and more. So I think what we're seeing is strengthening of the conversion and more clarity on what the year is going to look like, and we're really comfortable to stand behind what we said about growth. The conversion of the pipeline, I think really where the team has done some really good work is strong identification of what truly is in that near-term pipeline for things that we can close in the next 6 months. And we've seen, I'll say, an increase in the conversion rate or the win rate. And I think that's, again, a testament to being able to deliver more content to the customer. A lot of times in projects, it's much more about the timing and the financing of the project than it is really losing to other parties. But we see that with existing customers and new customers we're able to deliver quotes with more content, and that's being well received.

That's super helpful. And then as you think about the medium term in that business, now that you've got a broader portfolio of solutions and I'm sure looking at a little bit of longer-term relationships with some of these customers, is there a really meaningful opportunity to evolve the portfolio and design out some of the components and some of the costs or evolve the performance of those solutions to serve a different need?

I think a little bit more of the latter. I think in the longer term, maybe some of the former are trying to find what that sweet spot is, particularly when we combine content from D-VAR plus NEPSI where we can buy content with Neeltran plus NEPSI. Are there ways to think about streamlining costs and supply chain? But really, we want to get the stickiness with the customer and to get the order size growing. So that the effort per order should be roughly the same, but the yield per order, we're looking to grow or enhance. So that's really the message that the team has.

[Operator Instructions] It appears that there are no further questions at this time. I would like to turn the conference back to Mr. Daniel McGahn for any additional or closing remarks.

Thanks, Sharon. I really just want to emphasize with people today. We're really going for growth here. We're starting to see the beginning of that in what we reported out for Q1. You see in the guidance, clearly that we're looking to grow as well in Q2. You can hear in some of the remarks that we made, John made about working capital and preparing for growth that we see growth coming on the horizon. We're driving the team to become a much bigger business with these additional acquisitions. We are acknowledging today that's going to take time. And we said that on the outset when we bought these companies that it doesn't happen in a quarter to resolve it. Good news is we inherited some great backlog with great customers. The challenge is how do we improve the financials on the orders going forward. And I was very proud that the team was able to generate even more orders this quarter than last quarter. I'm very proud that the backlog is expanding and the backlog is getting better financially. So we're really on the growth. And a lot of what we've talked about to put the company in position for the past few years, you're going to see that to come to fruition here in 2021 and certainly 2022 and beyond. Happy with all the questions with REG. Really excited to hear about what's going on. And we'll leave it at that and look forward to getting back to you guys with how we do with second quarter operations. Thank you, everybody, for your support and attention.

That concludes today's conference. Thank you, everyone, for your participation. You may now disconnect.