BWEN - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the Broadwind Energy Quarter Two 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

to and conference CFO. like Bonfigt, to now President Vice would turn over the Jason I Please ahead. go

Jason Bonfigt

Thank you me and Broadwind Energy's President second good CEO, COO, morning and XXXX and conference welcome Eric earnings Blashford. call. Kushner; With Stephanie today Broadwind quarter are and to Broadwind

This news available release on bwen.com. website at morning's earnings is our

will financial plans Before today, like would call Actual I we outlook and differ these this statements market some materially non-GAAP include forward-looking forward-looking to will reference and results may statements. also begin measures. regarding caution our some you from that

consider Please information. including incorporated We assume refer will to the the our or SEC to X-K our obligation Form no morning and filings attachments there, we any and Form disclosed this later filed future-looking that statements with the SEC file uncertainties today. in update we risks our and XX-Q

the that, I'll said Kushner. Stephanie Having turn over call to

Stephanie Kushner

morning. Thanks, Good Jason.

the million. growth. of We $XX.X and strong $XXX to our revenue our with in booked all bookings million backlog guidance of second segments $XXX Revenue in quarter. line showed our The orders million was boosted

Gearing gas remains a $X for revenue segment. spot a We in margin million. customers, operating a reported XX% was XX% our oil EBITDA some demand and weakness from bright margin and this despite

EBITDA Total positive was EBITDA. segments all operating and again $X.X generated million

inventories we steel and $X Our to balance convert sheet continues bank improve half to our liquidity will continue million as the strengthen. risen to customer quarter-end, had At in advances. second and

result do our couple business up industry team. safety up as year. Tower risk supply this despite a farm proud stepping industry chain and last some averages our see and delivering that for plants I'm years. fact production Our wind the both are operations ramps level. strong our our development well of We we're in performance the is than our better running of performance They're

is we wind that materials install for the for towers. Demand tight our inside raw particularly inner components

to work through aggressively and managing and shortages expected the are We timing issue.

navigate not Assuming on our year can these through problems, outlook the has we changed.

of million $XXX We expect excess EBITDA total $X revenue million. of and approximately in

We Turning as Heavy and Heavy customers up booked and existing bring. Towers continue grow quality, recognize steadily to and we This to our in half the orders. new manufacturing engineering brings $XX book-to-bill X.X to times. both fab first million orders Fabrication. capabilities welding,

Towers, the In we've orders agreement couple has three-year signed now supply a spike been in XXXX in factors. of reflects fulfilled. Tower The

So for two that run-off. the up farm largely next higher backlog installations the plus is industry And over ramping is years. wind

was it orders So time get to placed. those

market efforts in we diversification booked stronger are order a with a fruit bearing and a large Additionally, customer. our new

were relatively orders seeing from and there's weak to as the mills first Gearing oil are lower been falloff bringing million from we in X.X. and book-to-bill gas demand at steel In well. recent general, demand customers half a $X.X

million. at gas we Process other small for Systems customer the are we largest and Encouragingly started our some in turbine seeing build $X.X flat materials orders support OEM. new was gas some from of book turbine for recovery about to have demand to

the company wind diversify reduce or from power industry shows next sales blue The The demand. and mainly of revenue dark chart the wind portion to which along top the on progress updates is reliance our the path power. to slide wind the

other in potential will less any to we're into production continue to power wind we make the at of to Although sales next industry industries slowdown. want growing be years, that our so during least progress the high couple wind steady vulnerable

The serve. we reflect other industries colors other

of about up a revenues been have to these $XXX to revenue this $XX grow run you is million built could million. see to medium-term our annual share rate, As about target non-wind organically

markets. our on comments few A

outlook for PTC, should the meet the the been which as medium-term out. drop-off, the XXXX has work developers for remain said strong requirements the wind The I which least improved. of As U.S. expected, to markets is long at has phasing

be the for. could we market less decline than rapid planned So

heavy product gear been we been strong off oil our customer somewhat fallen and the frac fabrication remains growing has fleet past us. said, this and two broadening of as have has gas of base pumps weaker. in And are years the The as and not Mining which year in fleets utilization has and quickly as impacted this I also the market. existing

coming this resources sales and accordingly. into year anticipated realigned our We the

out in second recovery half the have until anticipated now pushed we to which appears However been year-end.

some deferred of demand in from recent expansion. who customers their softness some steel We've seen have also capacity

And Cicero adding However because the some customers growing. also accounts. has demand and have for rebuilt been we been do both new industrial Pittsburgh in growing been other gearboxes, which we've

target So year. summary, million we diversification with $XX this diverse from for a customer customers continue in to bookings on focus

We track with at this are on mid-year. goal

invest sales We continue to support in execution. our and mix to our systems changing improve

the margin initiatives competition strategy improvement our reduce strong track to we're continuous and largely manufacturers. Our cash cycle or year. from modifying to conversion due compression our are more support by steel procurement at aimed market average offsetting We're XX% on to offshore this

talk And more Eric over a I'll to it about with our bit turn businesses. little to that,

Eric Blashford

Thanks, Stephanie.

Moving capacity Tower be plants. of scheduled expressing to OEMs installations. continues activity to strong our interest several tower with us orders placed Coating in orders at Towers million and robust turbine were both as to meet Heavy Fabrication $XX with segment. QX customers

and other Fabrications line grow. marine, construction, continues industrial mining, to markets Heavy operates Our which in

$XX for in business year. orders million have so approach reminder, should XXXX a grown from less As million $X they this this than

provide capital grow our investments to to a continue customers. complete We to this more for solution and business make

up volatility at the quarters eight X% sold XXX last production the slide. on our quarter tower consistent the over evidenced the We during graph The is XXXX lower the of left hand sections of QX with sequentially. and

ability to production pleased albeit are relatively lower two flex capacity. and for operation consistent this meet to are levels team's with demand production We stable our choppy to have encouraged quarters

level. our our expected employee above levels quality, retention and We productivity, improving, at proud that remain are delivery safety or are and metrics while

maintain year sound. was low core team period to last late a skilled of during highly decision production of a critical Our members

seeing now are in rebound demand. we that anticipated the Given

we and a runs careful track. on taller heavier process is quarter Abilene producing larger is new trend these our of toward Tower is equipment the model which taller Towers and planning, requires During than towers. production and heavier modification, a require indicative plant previous on started Texas Producing and market

CI This throughput improved that require team is the welding. used them weld towers This quarter of This make is as more sicker. get necessary to our weld our means rates. they get the increasing place deposition line on larger and and especially working

Fabrication plant. they handle continuing the Specifically weld for flexible we large Abilene cells our of added orders well that equipped in the are plant; to Heavy two Texas business, in influx

the new plant. table our rotary our to our large pleased are machining center with capacity adds we in that Additionally, Manitowoc, Wisconsin

pleased efforts report has key the that near our have on XXX% We with focused on-time tower now. production workforce, remained for the and cost even our And choppiness I'm resources our welding, several delivery and coatings. years of assembly, resulting to machining, to impact in

was second million EBITDA of QX million of in quarter in XXXX. versus $X.X million $XX.X sales $XX generating the versus $X.X QX XXXX million

Downward from competitive Power Purchase or pressure towers pricing Agreements imported PPAs and persists.

forward far expand this a than added The continues we've to XXXX, product Looking concerned. be benefit. production and providing we're that so to as up it's shaping pleased line fabrication balance is year are XXXX stronger commercial year of the to resources the

interest handling our our they shipped which seeing onsite markets. continued us. in addition our deepwater projects mining Wisconsin. is barge strength for see facility via so efforts leverages advantage that are port Manitowoc, to markets large be also to in sales increased We're from strategic in and yielding excited We're construction and This material at our diversified in the must transportation a orders the

software this to plant. We're forward going the all scheduling live through projects quarter production running and new visibility with of improved our look our

to Wisconsin operational machining which early expect plant during mentioned second last Manitowoc to in I adding our a our we XXXX. As are be call, I large center

tower $XX quarter, In the million. reflecting expect $X.X the EBITDA production $XX range of $X.X to range million be million to with to third the in million we higher revenues

Moving to and recently. stated oil last Gearing. I softened markets gas have quarter

Our business. in sectors and coming in seeing OEMs seeing the we're in major as we our are from orders diversification working are Fabrications Heavy mining efforts industrial just as

broadened offering Fabrications. both customers purchasing cross-sell gears, heavy bearing to and as Foote the full are Gear kitting Heavy assembling, efforts Our more gearboxes, are Brad capability some fruit early and fabrications, from

As sector conviction you revenue from wind, replaced by the industrial sectors. and the that We're largely gas result the necessary with diverse the are that on in market, was and revenue oil sales reduction pleased and reinforces really highlights the graph our this can effective. by it mining, efforts see both increases in as our

on we're markets with QX added The and nice project customers special application focus remain some diverse traction. early steel industrial and of a material markets handling. blend such and balanced in the management resources as seeing and direct other mining, sales on a focused seek We

line. times CMMS increase Maintenance really have we added and business, growing new things machines implemented team We our improve Computerized to our the maintenance going are lead our to uptime horizontal support embracing well. custom happy this throughput or System change reduce is to To I'm say gearbox that two and milling and for machine Management

now in and half our effective the last offering turn to production initiative permanent are first customers quick emergency doubling our year expand more year. gearbox custom for with get we a is in on a focus solution revenue our Additionally repair to this them. been business service developed Furthermore gearbox has versus of in back XXXX

operating delivered income $X.X QX million up $X.X on million X% was of XXXX of of XXXX. EBITDA revenue QX to $XXX,XXX as revenue. and We compared

be continue We year place yielding operational improvements in consistent are the results. that pleased to put last

the year for Gearing XXXX. reminder, a QX in improved results financial ago As a began

get going our So forward, will tougher. comps

million lower million. margin QX in $X.X EBITDA to expect to We in revenues but $XXX,XXX the million mix range $X.X to yielding be $X.X of

reflecting XX% Moving up onto versus was Systems. Revenue productivity. increased XXXX QX Process

loss were costs price for $XXX,XXX sourcing a our and to Our our positive impact to made The targeted million margins. earlier adjustments prices EBITDA this versus yielding quarter with of packaging same QX year $XXX,XXX sales $X.X the better last year. favorably align continue EBITDA

throughout trend this continue We the year. expect to

to And efforts business key a priority. coding diversify this is for encouraging. Our customers activity diverse remain

and management We supply assembly outside are fabrication, gas will customers turbine confident chain the services business. benefit that our kitting,

power In target fact, market for we us. the recently for orders booked several solar a small industry

resources opportunities fit Our resources orders. our that supply we gas have the a those QX increasing support believe coding chain quarter and and customers diverse opportunities we through our our as we that include are The we are we upgrading execute improved good have turbine expanding confident customer in aftermarket last development within on performance business. focused will for identified opportunities share existing operating strategy. diversification our market And Concurrently, added our business delivery yield opportunities. priorities

range expect revenue QX near EBITDA. with $X million break-even to in We the be

Jason Now I'll turn for it over his comments. to

Jason Bonfigt

Thanks, Eric.

driven increases fabrication sales and and Towers majority by unit $X.X sales heavier, $XX.X in consolidated steel and improvement segments. attributable each of price million, tower XX% was million complex represented escalation. were revenue QX up to year-over-year designs, more driven up year-over-year. our The the increase business by of

deliver We mix our continue and Gearing customers performance to higher sold improved diversified well the Gearing business. was operational in product throughput across in markets. quarter end the and And

Gross in profit change improvement point was primarily year-over-year X.X% segment approximately improvement Gearing margins in the sequentially. QX, a The basis QX results. reflected driven the year-over-year improvements by improved XXX significant operational to and

Our business. focus this transformed margins. supply and ongoing driven on chain plant focus execution, have and continuous improvement strong gross centered also around the in product quality, line investment throughput, And Heavy Fabrication has our efforts on cost improvement management

gains line. Tower year-over-year pressure product on offsetting was the our continued Partially margin

to to margin lower to Our pricing In points plants. basis increased Tower our and EBITDA idle imports. and competition by many had from Fabrication our and temporarily driven XXX ultimately retain workforce by not competitive we circumstances, our become conversion declined have segment

charge Operating a quarter year reserve. million and net year of of Prior million was a release in impairment quarter which goodwill $X.X prior the $X $X.X included earn-out during down then the million $X expenses $X.X were non-recurring of quarter. million million the from

incentive approximately was by of in amortization offset Lower intangibles partially $XXX,XXX increases of expenses. compensation

to continue below expenses operating of XX% revenue. trend Our

consolidated range, QX $X.X million ahead was our year-over-year $XXX,XXX netting EBITDA improvement was and one-time Our items. after guidance was and in of out

the from I $X.XX during quarter year a loss a the operating compared adverse mentioned included the current quarter We had prior to $X.XX a year non-recurring $X.XX in which earlier. expenses impact loss

several down of is As days XX at supply reduced more slightly credit expected, increased to increase due delayed Tower and and This projects significantly highlighted conversion QX. due version by at inventory end in to of days terms table the DPO norms This on DSO by the XX year-end our in delays of primarily improved to turns of to cycle driven by left our to was from rebuild we which processes ship four compared of focused collection our historic overall end XX the and chain. improvement customer QX XX primarily the days the offset to hand less the days continue quarter-over-quarter that from QX. was period days heightened cash slide to on mostly as at payments ends. will

As our a customer's has as to this included on utilized result, calls, noted turn inventory our inventory on should balance million last of and be XXXX. I of in approximately year normalize over have this inventory the that we year, will healthier steel previous behalf. our value $X.X levels of procured Most

working Operating I $X.X described million by by conversion cash cycle the driven capital the quarter during changes earlier. rose same

a deposits working as as was to XXXX scheduled capital Tower we substantial rebuilt We in our Tower and expect it build production to run-off. have levels

the the of graph of slide quarter operating to sales the during according range. per be our the hand an on historical within continues right to Our working $X.XX side performance on acceptable increased and capital dollar to

to are cash cycle We conversion continuing target improvements.

of are XXXX working capital in operating We in levels. deposit estimating $XX cycle. a cash we lowering cents corresponding our in to our operating improve to increase capital million dollar working result an by operating per balances $XX a million year-end announcements, order capital QX, conversion and working recent estimate and As will that improvement

Our line $XX.X million attributable increase, solely fewer line X/XX. last increased reduced at balance credit million in up under credit to balance availability availability the of of were line capital as credit at $X.X the credit from was to which working $XX.X our was line outstanding $X rise million credit level letters debt quarter compared last This quarter. of X/XX the despite increase million

the planned, The as rise inventory our of last year. in Towers since rebuilding in end million required investments to $XX capital levels business in build was working working has amounting operating capital

and As working a I liquidity. in capital sizable repayment, QX improvement in operating a of noted improved credit line further collected, as in are resulting previously deposits

expense. which Cash were positive minimize end. was mechanism a quarter Cash near the effective zero to receipts practice interest this at customary line is in

approximately capital investments. to Our expect budget remains these of finance we for at million and a portion $X XXXX

our Our investments. product expanding share Fabrications for Gearing's larger line capital a allocation philosophy future remains and on performance warrants focused of financial

new plan impact of Additionally, sizes and investments make the weights support Tower capital evolving of we to the designs. to

we for focus In new two a into begin are market summary, by for us quarter and we had a that of tower sizable encouraged Tower visibility to end diversification customers. orders customer the XXXX, key solid and new provide been from has and Fabrication booking orders

last continues segment business healthy Gearing This $X.X EBITDA half to results this Our break-even generated has in generate the of returns. million of year compared to year. first

We are the and progress of diversification customers operational our the over sustaining performance. along look our businesses past with year and further proud products strong to of forward

$XX revenue approximately is million. to be $X.X guidance QX summary above Our to and million $X.X million EBITDA

EBITDA as our Although rise revenue do sequentially, not was up expected. estimates

business. We competition our in Gearing have production headwinds pricing lower in a including Tower less a number profitable intense of from margin was from QX manufacturers along with driven foreign mix which

a full-year year we backlog of EBITDA. this of majority Our and target to $X continue target million supports our revenue

said, constraints extending seeing given wind the levels as times chain and are Stephanie industry. the we in supply activity lead higher However

on risk We more are provide and this working our in progress to mitigate updates QX.

the and back operator you I'll the Thank to Q&A session. for turn call the

Operator

We will question-and-answer [Operator now begin the Instructions]. session.

The comes question ROTH go ahead. Capital Partners. Justin with first Clare Please from

Justin Clare

questions. Everyone taking my thanks for

Stephanie Kushner

Justin. Hey

Jason Bonfigt

morning. Good

Justin Clare

anticipate the Tower know large some a So increase revenues us you risk. higher this then see start how chain with you into XXXX. And can I for to from saw supply you give QX? moving quarter out then trending early and wanted we given I revenues in I your guess you orders first QX mentioned just that Do sense

and limit elaborate in could growth wondering that just if I'm on you that QX? the say a bit So could

Stephanie Kushner

to Jason that I'll start may and want add.

internals basically, expect we we're really to invoice I able our for sequentially. So is that grow supply think revenue would wouldn't the so we Towers, of them. unable the portion to The we to need if question be some chain get

growth to We've of better. about this stronger know that booked but some way, would XXXX we mitigate of QX, so. meaningful a much got capacity in it could be And only time, come up at QX do in our is or XXXX. so be we'll XX% doesn't just that So the it if expect

quarter As about we'll confidence have the -- that. over the more next

Jason Bonfigt

I revenue. about to million above -- expect still still think we be $XX we think expect for I

Stephanie Kushner

Yes, think be that $XX even I with we million would above we risk do ship we them. better if will able to are

Justin Clare

that backlog Could Okay, some the okay you in anticipate margins potential more recently associated you can all those like do you've headwind then your mitigate some you the QX. with that's broadly tower have -- you to Or improvements you that about margin orders helpful. And won, you there's mentioned that it. to that won or headwind? also orders the headwinds orders and of talk do for see

Stephanie Kushner

less pressure we're not it’s Well we're year. a going that only just also may booking it's busy favorable be is What is QX competitive next is market mix. a seeing to be now

our prices is as we an but trend. there bit a to as would see upward maybe much So little are like Tower firming not of

Justin Clare

Okay.

Okay, great. of of Department the And into of imports week wind then, so investigations initiation Commerce the earlier announced towers. utility ADCVD scale this

So wind tariffs about if you what there was market? the the probability and trade domestic given case, that could for could experience are talk actually your with mean that I implemented the XXXX wondering

Stephanie Kushner

we I the -- don't damage part dumping have industry damage pursuing the sustained to guess if countries wouldn't also good like on be as I in these we've and there handicap was of didn't dumping others and that really sustained of except evidence we say well. of it it to up and think

then and determinations initial determination I'll There be over there. will obviously determination be so relatively or it's But in four website. a will Time detail will after maybe think tell, months, a whole the there's stop days XX be some on will there lot I by the a about the Commerce process. five XX in months Department of Commerce of process that. Department fast

Justin Clare

Right, right.

Okay.

been is to it tariffs could just -- understand is I So trying be one thing that the have retroactively applied. possible

So the you changes in and if conditions do case in that anticipate any market is near-term? the

Stephanie Kushner

the countries not from I And helpful domestic uncertainty six tariffs a is be would out. than think that it to application manufacturers. some for the of the these earlier obviously purchase making adds about any which months

Justin Clare

Right. Right.

shifting then and Okay a gears bit.

could was mentioned then increasing bit much and just there to of cross-selling customer. efforts detail I your segments different targeting the that from You you maybe in customer are your a how you making? about same that you're if give the products wondering business type on more talk progress you're little

Eric Blashford

Yes, the Eric. question. we for broad thanks Well have is offering. This do a

welding If target -- even large very as for a or have port, equipment you a handling heavy you the a a plus mining such think target a of or a of material a dump large truck precise material piece the assembly. some and equipment lot required lot there, structures handling gearbox about products mining of piece,

is encouraging our that people remind can of and cross line the can that's there about go out talk we provide traction. let for had what a need competently announce particular on they product mentioned service service. doing additional that enough and And are mature sell but sales to So trained the not other wouldn't couple. have they primary customers do their -- capabilities divisions, being only we so it's have to this I'm the certainly that this say starting I glad you [indiscernible] that. that it's We've a say gain some customers because we frankly them that but

and handling Fabrications. Foote We from Heavy and wins they where material industry construction in have mining buy Gear both had Brad some and

Justin Clare

of me one business, Okay, And terms $X XXXX. Fabrications was I $XX orders think Heavy one believe about then I of great, you maybe versus talked this million year, final your that's helpful. in from million in

Eric Blashford

Correct.

Justin Clare

is this of Can kind you could fairly business? we here this the growth talk potential been about can far. so be what expect obviously How big it's business for meaningful what and because

Eric Blashford

trajectory I think continue. the can

over $XX what the five But I could our be or million could do within the capacity. markets trajectory a even could at million business we our and plants, we're possibly think next $XXX even three continue to to years. think our I looking plants like things the expand and

Justin Clare

Okay, okay.

Eric Blashford

That’s certainly our objective.

Justin Clare

okay. Right,

for think will it for I Thanks do that's the me. questions.

Stephanie Kushner

you, Justin. thank Yes,

Operator

Instructions]. [Operator

concludes to This our the turn session. for back over remarks. Kushner closing to Stephanie question-and-answer I any ahead. Please like go conference would

Stephanie Kushner

strong making beyond Thanks some positioned well particular this XXXX and your feel that. Okay. in -- and we're we're very particularly attention. to strength for encouraging and We like progress exit year

we next Thanks forward again quarter. to So look you and updating bye-bye.

Operator

The now today's concluded. conference presentation. Thank for you attending has

You may now disconnect.

Broadwind (BWEN) 2 Aug 192019 Q2 Earnings call transcript