BWEN - Earnings call transcript Q2 2021

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Operator

Greetings, and welcome to the Broadwind Second Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Bonfigt, Chief Financial Officer. you. Thank

begin. may You

Jason Bonfigt

We outside welcome remind Leading Broadwind statements, our the I'm company's Blashford; and the release are questions results second opened market CEO, conference on quarter quarter conference to and today CFO. the Bonfigt, call. call Jason a call I the which, commentary to nature, management's morning, press second before the of may XXXX Eric issued would Good today results. our that and and forward-looking by control. today's uncertain their detailing like include XXXX you company's responses to is

these actual based results Although on beliefs, materially. differ expectations and are statements may management's forward-looking current

refer annual the of some discussion For to that and a Risk please of factors our with Factors quarterly section cause the SEC. actual filings latest could of the results differ, to

find of you the the call the Additionally, for conclusion the call issued can non-GAAP note that, Eric. release will we over questions. our press reconciliations please during With measures turn in the I'll open financial our remarks, of line prepared At discussed morning. to that historical this

Eric Blashford

Thanks, global in and chain business challenging our first to welcome and After joining to quarter, today. Jason, us stabilize quarter. the a second began supply those

near-term into towers was in have current QX the by we delivered result tower dampened to a raw wind pushed but As net wind expected, by expected of tower The that sequential revenue investments second decline higher the ship impacted costs been material in increase customers. year. year-over-year were sections we as half in sold,

half have of XXXX orders tower through optimal XX, for about capacity XX% production. approximately booked of of received have We XXXX our tower July wind for and second XXXX XX% our the now

tax increased subsidy creating Department year on mentioned XXXX, call, XX% together December wind, include law, an a provision our the at ITC the catalyst medium for for Biden into tax and a year of the significant wind approved If U.S. demand June or PTC, XXXX. Congress term. administration's including planned passed company additional the of the over for demand. through onshore the XXXX. I expects administration's offshore Treasury fiscal tower the would XXXX published the production offshore proposals projects for extension credit, PTC last the PTC, potential In provide level, from for in of multiyear the an extension with XX% tower As XXXX, new earnings These the proposals a

Mackenzie, cost over of for recently the by natural policy forecast and energy wind of with leading the over to result installation decade. of the next XXX-gigawatts a installed favorable a commercial backdrop provider wind its onshore levelized resource As decline XX% intelligence raised sector, continued of nearly world's the

increased products produce has one ship that still with eased As continue which the and we wind. key a fabrication customers' in near-term we supply the customers particularly exceed in materials pandemic, acute our in throughout past dampened to headwind investment capital inflation and the our Cost year. to of significantly cost and have that meet constraints precise while present, This on respect remains has QX. Pandemic-related often requirements. for done is chain steel,

a developers raw next direct waiting only tower year. to some efforts are pushed commodity wind has orders PT balanced risk, material we when customers price against align potential minimal This, into to While absorbs believe for normalize. with extension Broadwind costs projects

orders. softness in during Our helped tower to performed diverse intended non-wind end as as market quarter in offset growth strategy markets the

as and believe orders markets our are inventories. year-over-year replenish Gearing both generated to energy are our end energy steel Our and and supported their from placing backlog orders recovering segment growth industrial by revenue, We in significant demand markets. non-wind customers

orders to tower Fabrication year-over-year, with deals for the world primarily declined new third to the in flow this fabrications. $X.X year, that remains through we non-wind adequate variants, the credit this of open. but orders Quoting order the in and uncertainty. markets good a continues The million. and facilities from time and our industrial people remainder uncertain as activity total declined the at we and be safe us mentioned. of our Our to liquidity pandemic our expect We line actions take period business of to our to support segment, continue provides full impact delay anticipate strong, revenue I of current by previously Within cash attributable our especially our the Heavy our with gearing under keep availability

achieve a turbine we quote continues, basis, to customer components summary, $X she passed continue market. gives X% increased XX than diversification energy tubing gas to XX administration. the up the extension We in multiyear particularly under orders of over logistics met. as to how we've lower million doubled our but customers' the on revenue stabilized current PTC, our the delay while order the development looks driven nearly factory with pleased law Gearing, in US, keeping global year-over-year responding activity supply which anticipated for tower Industrial reduced quarters for activity the I'm the OEMs chance and seen our albeit Solutions and the Revenue ramp good while is quarters. challenges in multiple and still We the of it produce to chain customer Within business an in XX% the demand expect particularly year-over-year, materially steel to our fully a into all recent more improvement from throughput, should months, our in as segment pleased wind people first how better see In delivery delays. in team of and between by safe needs declined being present, a I'm to next second international to has solid and sectors. due a that us if

joint and exposure markets. our expertise manufacturing tech evaluate we clean to continue to to venture and before, leverage that As bolt-on existing acquisitions seek actively partnerships

We a our base and financial quarter well-established complementary continue for assets to and/or or diversification consider over further Jason customer I'll strategy. second a accretive support high acquisitions opportunities cost revenue turn that, With product our of businesses performance. discussion diverse to back lines for of with call the synergies, that

Jason Bonfigt

Thank you, Eric.

Turning to overview X for slide an of quarter second our performance.

credit. demand, million factors, of Second year-over-year of $XX.X million due quarter were to lower On consolidated average a sales sales a adjusted wind of which in a $X.X orders includes reduced the compared products was industrial benefit segments, lower driven in XXXX. a by million, which price of the EBITDA of $XX.X $XX.X PPP declined prior-year million and towers $X.X across QX selling on is loans to employee the number for sold our less million forgiveness demand quarter. with second mix including the tower basis, half associated retention and

a our resulting As call, our EBITDA the ERC the is financials we year. the from to experienced component in of throughout pandemic-related utilized last conference credit as payroll segment be increased disruptions costs will on highlighted offset

in the As loan QX received EBITDA application the in lender received adjusted We million to approximately forgiveness previous calls, our in has forgiveness we segment we forgiveness under highlighted on loans. on and subsequently our financials. included $X.X non-GAAP Paycheck PPP our Program. of all are SBA submitted also and amounts Protection proceeds

in increased fees to expense Interest quarter a coalition prior $XXX,XXX tower legal associated trade declined rate. with Second case. $XXX,XXX our expenses our year debt reduction levels operating due primarily from quarter increased to and in lower to the $XXX,XXX year-over-year, due borrowing

Fabrication to our of and X Heavy for slides segment. Turning X a discussion

in $XX.X to sales were consolidated results. driven million million quarter, factors $XX.X quarter the aforementioned compared Second by the prior in our year

million $XX.X two new were orders with orders from turbine OEMs. quarter Second tower

we've of period tower in As versus XXXX. production our XX% this during sold the XX% optimal approximately of second XXXX call, half same capacity

in mentioned, to material capacity not pause orders of the anticipation of the costs. likely full year PTC upside the rising a impact do is industry Eric extension pauses we see year. Further contributing As industry the new our steel of utilization the across as in to tower later

steel typically While half that cost represent increases in often steel wind risk a the influence approximately assume contracts, project of our pricing we significant tower Recall not prices steel tower. do viability. in of prices

in the million or For second tower PPP loan forgiveness. segment we EBITDA XXX $XX the excluding the sections $X.X resulting of million adjusted quarter, impact after sold of

plant our sell utilization discussed turbine cases multiple as as diversification industrial we over which run strategic key several earlier, of which our well product cycle. objective a order million continue been us towers to This is line, fabrication now over a annual at has the in rate customer OEMs, As we success improve to several years. allowed to expansion has past $XX and trade the

Turning X, segment. Gearing slide I'll cover our to

and the recovery and We position economic markets. are by industrial within encouraged energy our

the $X.X XXXX. $XX million $XX.X to double in new to customers last period resulting in Year-to-date orders is capital a in environment QX for Following recovery last has improved commercial in dramatically have Energy in and the comparable spending Year-to-date Industrial million, with response XXXX, in $X.X economic X.X a the our million. six XXXX resuming of to rebounded year of to are recovery. approximately restocking months orders times, compared orders inventory and million The book-to-bill the backlog nearly year. levels challenging of

loan the increased generated or in EBITDA, segment forgiveness. primarily year, in with sales result QX $X.X $X.X $X.X from We the a of to quarter Second associated energy million benefits versus in increases PPP segment prior customers. in million the excluding of demand EBITDA million $XXX,XXX

million a recovery customer. backlog. top from the $X.X largest a throughout QX, against Industrial in year gradual as recorded period, Solutions orders new its we execute our from in XXXX primarily $X.X expect We to the elevated of of performance line begin prior bottom result and timing down of orders to compared million

that healthy, supply end of its we markets, towers Our against expertise and pipeline opportunities that the internals chain can and leveraging customers activities order. business remains quoting execute global are is new including its encouraged of first now

was forgiveness. from declined in related million given sales segment quarter global chain $XXX,XXX, to $X.X and supply the Segment challenges. order EBITDA loan year includes $XXX,XXX Second prior to timing million adjusted PPP which $X.X

Operating quarter $X.X of subsequent to increases end. working invoicing accounts million or deposits balance to Customer and Turning X% led deliveries our to to receivable declined at timing. late million increased modestly sequentially capital in customers $XX quarter order to slide due XX. sales.

credit facility includes balances in second the availability decline under of million quarter, in As to remains quarter $XX $X above healthy cash liquidity inventory and which last our nearly approximately of normalize historical cash our expected million Total at they and levels, sheet. call, million. by and on $X we with end, had balance our did indicated

for in be previously, QX. proceeds the mentioned XXXX, to ERC balance with to benefits $X.X qualified million date, we As $X of half in collected netting cash the first of of million cash

ATM million an stock as in under $XX approximately we million offering, QX, offering which proceeds. announced, QX. completed cash was During netted was And at-the-market XXX,XXX of $X.X issued the previously shares common of authorized

As on as trailing debt a June declined loan debt and PPP finance with X.X million approximately sheet million, net XX-month our the with obligations a of balance to $XX XX. declining EBITDA And net result leverage increased us forgiveness, times of basis, by optionality. providing year-over-year we reduced $X to

release be expect this our $XX issued million $XX to morning, range the to in press between noted with $X we of expected revenue in quarter EBITDA million As million. million, to third be $X.X to

Additionally, sales we pause decline a the to year-over-year fourth tower basis XX% orders. by new in quarter on given anticipate

some markets for As QX. for a to in the an turn concludes end result remarks. That the to anticipated qualify overview of I'll likely sales, will over in remarks. again addition Eric ERC lower back benefit call my concluding of we

Eric Blashford

Thanks, Jason.

discussion Turning some for encouraging outlook And slide wound signs further are our market. there for here. domestic the to XX of

renewable XXXX. longer-term PTC the much recent in PTC investment, steps a drive consideration extension a through administration that to taken already have friendly We including incentive has of

mandates renewable the In thousands energy to to prior a to infrastructure extension Congress of expansion Wood presently of provision upgrade represents the this onshore for expects it addition forecasted the of during It's cost considerations, getting infrastructure an years which attractive X for continued energy. wind for to the a both expectations their has miles through which wind next the consistent a In supports away wind aging new commercial installations worth the designed our states individual those US, the the year-over-year remains fossil modernize energy. forecast, for of as meeting high next fuels power will and to with with a demand as ESG decade. each and service is This PTC is primarily this facilitate and new coast transmission demand in term. the believes a area into put of Woodmac significant to off source revised anticipating the legislation for probability from of drives in of lower forecast. of Mackenzie additions new job driver of move with Furthermore, working key buyers major medium long Broadwind noting Offshore for growth passed engine mandates through in in of renewables. it clean growth view. framework, nearly XXXX, continue that be gigawatts to bipartisan upon our new includes in be growth XX to foundation industrial creation state lines power an to eastern the installations increase, capacity

look mindful support our continue across to make world markets while to diverse we strategy future. end a proudly the number we outside cleaner to staying of progress As wind, transition of energy exciting a of long-term

revenue production one non-wind workforce leverage segment, allows non-wind tower streams. to of and other to may In our Fabrication working orders overall our continue generation, marine Heavy throughput. clean our sell to facilities renewables central mining are our wind capabilities and to us material asset we power to quarter-to-quarter, industrial Today, to as our core segment, and business, and includes the remains XXXX capacity and wind, markets. which our into forms initiative utilization diversification customer vary even skilled handling segments power penetration expand remain we include optimize plan, the our as and our our improve add Our fastest-growing that from

complementary entry industrial possible turbine to continue as the We of our offshore points in customers. expand evaluate mix the US to fabrication continue we market of for

making the opportunities continue some growing also pressure positive less by with internationally We've very customers energy more improving leveraging toward with industry July, both bring show This quoting focusing the delivered our domestically to existing mix order in proprietary our internal innovate, and to new precision EPC through expertise. our the our competitive which content most manufacturing new primary and technologies reduction to trade grow space. the and are Texas system growth increasing we both In at on than one to We an remains market path wind dropped unveiled repair on have Industrial in are three customer component content see the market. first the a throughput. available share, wind And emphasis tend will Solutions response. actively for This is in-house in natural it sales both driven the stream has growth are value-added our XXX technologies we forward pipeline more uses installations spaces. of in the in of support we domestic to In our markets to new shift revenue carbon-friendly In opportunities. as oil. decade, energy and will and and development we opportunities additional to into last ongoing business long-term coal such replace segment, decade, categories. continue to to summary, business clean the first, and cleaner that market, virtual burning which segment, a factors: added of upgrade working the transition. cost balanced more designed the offer build expand repowering be energy gigawatts mid a is the by fuels infrastructure, our Gearing system fuel In planned less dramatically continue gearbox within participant the given cyclical integral more while We our over energy active wind our including and new custom capabilities the of next offshore and an gas onshore

which PTC certainly mandated is Act Second, of a wind. ESG Paris to growing encourage the the GREEN the finally, wind, we and for supported investments will administration, and policymakers Accord. by voluntary announcements incentives to pro-renewables ITC initiatives, And Climate demand and the both reintroduction in have providing drive including continue

organic the to session. the I'll to are pursue We that balance capitalized cleaner in given world's moderator strategy. to well opportunities With committed support inorganic the both and back being call Q&A growth a over continued participant the that our of for the a turn And to sheet, are energy transition future. we further strength said, vital our

Operator

you. Thank

a your we now will We One please questions. Instructions] [Operator conducting be while for poll session. moment question-and-answer

Please line has ROTH questions. the first Capital come Our your of Partners. question from proceed with Clare with Justin

Justin Clare

Hey, questions. the guys. for Thanks taking

Eric Blashford

morning. Good Justin. Hi,

Justin Clare

Good morning.

production the How you've that do seeing schedule wanted stronger - potentially So, where ahead compare time year? see indicated here? to does of talked to know wind Is of off, in you tower be that about first is booked. this these you're a I delays XX% of to delays to you orders. expect I would typically XXXX XXXX? that lead already you

Eric Blashford

certainly bit little schedule XX%, schedule. than normal patterns. a actually of We ahead order to head more of like we're We're have

Jason Bonfigt

the the I four some for think at that's of to But typically months. is additional the lead that something year, five of projects. trigger extended extension, if likelihood times consider the can could at that to the end PTC given components be

a strong into it's little the at early So you of might back XX% year QX. or to read a too the see probably half bit this time. really But

Justin Clare

And Got then your guidance it. Okay. here. turning to

unlikely second optimal about know you getting bookings Or add now? at for year, that to capacity. you above there Are tower to to I back add booked XX% talked get this bookings? Or in year is opportunity need you of And additional You've right late currently for do half at level? XX% potentially this but the half is the that XX% point? then, production it's

Jason Bonfigt

weighting production. our question. have backlog with in of start There's I'll that today. do the more for towards We the first XX% part QX

going we little morning. lighter, in and this release press bit a So, to be indicated our QX that is

Eric Blashford

of calls, be into times steel point Yes. at due the Justin, time. things of it But as possible. on would difficult before talked especially say, this we've I and about likelihood QX, lead would it's internals, given to technically

Justin Clare

Okay.

more and your know margins. seen And one particular. on squeezed the I of a contracts? for pass-through, bit in higher And a pricing yes, wanted for then Got steel customers the just margins you pricing? We've to the customers the Okay. materials impact so but it. increased a to Any get looking as steel there? is steel, for to some raw share are margin any see from of your change change result

Eric Blashford

are factories say, are would optimize as sure for make our our costs conversion to Justin, as effective to customers us be. I our can they Yeah. looking always

to our asked optimize take been haven't again, We to are risk of try that, as costs make or with no, steel to designs possible. best are directly them But we increase. compress sure working their result to steel a as margins conversion the

Justin Clare

Okay. Thanks, guys. Great.

Operator

you. Thank

Our come your line next Eric question. questions Please of the with proceed from Stein Craig-Hallum. with

Aaron Spychalla

on Thanks Spychalla taking the Eric. Great. for Aaron It's for questions.

Eric Blashford

Hey, Aaron.

Jason Bonfigt

Aaron. Hey,

Aaron Spychalla

of out provide and policy just no first, pushouts like onshore. and lot roughly strengthening it's back then you push on your of on how is sounds can for costs? Maybe despite you on gave mean, just great half that backlog confirm business kind breakdown between the a end? orders detail the And demand loss But It current and I of a this uncertainty the backdrop all the materials real actually look. and mostly

Eric Blashford

Yes, do believe I certainly it's push out.

value 'XX very If 'XX. When is consideration, suggesting lift that to ultimately the steel scenarios, us. a buy the tailwind price even a has them at itself PTC yes, in XX%. a certainly Green a for provided projects PTC, some which And onshore, And more to from material than to PTC you Woodmac's a project increase of really price assumption, significant of has steel. but obviously our in for they're these in take of XXX% a the Book bit a take an you the and and is PTC having look developer at the Aaron, look lot to the of

uncertainty impacting, and the of kind reiterating PTC So and a both commodities question, steel, price impact. the I steel but is of the uncertainty has think they're PTC greater

Aaron Spychalla

maybe then second And offshore. Thanks. Understood. on

increased a see to how You it Can on results? activity there bit. touched positioned can seeing nice give a getting and color you lately. on start little you're to We've little maybe just when that we some been more contribute there

Eric Blashford

- take tends bit the to We're look to monitoring East at shift what's that ports these if our for But a little things, developers. how the the the - is Coast. market our these a delayed. in Yes. investment discussions us. timing in. be things as project space, definitely East about, calls, one And on in because in in tend you order from developers major ones need to stakeholders viable OEMs on for the presentation, still to contracts a the - of multiple growth previous remains Coast. as reminder, support We've to determining that the the even and/or talked We've both and got are I've this they're just an this we're in best activity such alternatives We're multiple make of order off to we avenues this table got for up. we've it with firms evaluating customers of size, and but wind we And firm service projects, offshore they we're right pencil

Aaron Spychalla

there. Understood. nice outlook in margins? Can the perspective? talk of of kind the about we for an And seen through activity XXXX. years past to the back just in EBITDA then pickup go that some mentioned from rebound You a you've that the maybe few for one get as more Can margins you Gearing on me, segment,

Jason Bonfigt

Yes.

some operate So, changes have introduced our how quarter, greater the we million that's to of mix we our focused that the There's revenue by been today. products customers. within are there's margins, we and the been EBITDA new in $X and range business products, above $X are being history XX% when has than $X generated per million on

XX% EBITDA issues. term, or always we're the be But greater start-up related those So margins. we over segment that long targeting through are still to that than business working

Eric Blashford

thing diversification expand product penetrate come markets, us. and temporary And markets bit as increase designed want we our new is may Aaron, that's to for add that on pressure to positions a in a of sometimes and we new would at our the that, a for those But especially take Yes. base. I only to margins,

Aaron Spychalla

questions. taking for Thanks Great. the

Eric Blashford

Thanks, Aaron.

Operator

you. Thank

questions. from Sameer Joshi Our H.C. with Wainwright. line next of your with proceed come Please questions the

Sameer Joshi

Is just that bit right steel So because shifting on this Or and the booked. clarification little maybe XX% because PTC a of prospects? is of of pressure mainly is it capacity price the it... to

Eric Blashford

we absolutely... Yes,

Jason Bonfigt

you question? the to had sorry, a I'm second part

Sameer Joshi

No, no.

on... Just

Eric Blashford

Yes.

again, a forecast, the think, increasing. take if at it you definitely I look is

but as this So developers is pause, customers maybe evaluate be hesitation this increase, going we're definitely to and what very of there excited rationalize. and about PTC level steel is at when starts that to

firmly So longer-term a has market. I believe and the it impact to out no slide

Sameer Joshi

And just bit clarification. another of

steel profitability terms In segment? price of in - steel prices, there the factors? your other is are it gearing impacting Or

Eric Blashford

Outside of within should company project based, all well, all all our the our our including - POs say towers, of gearing. company of our are projects I are within

So locking securing sort are is at same time that prices what contracts. are are we we our the steel customers doing in of

taking price So steel that we're risk. not

way So cost customers. steel long a on we to passing increases to are our say,

Eric Blashford

quote a gear that XX your any uncertainty if we weeks be that Brad XX where steel because of it the Said the now, divisions, different duration you or can we Yes. less way. the Robin see make Foote of the want prices sure days a now you Because is could it receive. days we the or two quoted or are of be price is might that to of - of of the customer steel would your price

Sameer Joshi

Or upgrades and services? focused? that be into in may the - of heard and Do buzzwords diversifying I EPC into discussion about indicate your acquisition as and will you well. it you non-wind, about And those expansion repairs think Understood. be product still terms talk I

Eric Blashford

No.

smaller targets repairs the businesses. As often maintenance, focused those their we're how and and food foot them customers in would the gearing may be gearboxes they they'll get bad I in learn far upgrades first That them bolt-ons we the learn that to market. or accretive no, gear or mentioned some not be M&A, fact. and and Brad helps But us as help when M&A, that our problem that Brad tech not, and with our a Foote on be with new because may then active existing tends are know clean then for after certainly, to brand. it more and existing the box buy have about new

Sameer Joshi

one And one. last it. Got just

what statements? the expense queue, information of could meaning this the trade terms long how case, the but to you tell expect in if In you you incurring do be is are maybe there of that just us level and now, on expenses

Eric Blashford

don't provide would have flowed through QX, level but that some financials. QX majority that disclosure. in complete. might say those a We residual it's already of of and I But our SG&A Yes. There largely, expenses be

Sameer Joshi

you. Thank Understood.

Eric Blashford

you. Thank

Operator

Thank conclude teleconference. your participation. you. do further we time. for This you this There are questions With at that, thank does today's no

You may disconnect your this lines a at time. Have great day.

Broadwind (BWEN) 6 Aug 212021 Q2 Earnings call transcript