BWEN - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the Broadwind First Quarter 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Tom Ciccone, Vice President and Principal Accounting Officer of Broadwind. Thank you.

You may begin.

Tom Ciccone

to First welcome Conference XXXX and Call. morning, the Quarter Broadwind Results Good today Eric Accounting our Tom the is Leading call CEO, Company’s President Ciccone, Vice Blashford; and Principal Officer. the I’m and release before results. quarter We issued a the opened our today, market first detailing press today’s to by on their the uncertain out call I nature, to would commentary company’s responses forward-looking of you are remind like may control. management’s include that and questions conference which, statements, and

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

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

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

Eric Blashford

welcome us you, to Thank those And today. joining Tom.

As in order of investments activity solar our discussed PTC high in such potential a industry. wind credit of number the will production steel. temporary to Commerce XXXX as the in given of see case wind tax cost market We the could wind and investments, switching recover experiencing headwinds, a the believe federal we in or business delay to beginning due pause in is that and solar previous the the some from recent Department quarters,

our we we competitively the Labor recruit, meet customers’ managing current and liquidity focused expect of enacted but number to year-end to a cash and remained effectively to train We contracts have Our rising at we’ve recognition quoting remain non-wind talent of the end remains costs, our with a by demand. levels strong. but are XXXX. challenge, on markets retain programs need

gains million Fabrications we XX%, year-over-year. than of million During Gearing adjusted segment, delivered the XX% ERC excluding more posted EBITDA Heavy increased the in the $XX XXXX, which and year-over-year, by respectively. impact led And quarter of by a quarter, XX% revenue, first first increase $X and

We secure about optimal of in orders. so are orders capacity far, XXXX working We’ve for placed discussions our we’re and multiple OEMs. with to further turbine XX% tower

wind activity quarter customers tower inflation Cost key production after first wind of half increased capital the material remains steel, turbine of customers discussions our the capacity. during second X wind. quoting XXXX for materials elevated plate XXXX significant investment Our the The dampened the increases as tower and for near-term reserve remains a significant XXXX seen a of construction capacity of headwind and the regarding that cost year. over has began in in on last

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

Our Fabrication QX increase strength segments. a year-over-year, Heavy by million, in our XX% were and led orders $XX Gearing

our while million, strength segment our of year-over-year, of over energy in increase mining a XXXX, orders, $XX XX% record XX% saw Heavy a Fabrication $XX and XXXX segment Gearing increase Our QX orders continued to QX booked markets. due a million following

robust, gain Our and on fabrication Within shipments. Heavy fabrication to and order the quoting customers. in strong from activity year-over-year, Fabrication cost segment, to ability our activity. industrial book-to-bill segments good driven non-wind the flow increases new seeing our by Quoting revenue we backlog increased inflationary $XXX XXXX, a our through Gearing are especially we industrial million, And XX%, pass to repowering XX% and ratio a X. continue increased remains above with reporting expect all markets

resolves. year-over-year improvement for by through our or well pause us temporary QX to to turbine Industrial Orders million until customer we of wind continues. Revenue incoming the in were diversification our for pricing this and provide the supply segment continue quote segment Solutions as wind expand continues delayed Within policy activity headwinds demand and chain I’m Gearing, million our OEMs to will were into that anticipated turbine constraints. are XX% opportunities up $X.X pleased we due for in wind as approximately strategy produce to as dropped customer as In wind $XX several globally. business continue and shipments serve to our market revenue doubled the the multiple as the XX% energy strengthen, aftermarket recovers. tower seeing and gas We diversification revenue in we summary, uncertainty commodity segment work

Our team continue to well-documented supply and meet our as global has we responded people needs quickly customers’ safe. challenges chain our to keep the

to first We our and medium discussion a expect call a performance. to interconnection up ramp gradually development extension see the particularly PTC increased over term, of Tom With we quarter of for over activity wind the substantial that, the I’ll if back financial turn activity.

Tom Ciccone

Eric. you, Thank

to performance. Slide an our quarter for Turning overview of X first

First in quarter the Heavy year compared Gearing $XX.X prior consolidated our Versus the million prior in and year, segments. Fabrication million sales were QX to quarter. $XX.X sales increased

continues Our and in end almost operate commercial a all Gearing revenue markets. segment to environment in saw robust increase

from retention revenue, EBITDA line. the sections noted outlined year adjusted be Industrial to first million in order attributable repowering intake It Act. the breakeven QX year million byproduct tower XX% provisions credit a Fabrication but included in quarter. $X.X of Within CARES compared QX recognized the in should of that as as $X.X the QX, prior the a prior EBITDA flat a Heavy In the that to EBITDA employee adjusted as benefit increase record-level of were activity benefited we Fabrication an sold well for in increase segment, we product

when impact Excluding of by to employee increased the EBITDA adjusted of retention XXXX. the first the quarter credit, $X.X compared million

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

activity sales Manitowoc offset intake increased our year. increased of Industrial XX% repowering tower to in $XX.X year First increase $XX.X were were were due an million due as throughput when flat the quarter that to strong the was absence prior Tower Tower in year. quarter prior million, sections Fabrication in prior in order demand up quarter year operational experienced versus the sales production XX% XXXX. to prior in for compared versus also the sold the weakness as headwinds the by activity

First facility to available but quarter chain the and sooner orders orders temporary planned given business fabrication to be be wind were our product capacity received orders are servicing $XX.X has per we million, that period. helped on been demand fabrication pause There as in power offset region. overall Industrial Despite partially increase the with industry-wide mitigate our decreased production or soft for activity, projects, PRS softness doubled towers XXXX a XX% potential the to to expected were continues our Manitowoc challenges. of capacity focused ongoing year and as plan. than secure Abilene Abilene location prior Overall, in strong supply more to units. in pressure than industrial reduction other line orders due that projects production able interest QX Abilene as to continues relative system from

supply in challenges major customer with a Additionally, some work have Manitowoc. chain delayed

quarter, period. sections we During year flat the prior the tower sold versus XXX first

in from by as temporarily a some adversely the wind reallocating and activity. to months, been in last a impacted the tower lack sold production successful and end result, of have our capacity aforementioned Manitowoc, diverse industrial supply in section serve XX as where challenges, over chain has pressure Despite wind EBITDA power plant pause markets mining, inflationary our we such construction tower fabrication we However, and our demand been of energy.

the in sections tower QX. for levels Adjusted for and expect Abilene near EBITDA demand Additionally, at to year. we remains segment for $XXX,XXX of the balance the operate optimal was capacity strong, in

compared first million of quarter of impact by employee the the EBITDA the increased to credit, Excluding adjusted retention XXXX. $X.X when

Slide Gearing segment. in our continues X. a led mining I robust markets. energy to Turning environment, to will Gearing operate by and commercial cover

this XXXX. of from totaled up into year strength, orders orders in quarter, begun was As we’ve QX, what a to XX% $XX.X book prior in million the booked and result

Sales favorable sales are XX% of sales prior versus also to mid-XXXX. order million strong since result up comps experiencing quarter in $X.X a $X.X $XX.X we’ve increased the million over been First The sequentially. intake segment million year. the were

also training as ramped $X.X $X.X meet million hiring, modest year we inflationary increase addition of QX, generated the to We we QX, segment EBITDA related of demand. In million costs some to increased pressures prior learning inefficiencies to curve incurred capacity a up and in versus experienced in period.

However, to XXXX. adjusted when excluding the credit, EBITDA quarter employee of retention increased impact the million of the $X by first compared

million Industrial discussion $X are Sequentially, our of a prior large a segment. new down Solutions a of recorded follow-on from Industrial QX, X from up international orders $X.X orders to included new customer. quarter. $X.X year in the million Solutions order Turning QX million as Slide for

are and progress the by both encouraged been gas sequentially. up we’ve down, businesses turbines our are orders turbine gas as orders overall Although in core aftermarket

period First delays when quarter the to year compared decreased from $X.X million materials year segment as sales mix to prior EBITDA dropped a favorable sales due decreased supply production to the to million sales sequencing. our chain on impacted and volume breakeven less $X.X prior quarter. inbound in

delay where XX. availability as quarter of sequentially similar facility million operating with continue customer mix. change supply also remain $XX.X customer liquidity a nearly due reflecting XXXX. million, we $X Inventory million balances credit deliveries. and increased cash at at $XX Slide customer to issues remains to to levels Total capital Turning elevated deposits to our end, to an working primarily level under adequate ended in at chain Net

We as of extended able been the inventory, to carrying periods. we’re expect ship normalize XXXX balances to for inventory we’ve balance over which

increased million segment. finance our for the funded During we build our $XX includes sheet QX, from X just as Gearing balance net added to to finance within which working equipment leases leases, $XX.X machinery debt, new over capital million significant and

trailing quarter XX-month stood as net of Our X.Xx leverage at EBITDA end.

have in available ongoing expect a are and aggressively, chain comfortable feel similar as position are the end year liquidity liquidity in remain to it to given today. especially managing We challenges. that supply global sufficient committed we we closely liquidity We watching and

be As That noted concludes my to remarks. concluding our for EBITDA issued markets this morning, addition will remarks. end $XXX,XXX over the to back in Eric overview in to of adjusted press quarter to approximately call expect we second some an turn I $XXX,XXX. release

Eric Blashford

Thanks, Tom.

new gigawatts to for view commercial outlook the through and demand medium some an decade. to to domestic In rising term capacity installation for the of we to as XX be and annual market. are the activity in medium encouraging term, catalysts the increased nearly PTC expect latter onshore XX the Slide our installation. wind near further activity Turning signs discussion There for repowering of wind added with of as acceleration half of long XXXX extension, the industrial we for

North along constraints transmission cooperation Operator Midcontinent to Southwest the shared SPP, the work Broadwind or generation, the through by component encouraged from cooperation Pool, continued MISO remains we the stream market ensure installations by to from renewable positive study citing all in resolve together The power. from as organizations which to also fossil our echoing interconnection as of the confidence parties as Independent wind. completed expansion need fuels energy to between regional outlook Wood Mackenzie the value recently of the their such We’re includes System the and boundaries. wind America. this in forecast to XXXX renewable increasing manufacturing, capacity applauds long-term Power transmission transitions XXXX the energy energy,

across to markets. our augment a complementary with continues products, progress we continue end number diverse wind of our As business

share growing the pipeline other developing sell line, capacity and and industrial wind In Renewables market we models to in clean as revenue streams momentum, The gas quarter-to-quarter. both to our market, projects machining new valued which markets, and as optimize and remain handling introduced a to overall Today, to plan, our Heavy we material mining less into generation, adding expand capacity, we’re segment, the our toward non-wind and remaining improve most [indiscernible] XXXX in diversification include we to work customer cost customers costs and we’re Our to leverage Broadwind production industrial inroads as cyclical to continue We’ve towers segments application. providing balanced even forms inflationary stream. and open other to customers with penetration new revenue PRS paper offer central the deploy natural vary and the of power core power including of costs to we XXXX capabilities into continue from plant In fabrication. fastest-growing gain we utilization as continues to increases our Broadwind, serve Gearing our other our increasing opportunities the to infrastructure, segment, and expand mix our some segment, workforce be shift and industry. importantly, reduce to our remains new facilities broader capabilities our new Fabrication sales virtual service outside wind. initiative to more tend markets. reduce

continues one custom the reliability segment, last upgrade categories both business our we The emphasis special the share to upgrades gearbox in that and place market, segment are our in the clean improve to to solar we’re able be and growth expanding energy including we’re improvements gas, customers repair their transition. operations chain wind participant plant turbines process energy internationally, long-term business ongoing aeroderivative to cost-competitive and reliable Our of available. times turbine added In on based to domestically market. most the engineering with natural and grow our technologies and deliveries. both energy given in on continue put utilization. summary, the remains continuing in wind year of help see We talent lead win resources growing gas of bearing supply Industrial continues Broadwind an Solutions growth manage challenges in the fruit In and domestic the market. our wind and We’ve market our as active and the

precision create markets the business normal capabilities help we serve. new fluctuation manufacturing opportunities customer offset set and in broadening the Our to order increasing

all are adequately opportunities, to for market our divisions investing turn technology We lastly, in to the over new and Q&A and in strategy. prudently the I’ll to and costs improve moderator reduce the capitalize improvements With throughput, capability address said, that session. call growth to support

Operator

with from Our Instructions] of Partners. ROTH Clare the [Operator Capital come questions line Justin first

Justin Clare

more on then what might revenue guidance. And QX? was QX adjusted I start driving to bit EBITDA expect sequential to trend on provide is the could by EBITDA you from wanted the just I adjusted just if little QX wondering off, detail QX? first how a just improvement segments to So in in you and

Eric Blashford

revenue going grow to the QX. think far from segments will of I individual business, we’re as Yes, as see the

also, see see had, my of prepared to in We’re resolved. chain delays continued remarks. be supply the we’re business, Gearing we going to of out because some shipments Solutions in to Industrial And strength indicated I’ve as going the the going

the EBITDA be in of be It’s to going costs also as to the and expect a incurred don’t but revenue of growth that Regarding things. to QX because adjustment, going there, that couple some demand. we little continue as seeing it’s in such we training, some we’re the our price increasing to of And a price impact take, also, there’s delay of some we in costs to there’s business capacity we’re meet because were ramp-up Gearing bit some able that the realization. hiring,

Justin Clare

release, improvement Okay. it XXXX. as of press Great. in financial the through quarterly anticipating then And move indicated that in your remainder performance you’re you

does then So the And again if just in should could that improvement. we see you and mean adjusted QX of in on sequentially and EBITDA QX drivers wondering touch then again that QX. improve that in then

maybe So expand helpful? if be could that you on that, would

Eric Blashford

Yes.

QX, capacity fill. there’s there, Justin, as you’re well. as we possibly QX, to see QX we improvement some -- still need to think that you’re I indicated, in the in sequential going unsold

on can’t QX really at this time. comment So I

Justin Clare

on fill that It Okay. optimal booked. the to here, capacity like may booked nearly Abilene just the tower of And capacity XX% completely need sounds be you year. you’ve for then

fabrication a tower So address the volume. industrial Manitowoc that. then with you to maybe is volume rest the maybe fill of facility for if year just the the so the and could combination And of goal

Eric Blashford

towers Manitowoc in Yes. towards facility certainly we’d end in facility feel Fabrications. have some open north. we I wouldn’t year than is more and Industrial Manitowoc that that both Abilene say have in like is But of the production more our capacity full Abilene still the to the certainly we

business Industrial the the North. Fabrication stronger in is much Fortunately,

as move the And of of it’s to so the quarters year. fabrications capacity of rest that we are we year. -- the the lead through this continue advantage quarter easier fill book to We’re able the shorter to on times take industrial through through the business, as

Operator

Our from the with Craig-Hallum. come next of Eric Stine questions line

Aaron Spychalla

Eric. for on Spychalla Aaron is This

just of of quarter. it in a kind repowering, talk sustainable kind you of of the business is? How it pullback you’re it in that related Is the is on that? -- to seeing? that overall wind strength First kind the was more about Can or source first

Eric Blashford

repowering is -- project-based, think Aaron. is basically I

with the allow repowering, -- we to what work new which talk So as up, will blade usually adapters, it’s and get larger a a developers we’re tower the will the possibly When talking about projects about come is components. to a accept OEMs nacelle set.

the some are projects, but developer, on And project so those of timing it’s EPC visibility the the have and OEM. based do We some really, specific.

So it’s I’d very spiky. will say it continue, but

Aaron Spychalla

about kind some more just just All mentioned there. on You bit you can little then right. new talk that? And a of PRS, products

for outlook head we as into XXXX? the what’s kind Just contribution of and that

Eric Blashford

We set again, Yes. We that That’s a is us. that to XX-or-so small of can because market. annualized proprietary. I the get higher have than product still a million But profile pretty other those $XXX margins are see that. profit that’s because percent we that highlighted products for estimate rather of are us. products the be like on it’s eventually. good a again, The The share reason certainly -- to nice to market proprietary we maybe

to of participate high what to in low unload also with a flow at is more can market, share possibly We products, medium And transitional flow, high we in fact us progress I’m virtual that’s as markets, the flow. time. generation up a different to natural even we U.S. pipeline in a which there’s that, space, more lion’s flow the energy full come fuel but have the the a which as talking we we’re looking like the renewable also a as that such and same see allows what is that about trailers we new call gas When the a

that them -- that to in model. type be order flow us So high-flow it for to to at a of has require that needs site

Aaron Spychalla

All there then see there, is just like And of also by challenges just some maybe normalization look you sounds we see me, these last driven material dragging on XXXX hope it’s It Or we that more view customer there? of then and to can kind some kind maybe... the PTC but in just as early right. costs more for end, year? of do an next into

Eric Blashford

sure something in gets think that lobbying sooner the think the on energy that continues. better. wind both our wind and Lobbyists they whole I side the to get solar done, certainly are the that or I on help Yes, the make side, Washington policy and done to Congress

We’re in delay, these encouraged the that PTC SPP, as such MISO which are we’re also of pause and together seeing, or working spite that’s are interconnection. -- operators

You its have both interconnects the PTC generation this of of to from also source use. [prices], you to but the the that and its sure source can make distribute normalized need energy to

that still moving we’re is Aaron. the So encouraged forward, market

that yes, progressive of to X next way is So do I the because through the there this improvement X over what pause Mac all indicates a going forecast through years, normalize PTC still XXXX. expect the XXXX. year a And -- and the Wood or on into of that’s uncertainty. is end the

Operator

from questions H.C. line Our come of the next Amit Dayal with Wainwright.

Amit Dayal

side you an those for the easy and early managing manage sort are guys side along sort remaining it the wind is utilization new with tower energy of of around to How respect like ‘XX, on also sort potentially side orders How both have developments sort is to was going of into later the flexible energy year, the potential you levels? in Just ‘XX you versus your to through lines? will find coming And capacity? there if uptick be strong. things, the as shift, capacity to win of of start market going

Eric Blashford

Yes. really That’s question. good a

still maintained labor, still some industrial and have We back of capacity maintained, the is all of fabrications We’ve benefit our that’s business of shift any can core forth. haven’t equipment. the being It’s a and having taken multi-use. of we labor portion great as We there it these offline.

get we through the people opportunities and market into would with have weren’t have able compensation to left go the great back them the right the that relations that package orders for confident Now that back if visibility the robustly, rehire. but future. business in and to come wind we’re in with we got We’ve maintain, may very other we were right the can the

that Amit, a factor. yes, ramp-up factor, So is

can We with have them get great I relationships so said with, back. local population, we the before, as

The to times these other because of before, of about weeks, is that be to things, us note that the thing and up which lead gives some we’ve up. there that’s of of can XX time length talked the ramp

to within have we’d it turn like or month not a back it’s X. [stick] to So on

So them to have retrain, would time back. recruit we bring and

Amit Dayal

we gross margins margins as those some Understood. of the through XXXX, from to with we sort cost sequential here? I’m But are model some to maybe for think have, Okay. maybe should trying for through you. utilization in improvements as you to issues, should improvements maybe in your get expect levels And improve? visibility you still show gross look just play of

Eric Blashford

I what the think analyst, business, I -- separate take mean you another. and Gearing that would orders I would XXXX. booking as should I quite one into right as -- is the as we’re so from particular business actually now, we’re strong -- The mentioned, I businesses

the training -- we As ramp-up, mentioned I the because precise take through very ramp-up to the are workforce speed. earlier, get operations, get these up issues time some issues, to work does it the what

that we’ve there’s price I timing some some mentioned, will for think actions to And I continue So as of improve. realization. moderately taken, the

business we’ve before is more And because tend in As margins I’d as Tower’s is comes business as this the the on say higher really business, it’s Industrial more that other margins, talked utilization call, Solutions it nature. technical other far key to there. the than to of be flat.

So are comes utilization. there your I sound think models when it to probably

Operator

of line with Martin the Johnson questions Rice. Malloy next Our come from

Martin Malloy

was what’s uncertainty utility some spending of over the terms impact wind Are for projects solar having to -- around investigation utility about industry wind solar the The customers developer from their hearing slide, of types you had talk from you on AD/CVD given I panels? renewables. shifting in to they’re the first the question related potentially that

Eric Blashford

I I little personally say there’s have they’re lot far there, bit of I have Remember, our from not OEM would Marty, a buzz a line. heard the -- industry customers. not I mean down

and got whatnot. developers, your EPCs turbine your OEMs You’ve your and

we things So have will heard considered. of say And buzz. that, think there’s an would all impact it haven’t I industry but plenty I the

that’s you’re and the are risk. If you if between earlier, interconnect, wind financials risk they with panel mentioned there’s a or your developer relatively same solar wind. there’s got there, a restriction, nod maybe an get could execution a execution the as component give And figure I and because solar project, can’t components, to I think it to

think much a wind. at much could would give be solar but nod to would higher Again, I piece definitely I It’s a on tough be, it’s time. this the tell execution that risk how it to think consideration.

Martin Malloy

And then balance the just Okay. sheet. on

any up. are to end noticed were could I think to any And the heard end a drivers mentioned just -- of think the the just you cash talk inventories end similar on of the this that if year. maybe be you expect position first bit through the bank covenant you using I at concern liquidity year through could expected And you that of not about decline. little I also the the you And behind from of the receivables front? more state then kind maybe I roughly the quarter. talk if

Tom Ciccone

Yes. Sure.

we’re right of at our expecting capital. fluctuate in capital we’re terms to the now about think I where So balance expect of year. throughout to But the continue to be working we working

challenges. avoid chain extra we’re try as they’re some an we inflated chain a to was inventory a of now receipt timing just as Our effort supply of the some that little we’ve right to steel challenges bit carrying accelerated some inventory any as in result had. There some supply also balances,

and working up of capital. our in So again, In balances to ups relation at inventory we’re not normalize. we But now yes, end covenant, anticipating we going at this think will to point. some issues as be we’re we’re any the downs funding where

Operator

Blashford over you. any at no closing call like this Thank questions Eric the to would to for back are comments. There time. turn further now I

Eric Blashford

I now. and Thanks, you and appreciate our a Yes. with everyone. after company. QX. interest back forward coming in Bye everyone. to your look We day, Have our attention speaking great again

Operator

This does participation. conclude today’s teleconference. your appreciate We

at disconnect this your the of lines Enjoy You time. your day. may rest

Broadwind (BWEN) 6 May 222022 Q1 Earnings call transcript