BWEN - Earnings call transcript Q2 2022

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Operator

Greetings. Welcome to Broadwind's Second Quarter 2022 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Tom Ciccone, Chief Accounting Officer. Thank you.

begin. may You

Tom Ciccone

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

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

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

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

Eric Blashford

those Tom Thanks, today. to us and joining welcome

growth the segments. generated During we year-over-year our strong Solutions quarter, and Gearing Industrial revenue second within

but to such or policy While continued proposed to together as manage XXXX Reduction we're believe Act, costs extension such IRA the the this when to the of XXXX. again, notably year as offset in the ago levels labor that be will includes pause market seeing increased elevated our true are production most extension uncertainty, by challenge federal recover still to than raw several period. provisions, in with that tower or non-wind an January second pass X, the PTC, improved attempts efforts market time, encouraged At on credit, our wind demand non-wind the a to of orders proposed Operationally, recent congressional steel as the several play. the Inflation compared material major XX% tax around important construction in remains in an beginning to Once PTC before more wind quarter and recruitment a to energy the markets. the renewable projects we begin business proved

closely year-end impacts We the expect continue cost managing our adjusted costs. at to effectively to and quoting calendar manage reflect inflation models to have of XXXX. remain levels have We're by and current cash liquidity our rising

Solutions in we second adjusted an Gearing year-over-year. and of ERC PPP QX delivered Industrial posted forgiveness During and And gains increased EBITDA of and excluding increase XX% our million the segments revenue, loan by the XXXX, impact X% in led $XX respectively. which growth quarter, $XXX,XXX year-over-year, XX%,

consolidated climate-related orders year-over-year, industrial as partially the segments a in softness QX On continue secure typical accelerated reflecting and for heavy optimal XX% activity line X% million, as well have is work tower secure now to the aspects and regarding time to our customers the capacity OEM first capacity are demand, product reserving news the in work with within XXXX customers for capacity of the by capacity. to decrease of available Solutions of the orders increasing basis, as We our about a recent tower The a IRA fabrications. placed who our half offset tower XXXX. this have were stronger turbine production into Industrial fabrication Gearing $XX interest as orders XXXX of is Tower our year. quoting OEM within for

orders offsetting tower the Our year-over-year orders. Heavy industrial orders segment Fabrications decrease of $XX of with stronger million, saw a XX% timing fabrication

outlook in received data view point year. an encouraging that supports improved we However, nearly wind early $X for tower our the an July, new million in orders, next in

million orders, industrial $X to markets. booked year-over-year segment see energy our XX% Our and we a increase strength Gearing as in continue of

total at we the QX Gearing expect prior notably through order gain flow most was the of Industrial good in year and a and versus $XX period. markets XX% products. to million, the our end non-wind continue strong backlog from remains XXXX, Our Quoting the Fabrication activity

Fabrications We on year-over-year the activity declined demand. tower Within inflationary ability are temporary in new and cost our our X% to certain pause increases seeing in a to due pass in quoting surcharges. through cases, revenue Heavy segment,

and commercial We’re allocating other capacity in spare section markets. projects tower towards other energy, industrial

units. wind with for a in Within wind diversification continues in turbine XX% conjunction until revenue to as XX% work policy turbine wind OEMs increased quote million, given accelerate will for resolved. demand increased to upgrading energy year-over-year clarity. customer the well Gearing, these and for pause stronger segment our by including within Revenue energy content, multiple pricing opportunities the elevated the commodity was pricing. market tower headwinds as $X temporary the as demand In particularly to continue pleased our natural our I’m uncertainty increase sector, and to federal customer demand strategy provide Industrial diversification in summary, we policy used driven the We recovers new million, wind us in as that of the gas aftermarket activity commodity maintenance components segment through continues Solutions serve for $XX of

continuing human responded the and has assets challenges chain well-documented a both during supply while capital optimize our transitional to quickly to Our global team period.

over activity our particularly extension most call development recent performance. see ramp that, Tom of gradually discussion second term, as the wind of for in the if version quarter reflected of to a financial turn the With medium expect We the substantial we back up to a PTC IRA. the I’ll over

Tom Ciccone

Eric. you, Thank

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

in in were the Fabrications. Industrial and Industrial increased tends remain benefited both fluctuate wind million recent compared on based million increase recognized from of end activity prior increases also as year the a saw Act. patterns. $X.X CARES second flat to and million order second Fabrications prior within sections intake sold Solutions year year ERC byproduct prior from related Versus customer markets and that of tower adjusted PPP year, almost provisions but to XX% segment, revenue sales for benefited but XXX% results in served in that consolidated should compared $XXX,XXX Within order include Heavy forgiveness, as $X.X a outlined the quarter. attributable we to adjusted strong the be in of down loan million revenue, a in in quarter. prior quarter as repowering by we the segments Gearing It a the segments offset line. fabrication most QX, strong to quarter in million recent a increase together $XX well benefit $XX.X the to Second Gearing which in with $XX.X Heavy Sales were partially sales order our Solutions industrial benefit an product reduction the the QX EBITDA EBITDA Gearing noted intake of In

compared Excluding second the of these unique impact XXXX. $XXX,XXX benefits, of to adjusted the by increased quarter when EBITDA

X discussion of Slide Fabrications segment. a for to our Heavy Turning

wind This were the is a the orders to quarter Second in and period. $XX.X pause from industry-wide attributable million, decrease activity. overall XX% prior orders segment decrease year

to increased in to was While pressure-reducing strong driver line, or approximately to our units $X most significant orders XXX% million. nearly multiunit wind was several the natural our PRS Industrial $X systems, related we our fabrication year of we experience whereby tower this industrial related million quarter. or versus interest increase prior gas continue fabrication orders totalling products. weakness recorded The there

industrial in sales sales intake the quarter when in revenue from fabrication only tower prior compared quarter. than year Second in down late order $XX.X was million into were Weakness XXXX. by million, greater offset in XXXX $XX.X slightly and a benefited to strong increase which the XXX% largely

temporary we've comparison fabrication projects soft softness been that offset we and that to plan. Interest or on production Manitowoc plant due ongoing power our repower region. industrial capacity During Abilene to industrial our to work. Manitowoc project stronger capacity demand transitioning facility able out to be QX, ongoing we workforce continues are but to per our an completed in in with fabrication wind of in as Overall, continues our in planned products and be focus that partially

Given near-term to locations, and in plant interest facing. Abilene work industrial diversified both fabrication the been remain prepared ongoing our we've the and in headwinds endure our we

QX. second versus in XXX the we year year XXX for operate to expect the near sold in and levels $X.X Despite the the down quarter, period the levels. million historical tower the at we in EBITDA Abilene. capacity for Manitowoc, below segment was in optimal sections prior During weakness of Adjusted balance tower

transition the capacity of work. second impact forgiveness of PPP decreased cost by to the the XXXX, the and and to fabrication million our reflective the when adjusted ERC, workforce compared $X.X loan of Excluding quarter plant industrial to EBITDA

in million to orders cover year our in Turning but quarter. was what X. QX, XX% sequentially prior Gearing $X.X will from up Gearing booked totalled down segment. the I Slide

quarter Second of quarter to year mid-XXXX. versus $XX.X million order segment as prior since increased sales a been the million experiencing we've result the intake $X.X strong in

as segment meet in a workforce a incur quarter. segment a persistent QX associated labor versus In within pressures, addition of $X.X to its up modest to decrease of labor ramps the EBITDA in efforts and to prior million increase training generated with QX, continued production it to inflationary inefficiencies million tight demand. the $X.X market year We

when the excluding by of in second XXXX. the recorded to increased and the EBITDA ERC prior quarter loan forgiveness the However, PPP adjusted the impacts million year, $X.X compared

year million increase prior EBITDA both levels. and of our the segment. and inbound discussion orders and been Despite upgrade million chain was $X business, our Industrial delays $X.X of $X.X increased adjusting for an turbines quarter. the sequentially year Industrial new in supply the versus gas the second $XXX,XXX PPP of segment year. the both including increase reflective quarter the the QX, Sequentially, order after forgiveness Sales Solutions encouraged which quarter. strong Solutions the versus and down to million the prior up materials, $XXX,XXX X Turning represents margin in increase up year for Slide from loan progress were prior $XXX,XXX $X.X but is orders turbine our we've service second core quarter sequentially. a for on recorded benefited of by aftermarket up This prior million continued a which versus second in prior intake in the components gas recent of significant ERC the sales quarter, in quarter profile. year improving are

credit to availability our million Total at Slide under end. of an than more X. level cash adequate remains at with quarter Turning $XX liquidity facility and

Not sequentially to yesterday, flat decrease with second it quarter, remain balance facility operating a Fargo. with increased million $X a have facility credit reported credit $X.X new we in the customer we we but million deposits new of to customer million million. reflective $XX new $XX.X million. agreement million $X.X we've capital Net new forward the to relatively increased $XX of operating loan million impact than increases estimate As into the company's believe revolving line Wells deposit by more changing in $XX mix. available Initially, capital in We only QX. does working working capital from term expect limited the to the working entered to a that introduce liquidity the our primarily commensurate will and that moving our operating

expect similar year, working Looking QX to be build as inventory deliveries of do QX we XXXX towards the XXXX. of end building we will of levels the ahead capital some

sequentially debt capital working During we as aforementioned build. million $X.X the QX, net increased funded

global the have supply capital liquidity, and pause will continue prudently we support growth improve temporary While given to in ongoing the measures for manage we working to our it strategy. need demand, tower chain potential challenges taken the to

call to my Finally, concludes remarks. EBITDA million we addition respect to to quarter remarks. I end $X.X over third to expect Eric concluding adjusted some markets That the for our back approximately guidance, will $X.X an to of overview with turn financial million. be in

Eric Blashford

potential Thanks, rising will we by wind If demand wind drive it this, into medium period. commercial tax view the the clarifies developers. positive increased IRA industrial along multiyear long-term near the In as policy the over guidance sector law, to and with as passed installations Tom. for a a awaited term, help long believe catalyst we

to In we're optimize facilities inroads natural industrial our vertical wind Today, capacity improve building to expand and as markets power and which include clean customers plant Customer some and of we and PRS continue diversification markets. our Heavy core other into to projects cost our proprietary a towers to as with less augment overall diverse revenue providing ahead from wind our slightly industrial progressing power progress end of complementary to to The segment, and new optimize year automation infrastructure the Gearing even the our cyclical nicely sales business continue material gas more as broaden marine well penetration number of forms balanced wind. reduce of opportunities quarter. efforts plan, with vary and for we Renewables activity XXXX the to central In revenue quarter development labor serve throughput, with last As our markets, continues production into nonwind generation, orders our and segment, industries. we products, pipeline Broadwind, virtual increasing and into across our book to our continue is outside stream. other track Fabrications we into adding remains streams on our market fastest-growing mining handling introduced to as work fabrications. a mix markets to market offering plan. includes the our as remain

preserve inflationary we are fully to The as operational open to leveraging quickly forward to look cost to possible expand work increases capacity to reduce share machining new continue new customers centers as and their markets. capabilities with costs margins. We our and now

working our expand are meet We labor increasing to bottlenecks. to a demand limited shift production have third and certain the address launched to force

in key our the market, as aeroderivative energy share wind the In cost-competitive seeing In capture business internationally, including heat remains given available turbine of energy Solutions distributed Industrial segment, growth of management active see and to Additionally, such wind technologies we're expanding growing capacity the treat energy our opportunities. market and We're Broadwind gas be summary, activity most growth participant markets We that we've to wind adjacent in continues leverage our external one domestically for power, the solar. market. ongoing available. domestic increased quoting segment long-term to both in clean the transition. upgraded an

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

support this carefully With session. pause managing strategy. I'll activity, capitalized during for the to turn remain moderator wind said, that over CapEx Q&A against executing in our costs, we new adequately We opportunities. are to lastly, and market liquidity while And call the growth the

Operator

[Operator Instructions] with Our Clare first question Justin Capital. is ROTH from

Justin Clare

bit I you’re talk sequential off bit to provide here, the first about of potentially enabling here? just how So to QX anticipating expecting And margins through wanted what’s pricing increases EBITDA. revenues implementing QX the you’re a EBITDA rolling more in you in your wondering could improvement more was you if the trend a in margins some and just QX? on and guide. that adjusted driving Are higher

Tom Ciccone

Justin. Yes. Thanks,

In think revenue terms remain in of revenue, I projecting we'll to relatively assume -- we're QX. flat

guidance. of terms In

think just price that P&L actions I improved is benefiting through what's our that's taken. we've some coming based on realization pricing outlook the

Justin Clare

the Is into I Reduction think that also if earlier? customers to XXXX? secure legislation costs? half could think passes, credits just especially Or which enable something are flow pickup customers in to how you're that in if And the pickup that's back could a given quickly tower from Okay, wanted And that manufacturing your wind pass. going you hearing tower when to then, revenue? do a were to on there act to Inflation lower could tower something of might helpful. through And the you see to what see that then, could potential you Act for you you do see demand? domestic see capacity, try demand the are just quickly in And you

Eric Blashford

policy that for, Justin. see We Thanks, clarity giving it literally certainly a couple has the now, been seems. years as IRA some market for waiting of Yes. the

the a capacity availability or towers you're logjam I frequently And to for than They're free our maybe lead so three of do couple a XX to frankly, I aware, expect to quoting quarters couple now expect lot into as just And break were fully be do benefit couple in of next more quarters. take phones increase, pause XXXX, the a customers. interested really year. weeks. next even over activity this a or they are I times so weeks expect into expect or a just of of ringing is the ago. We do to this about bit quarters, four realized. the

we 'XX. see end XXXX, if towards so QX, and revenue benefit of QX and of certainly in the orders And could see into we breakthrough 'XX QX

Justin Clare

I’m yourself manufacturers much see domestic much is more Okay, how market of being just such And given was competitive. imagining being served more. to served domestically wondering the you’d U.S. the good imports, hear. that then, by in the is about versus significant manufacturing IRA if as and I benefit credit share one current I’m there’s thinking here wind much could producers a the and that domestic be how tower

understand wanted just better to see So could there. opportunity if we the

Eric Blashford

speak is X,XXX in X,XXX quarters those behind United because the towers timing two there I X,XXX in about States produced or if but or will general, every we data generalities Yes, import there's in of about of can imported. the come the say three year, additional

if is a which an a all So we towers could annualized barrier, to see truly normalized additional be X,XXX in benefit needed essentially, would market U.S. manufacturers. a that

Operator

is next from with H.C. question Our Wainwright. Sameer Joshi

Sameer Joshi

bit the a are quarter? down volume mean next -- EBITDA prior -- revenues -- flat are on helping, expected pricing expectations. digging question next this on down mean If to Just I that year and be action sales deeper is does this the

Tom Ciccone

We're related really of quarter. some in should the is expecting I as think EBITDA some to chain of of the to we that in out supply a same think lot be mix. related we maybe just uncertainty things have it where slip we're I mentioned to might Justin this is in increase to some what the But probably and the of projection I our -- will trying and give be that of have revenue quarter. No, range might not at because

than first year, -- we QX the in have first of in of maybe half also half say. QX a did I should We stronger mix the

Sameer Joshi

year the what mix for sharing the The was margin utilizing like See, towers, now, Yes. you’re be to going capacity looks question. next do contribution my also from X the or segments? different from if blended

Tom Ciccone

talk But ability have the will when capacity. Fabrications segment, we're percentages don't full margin operating to at Heavy publicly. our is do what say we about double-digit I Well, we that contribution EBITDA generate within

that point is point. the to was tower it to in strongest its where opportunity get approach market there the So the should

that we're So there towards and opportunity that. is working

Sameer Joshi

in IRA that capacity, demand have and And the the just resurgence different following utilization how Right. segments? terms a you different is between manage would if orders the wind of in there from you passage,

Eric Blashford

good That's a really question.

to We have been both the in plants, pause. able sustained a in we in did our facility because will the see let the maintain some capacity especially can market, to fabrications. do to able capabilities to go drop maintained in tower of produce towers in both stronger But business Manitowoc We've recover been be do able shift labor have book during the those have do tower because of we manufacturing labor tower our even demand. most part to because industrial order the this to industrial the plants and we we believe both. for we a part with our labor fabrications We from

Sameer Joshi

how at we And as one. The last one look Got it then impacts it how And -- forward? we should should customer does in deposits, going Understood. look what signify? capital it just working into it. drop

Eric Blashford

those it. form capacity require really of and like issue in mix That's deposits. with. different to customers, the see certain we address can negotiate because of I'll Other from we product terms reservations Well, a customers what have the we

our working a read would would recover to mix mix. -- over more I'll that as a to I of that read regarding a turn change capital, Tom. could back also But mix go if former So that into that

Tom Ciccone

Yes.

we’ve capital going forward, deposits. based a I’ll I think that think mix We customer could I and forward is working in significant in drop only seen thing related a significant to don’t foresee being Eric like the ebb increase add that alluded flow to. going on factor

Operator

Stine Eric Craig-Hallum Capital with from is question Group. final Our

Eric Stine

mean, on on actions see do that you just how the passage there. Or But potential be think onshore. too offshore some OEM that? activity thinking I So does of lot you about impacted But IRA focused and calculus your aspects and the offshore? are in know or we to here, maybe a change early maybe I at terms by of all?

Eric Blashford

onshore. seen out Offshore they have there is I But encouraging to as offshore there of we talk seeing, same stimulus. OEMs, if we're would a other a This think Eric. several variables say that we thing. don't are is years, the And lot in the with certainly and not simply

I think on would IRA the than on much be So, impact sooner impact offshore. the of onshore the

certainly us OEM developer our would regarding It's We somewhere interest studying plant, us. required So but manufacturing to for partner partner East it of Coast. we produce a it take and are strong offshore. order the need thesis really have and in doesn't a on change the partner to CapEx to to

Eric Stine

just Maybe the know some Fab. understood. new Yes, with talked I legislation. in you've markets sticking about Heavy

hydrogen so a obviously, have carbon capture, and legislation. And big this of component

So lines. along guess, those of I same kind thoughts

Eric Blashford

Yes.

support that's think exciting. all like We renewables. forms I to of

is We are market gas, CNG see farms as But renewable and methane which -- digester the captures natural in that. you primarily know. which we market RNG digesters the landfills things through right into the and is like leads from also it wind,

for into terms and out, in a this of virtual technology are CNG, looking be and PRS, bit hydrogen hydrogen. the we pipeline in CNG little the we've can using developed fact, blends with Eric, for pressure-reducing RNG, So this system further that

track. this forward. take we that definitely right a to When we on at look as just market IRA So the we're catalyst the segment, Clean reinforces of the going it see a Fuel that. And

Eric Stine

Yes.

here last of thoughts that seeing feel couple quarters. I got because, seem drivers something was And here. Solutions does alone. I certainly been the you -- me, Obviously, do then obviously, you energy quite over mean, we more that you Gearing, it’s In you’ve higher great you you’re for X traction just the that and mean like prices, do it -- I last on but know the than Industrial And I now -- where have sustainable? your needed trends Okay. that, good industrial do that fab, right mean, is diversification.

Eric Blashford

we Yes, track track seeing sustaining we that order we track next markets And funnels, do. diverse opportunities. in several We the quarters. those sales the see markets. do We over we're trends

we're in which those What's want. more we those and is those to that. and they're is it’s customers they're good In becoming we as customers’ easy to some those And products. you confident to in countercyclical that's penetrate markets tend customers, spec-ed to So you what cases, not stick diverse. in get about wind spec-ed nice certainly with more and are because

So I do think wait the for we there’s stickiness there be and wind I to certainly quarters do sustained as the several market think it over could next recover.

Operator

the question-and-answer our the reached I to for comments. have session. We like of management end over back closing to would conference turn

Eric Blashford

and Thanks, Thanks, to Broadwind everyone. look your shortly you. in appreciate our to everyone. you results. QX Thank and again We talking forward about coming interest

Operator

you. conference. Thank today's does conclude This

time You may and participation. you thank at disconnect your for this lines your

Broadwind (BWEN) 9 Aug 222022 Q2 Earnings call transcript