TPIC - Earnings call transcript Q4 2017

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Operator

Good afternoon and welcome to the TPI Composites’ Fourth Quarter and Full Year 2017 Earnings Conference Call. Today’s call is being recorded and we have allocated an hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Anthony Rozmus, Investor Relations for TPI Composites. Thank you, sir. Please go ahead.

Anthony Rozmus

operator. you, Thank welcome full to TPI fourth Composites’ I’d XXXX everyone earnings and year call. quarter like to

In addition website. to our our press release, you slide on QX can presentation our IR earnings also find

that filed statements expectations, Before let to include of update Such uncertainties management make materially and by Commission. Private Exchange that subject and the such and statements in periodic to we other certain XXXX. Securities could does with factors company projections, Such The remarks a plans variety as XX-K within call statements. those constitute prospects. statements of me cause other undertake everyone forward-looking implied the actual or Securities These may forward-looking Form begin, that any results beliefs, are duty described meaning other to TPI estimates, during our are differ and risks, remind Litigation Composites’ indicated factors future statements. this about not the Act risks from Reform of and such reports

as website TPI GAAP non-GAAP www.tpicomposites.com Composites’ XX-K also that, at With isolation for today’s CEO. our which useful and all in Lockard, Form reconciliations Additionally, be measures as with information we posted be can not is found in non-GAAP let of which over company information presentation considered discuss substitute prepared President on GAAP. this will can to should be the to filed. call in the performance. a additional evaluating believe of the release, in our in results our call, me earnings included Steve The The or turn accordance and during our

Steve Lockard

more earnings full am some highlights and our for joining call. over Bill on CFO. to then today TPI’s from diversified I then the We full fourth year everyone Please XXXX detail. update of Q&A. review call Slide financial call followed by to I public with quarter in the consistent quarter turn year I and to for afternoon, of growth. start global our Bill we strong growth. will Siwek, with a you achieved I review turn up conclude solid will results thank joined Good full of will progress wind In operational we performance the market delivered and as a outlook another open a and company by our X. before strategy second the our our year efficient record of year, financial our finished and and XXXX, brief strong results. XXXX

on XXX grew X.X% a market efforts we from basis for Adjusted $$XXX.X term with sets lines both our wind up our times, $XXX.X lines the below above installations our two hub to our XXXX product of million November manufacturing supply onshore share and the of points technical XX% EBITDA to EBITDA a range a a and in roughly adjusted improvements cycle with of productivity to second gain new EBITDA the in contract manufacturing year enhance adjusted late new These multiyear million one XX.X% volume margin supply for over lines, We the increased due for the to slightly Turkey. manufacturing potential additional quarter. additional changes billings Siemens agreement plus $XXX.X option with in and increased to second XX% sales one guidance X% and an on million plant from of new net agreements multiyear customers an respectively Denmark our Senvion supply the talent guidance a Our Kolding, advanced November in in provided our in represent full XX% Matamoros, year Based XXXX, We continue We wind Izmir, delivered, engineering gigawatts, material reductions overall to in Mexico. capabilities for center a base. manufacturing drive global XX.X% an we manufacturing from in agreements. multiyear shared XXXX. option our with from for to Port, signed increased in China cost-out line in revenue results. serve customer in attract our and line blade XX increase turbine in plant. approximately Taicang in $XXX for opened Vesatas a supply signed XXXX We in signed million European Gamesa in to agreement agreement two

continues commercial for capabilities advanced to additional TPI demonstrate Finally, our composites expertise.

collaborative Proterra, that have we today with weight rails, with markets Energy’s a Super business supply of into efficiency with have project trucks. the recent to composite leading This is X Class grown being comprised connection Department in while tractor zero our truck frame U.S. designed commercial strategic of our design development to This transportation buses development is last and which investment Navistar of II count an to promote quarter. brings develop entered Inc. a X, the to total Truck XX% supplier of agreement X and in savings program current program, from award emission under vehicles. with and entered freight a compared in We in footprint announced into a Navistar’s we targeting our agreement up

expectations. and our the our with that both as explained onshore we robust output to offshore to more increased current more continue Last line, per be develop get with and from wind opportunities lines new materials quarter, pipeline, and continue advanced global utilize drive longer, we new blades. that revenue meaningfully blades customers will We earlier continued of to than

revenue revenue per As million quarter, million. under customers to to a range blades lines. At $XX increase Furthermore, of was opportunities as our average a to wind transition million prioritized year will in larger pipeline excess line of increasing from $XX result, per contracts, the XX the $XX existing existing from end facilities. of last revenue our providing growth additional is per line the

pipeline next the XX fact our the of over them in this XX. and negotiations X closing for X are confident to months. active to of lines next in prioritized expectation with months today, number of very the in convert sits our we remain pipeline We a ability at As in

As be as XX will investment we TPI we XX will XX% XXXX transition top and approximately in that will will lines line lines about in startup. Notwithstanding have estimated be that an talked in we have growth year November, of year. this be we for this, estimate

strong revenue our target well CAGR revenue or growth in we $X.X and these approximately to expect at XX% in XXXX new position billion target startups lines billion and additional stands transitions We for through are XXXX. in to nicely still as our still XX% us confident $X.X will growth of XX% X-year XXXX. Therefore, as

strategy Our remains intact.

We as geographies we diversify continue our of to see sources customers, non-wind traction markets. and across revenue

the outsourcing and take in global trend. on the wind execute to continue the the will ongoing advantage stability in market, wind and growth market strategy of wind blade the We U.S.

today, and X, Turning notwithstanding over blade long-term lines. provide Slide potential nearly revenue of transportation our This XXXX, $X.X of $XXX as the to XX to billings contract our manufacturing agreements wind up quarter our last million. of value through increased production QX lines supply including billion has

will XXXX and mature more while We believe markets, to end but our Mexico of the the of period, the that contract at our contract facilities growth markets, at maximum the to has the we seen capacity This guaranteed CAGR X, billion, and those view projected provided Turkey. remains expected from onshore wind grown purchase essentially encourages the China, installed X to market these in grow, $X.X to Annual XX last grow to least during trend markets approximately will driven Slide gigawatts emerging installed of structure continue will global at expect And we continue in X.X% a to well-positioned modest years. Matamoros, by customers according have XX.X a outsourcing over which of volume. to be While XXXX. more will volume increase Please growth Juarez, of of these turn to gigawatts growth at by onshore is remain our primarily CAGR developing to MAKE data markets growth drive minimum under we the with unchanged. serve X.X%.

We tax in and With to growth rejected U.S. industry. economies where China, wind avenues emerging India, the such for respect We to The last wind multiple to see wind opportunity to rates. of well-positioned market, alter PTC penetration where late for markets, more and as existing mature from we both markets developed were year onshore for continues Republican low reform U.S. and are areas the large large and allies. China with key allows serve phase-down outcome by the for outlook the very also broader we energy strong be footprint. U.S. believe are pleased threats there in the the our TPI

utilities has XX% gigawatts direct gigawatts to gigawatts XX.X develop contributing of in capacity X.X of are ownership fourth and years beginning few development annual next the for very during AWEA, advanced total for XX% utility X, wind a utilities XX% wind additional of Slide proceeding with averaging reported to development for of end an year-over-year and of increase. on the to under wind of industry ownership capacity since utility construction XXXX. see According made is Electric Approximately, accounted quarter only of rate-based utility strong advanced procurement. the wind installations gigawatts contracted the XXXX capacity XX.X by announced XXXX, expected the can you as X.X Direct ownership. X.X in U.S. to of of or As own expected a plans direct be total historically under gigawatts. capacity

XX% accounted and JPMorgan total Amazon signed account the all customers by the Services. they than included with contracted PPAs direct Cummins, Target. and corporate other non-utility advanced OEM. Anheuser-Busch, of Home for customers Corporate since beginning and where more customers utility during current share for However, very X.X well-positioned other of of for now XX% of in market U.S. We XX% notable reported Energy, during has signed the Corporate and have Other gigawatts XXXX, purchasers led under and Google projects Amazon remain PPAs total in in ownership non-utility we an of project year developers U.S. our procurement. the capacity also construction representing Depot, XXXX development Web of accounting Chase the XX% XXXX believe of have to-date. or

industry. businesses previous very its several factors. reduction large is in Utilities wind that to in gigawatts XXXX, there forecast. retail XXXX grow the are the uncertainty building the XX meet MAKE was XX% institutional marketplace it placed of will energy PTC gigawatts change want due in to in is in emission applying that to recognized than some and of to in The more market and social installed U.S. reported increase their goals are wind safe orders harbored beyond and concerning Corporate XX% there customers XXXX requiring XXXX, wind optimism we from investors really energy aggressive compelling. responsibility economics and buy pure wind. COX are Although

its wind come. of IRENA will power have to XX% add time. in place in XX, around is At Slide Since not cover strategic XXXX moving energy generate use of for Increased over renewables the the that and gigawatts plans now wind to MidAmerican, In new the will many and states they XXXX, pledged rapidly generation X.X% Akins, of any are X this U.S. lighter corporations, the vision of re-powering the noted New We to smart XX% overwhelmingly environmentally of use U.S. for owns the overall it in in investment-enabling new reducing that is territory. energy of a New heavy more out year, chains global U.S. offshore to globally XXXX a decarbonization will wind, of policies a built XX that a strong XXX our of Hathaway COX of wind for to markets substantial from for estimates including time, now XX% and the the for down levels wind the AEP’s it gigawatts is project the get capacity MAKE for see provide the toward among turning in loads. account According ongoing decision target its energy and three power taller demand and blades, globally. have announcements an continues by recent Island. market to by projects drive need upwards of states, and trend multi-state regulated longer and conscious is the with own Wind electrification industry economy. from XXXX to of its will driving renewable emissions U.S. energy the AEP XX range for in to estimated and up undergoing towers, were offshore our re-powering transformation energy MAKE, will clean incremental its to vehicle York. through believe XX which that a XX/XX nearly than this There and are X driven be offshore with increased in Massachusetts the capacity other up opportunities EVs power XXX% U.S. in gigawatts unit add growth new to is energy last enough to the of XXXX add years Berkshire continues. globally its utility. the wind carbon beyond The AEP near-term Nick U.S. XXXX simply also And the future for the technology PTC. utilities energy electric call energy segment capacity gigawatts New through of in wind service York, historic and X.X X maturing to members and XXXX, economics XXX supply one. by Much of made during Connecticut strong In transformation major XX for fleet. end facilities REXXX clean economic we Turning advancements TPI January electric industrial Rhode of by re-powering globally, both from CEO LCOE Jersey, XXXX demand. stated has top capabilities, Maryland, by XXXX. trends a XXXX, once provisions generation report, the most as is vehicle U.S. a sector

call over Bill our turn Let financials. to review me the to now

Bill Siwek

Thanks, Steve.

to XX%. million, same million XX $XX.X Slide quarter. increase by $XXX.X of was the million margin XX million the revenue quarter $X.X XXXX $X.XX above margin a to and global of continued or the or sales for quarter increased savings to stronger diversification benefit net $X.X prepayment net results Costs to The to billings personnel compared increase U.S. strategy. currency for the which during primarily XXXX, XXXX to net XXXX. when the an to the costs debt fourth of and transition the quarter X.X% million driven for the implementation quarter XXXX, of support XXXX. EBITDA impact an and million points share, same Total per a from period improved period write-off for Mexico compared $X.X increased our costs of net XXXX. Adjusted number consolidated a issuance the $X.X in ASC to XX.X% as as same for as in to the General XXXX operating total the profit our Diluted positions quarter of increased improvement the the same period discussed delivered totaled to $X.XX in the the and efficiencies, in in XXXX. work refinanced was credit recognition compared an over increase $XX.X quarter. share blades of XXXX. the million per a administrative the compared quarter standard. for offset raw same were period XX% loss was sales by of during fourth million earnings dollar costs fourth to increase gross million to Net quarter of and to primarily income increased increased increase our quarter compared or in startup the XXXX, X.X% costs of ago. of quarter profit dollar operating The is by gross $X.X same our as year partially $XX in favorable period in to primarily from filling driven basis was compared of Turning driven and and expenses of and the in overall the quarter-over-quarter primarily the $XXX.X of increased same well same the largely costs period quarter growth net $XX.X prices million impact and of by during the fourth sales. as million of China, This to blades was in fourth material blades net for for in in of The wind Turkey by net by million million The related XX% movements penalties Sarbanes-Oxley sales of was the facility. XX.X% plants $XXX.X a we both the XXX average new related of was $XX.X for period fourth compared compared to the the for the increase the billings XXXX wind for to long-term our period to increase to quarter Gross compared loss on sales and sales due X.X% in

margin improvement EBITDA XXX was from margin our the quarter in basis adjusted XX.X%, a point Our XXXX. of the for fourth of X.X% quarter

to $XXX.X and with with a was in to XXXX. the during blade. year in a which geographic million delivered $XXX.X average and wind The X.X% we per mix. billings full decrease year in to share to of the of in to compared our million strategy. primarily sales result XX.X% in $XXX.X for year Total we as for savings million as number compared customers costs, line raw increased slightly our increased portion XXXX record offset $XXX.X XX.X% price by to compared driven results the material we blades sales Net XXXX XXXX. a the to continue XXXX, by of The For increase XX% delivered million grow increase

percentage year, largest down from XX.X%, revenue the in XXXX. XX.X% GE, from of full the customer, our For was

as partially We expect gross with will grow totaled increase improved million other $XXX.X percentage Gross profit period margin to of margin driven revenue same in $XX.X points the the and XXXX. globally, to for currencies compared we XXXX XXXX GE $XX.X raw profit primarily the fluctuations million transition offset continue of costs, customers. $XX.X continue was to administrative million, going in year the XXX forward of startup to increase to in and our to $XX.X to by XX.X%. the of and The XXXX. of from the relative we the over U.S. year General of an impact gross and decline the material increased for local and efficiencies in impact basis by operating operate totaled savings favorable costs dollar million the as compared increase where million expenses

XX%. and income percentage for As $XX.X in the lines administrative year-over-year generated estimated and of or in for for $XXX.X long-term from estimated We compared currently the XX common in agreements, of an X expenses a to to and net This sales, decreased was the previously. those manufacturing a megawatts sets the X $XX.X have XXXX. Adjusted share XXXX. dedicated with $XX.X blade XXX earnings per from increase the year during in lines sets increased increased year-over-year increase Diluted of was in XXXX to million to of under for Net year XXXX. attributable of installed, X.X% $X.X once invoiced XXXX EBITDA ended X,XXX, points was X.X% $X.XX year a transition. lines million as increase a XX% wind to XXXX. X,XXX of the by those be Net compared stockholders million improved margin year discussed XX, income $X.XX We million to XX.X% general startup the December supply increase December due to slightly in operating over XX, XXXX. basis installed year XX million XX.X% is results to primarily ended

was compared to million XXXX. cash Moving cash million $X.X December at total XX, million million resulting net to equivalents at XXXX in were year cash and of of $XXX.X of indebtedness Slide XX, as end net and year $XX.X end debt $XXX.X

existing flexibility, reduced interest and amended our basis we update provide the covenants our to XXXX points. more XX operating fourth quarter, for us facility credit by rate During with

better CapEx CapEx. from to flow For flow the while in quarter delay spending quarter, operating free related We for $XX.X we timing cash $X.X million generated to of activities $XX.X generated million. cash the than anticipated of cash some quarter resulting in due free on million, the

For from of spending cash flow while of resulting million. activities free on XXXX, operating year we million, $XX.X in generated CapEx $XX.X cash million the for $XX.X

was result, of XXXX other than our the And a Our accordingly. in CapEx CapEx will XXXX. into certain moving for fourth less to as work guidance anticipated purchases timing the and due be adjusted quarter

in the we footprint. We of continue our our balance to strength our to generate the sheet ability cash to be global pleased expand with need

on Steve, also ASC the I on Before update would delivery recognized course I TPI. under was the call XXX in percentage recognition turn whereas XXXX, be XXX, disclosure regarding provide XX, With through to revenue the December to completion during like XX-K ASC January we which standard of recognized new revenue X, impact accounting, akin revenue to the back highlight of customers. to and upon the on over process the our to XXX, time ASC adopted respect reform an production our XXXX, tax will

An amendments will contract of of amount production at important note and changes. associated as and will generates recognized the reported manufacturing increased transitions in of that revenue as related as before under period for the delivered realized curve and the of are production. end that of the well revenue these contracts, impact the revenue product in are the for revenue, the of learning the starting of term manufacturing ASC timing customer the XXX recognized the the lines company’s whereas recognized up the supply period not only activities would future will revenue contractual change, be over amount margin beginning with will previously is revenue be remaining of when the put upon sold adoption be recognized result, costs goods cost amount impacted agreements products related the periods. from the include sales, and total materials of in It a of by operations only As income to products and time they on to over timing amounts be to will production revenue the period raw net the will Since considered changes was in future to and of was customer. process. that Gross recognized production the as into contract amount specific long-term sales

a and the initial to startup will underlying Although, XXX on to not company’s of the likely an of result of the a guidance does startup have and nor impact in economics contracts in under cash applying was customer transition reported effect the accounting the earnings new revenue XXXX contracts higher recognition contract. years transition as shifted then activities in revenue previous

which will XXX as diluted net follows. the share, years project retrospective of on sold, to that impact of adoption the upon back timing will adoption company this of earnings and corresponding completed and will the expects December prior company’s sales, impact to-date revenue be on Based and all The gross margins the application the years made ended contracts of preliminary of goods EBITDA to progress pushed by adjusted reflect However, a of XXXX, are cost to topic XXX, acceleration when the the of offset estimates XX, retrospective for retrospective topic per XXXX for recognition is as application well. be acceleration topic to revenue XXX. these aspects

of compared diluted million approximately million. adjusted million. per $XXX.X of earnings to $X.XX reported of of million $XXX to $XXX.X EBITDA and $X.XX diluted net Earnings sales compared XXXX, sales share approximately as per reported net as of to For EBITDA compared adjusted share $XX of approximately reported

million. as XXXX, net EBITDA compared diluted of adjusted of diluted For $XX.X compared million $XX earnings reported approximately $X.XX adjusted compared million reported of $X.XX as per approximately sales of per of approximately $XXX.X $XXX EBITDA of as million. share reported to to net sales and to share Earnings

share Page now on guidance earnings will As we and on to updated begin and XXX, provide guidance XX have targets EBITDA of for the per revenue adjusted included we ASC based presentation.

$XX November. this $X.XX between expect be up the billion XXXX, $XX and EBITDA from guidance sales of of back of range no in it’s or the credits this tax. previously have With million includes billion million to the foreign impact of provided. cash range we tax and and approximately foreign due million and is million, net same in XXXX and to $XX billings in For to respect to net NOL tax XXXX diluted reform, adjusted per the the will the provided share $XX and repatriation $X and profits, million $X.XX of $X.XX taxes on between utilization as the we estimated of we will in $XX.X U.S. taxes Earnings earnings

expect direct impact BEAT future We from provisions. the no

lower impact the tax U.S. given U.S. fully of as the in our expect result to immediate the benefit once a nominal are small overall XXXX, We of in NOLs amount of CapEx of And we CapEx rates positive reform after expensing relatively expect tax TPI utilized. to have an

we approximately the Mexico and of effective the as of in operating and our are the rate adjusting following. a results our XXXX, for from U.S. structure, operating China for XX% majority in guidance result XX% to to are taxed XX% our As our Under tax

structured the of in U.S. take are we as way and advantage efficient net the this We to have our operating way generated a losses global to cash. more manage

unable the allowance U.S. as valuation net GAAP. benefit generated However, this against to required U.S. U.S. the operating the the in currently due we under recorded of are in losses to recognize asset

back XXXX being and in higher originally Iowa. Vestas the We Matamoros, to Senvion turn the will over tax U.S. I anticipated. tax a losses in inability rate that, benefit reported than China for Proterra call as XXXX in tax The in the XXXX will our effective recognize result losses With startups in will U.S. now of in result of to Steve. for generate

Steve Lockard

Please turn Slide Thanks, to Bill. XX.

like update would guidance I key to Now, our metrics.

of $X ASC under is XXX XXXX We the and within to expected total billion between revenue be while billion, billings range. expect for $X.XX same

our $XX expect million be We under $XX year adjusted EBITDA the XXX. million to full ASC between for and

year $XXX,XXX. the end Blade XX X,XXX between to $XX $XX lines be range deliver of expect million and between to be XX. in for will $XXX,XXX XXXX. and at manufacturing million. expenditures sets price Capital will wind blade wind We will blade between installed average year be Total X,XXX in the selling and

As Bill million million. the mentioned, the expected moving quarter be fourth the result and into Startup million we and $XX this in is as XXXX. increase some a an $XX $XX million CapEx will range between transition $XX from to of of costs of

and as We Although our just explained. compared we effective between taxes XX% be supplier take provided of the the remain the share gains for application in in no by of outsourcing to very will income market will confident dynamic. and towards model rate our in pay XXXX, to opportunities position current global growing trend to the blade our competitive XX% Bill market, of of advantage the strength guidance XX%, regions wind U.S. the the competitive tax the previous dedicated

conversions the the Navistar our over and the We our the announced OEMs $XXX Matamoros, X Gamesa results months manufacture next of began market for pleased very sets with of basis further In our To We supply to and shares of contract some converting on be investor to to lines X milestones XXXX. development wind XX base results well agreement supply secondary and X% X now Senvion our new gigawatts TPI’s base X added We potential the to revenue adjusted ability from in in public in continue to Senvion options plus with customer global our nearly signed million completed increased and helped top improve Vestas, those our XXXX XX%. diversification announcing for on and offering confident Proterra an in we months. and manufacturing of the to as agreements liquidity shares has XXXX, an blades of delivered our public wind base. wind joint adding marketplace total and value We start approximately multiyear Siemens We summarize, line We we very share EBITDA our basis. with to expand X.X which hub Mexico. a delivered blade X our top as the in ex-China reached XXXX. our X.X and are on outstanding in to in agreement. the of both remain expect overall wind May, million next pipeline and

to efforts, the build customers in senior us associates today. for for our for your time on continued basis. questions. global shareholders these I We position you please continued want to technical open for support. management trust our placing talent the line our operator, growth. for that, continue thank their and their And We well for Thank dedicated us with a TPI accomplishments out again and your believe

Operator

comes from question Partners. proceed [Operator Instructions] you. ROTH Shen, Our Philip your question. Please Thank Capital with first

Philip Shen

Hi, Steve, Thanks for Bill. the questions.

you stabilized on in do with we is appears have happening said, QX that of based pricing may some them actually and And turbine back or are customers are one on them used or or the the in kind your in how First extra they in that if want getting seeing of may give customers especially additional pricing OEMs forward? commentary in get greater you going some not It who future? general. more view, pressure to to the to some share of savings improved what deal pricing with that your from savings of and is some customers your stability

Steve Lockard

Thanks. Phil. Yes,

So, that’s we question. product that or their the part on it’s pricing answer to to the place market comment and we are think of our customer’s not in stabilizing of going whether not,

As pain raw you do gain cost-outs. and know, share on Phil, we for that share material matter

of build customer. our to has blades a the with model of drive bigger building. help the been portion typically And share Our our down, are then cost cost, to those large per savings we job order drive-down is agreements state-of-the-art and to in drive-down blades LCOE

would price energy average goes goes of down, down, cost then go up. generally our margin levelized selling Our

companies That that’s about more So, where trend some The general being you just to if is at continues. for it there competing opportunities. economic competing around the trend. of sure and all making the stability work harder on the we is driven of the are growth share But world will demand to the and good the for news more build supply and economics wind profiles economics. for maturation means are we also chain that

consider we that’s in. accordingly, cycle have will and our but with generally product we and have The growth So, cost-out we still the the I’d opportunities look customers, actually work model take time working. way before are discussed new price the as say a leaning we is benefits at we gotten

We same kind down on LCOE pass in the savings and drive of chunk the of still are help leaning customers. in to way a good to our

Philip Shen

in in ‘XX? this by to purposes can after color the about it’s a blade full get Great. more each backing that $XXX,XXX out we Thanks, quarter? little Steve. quarter I do guidance Thanks. QX. higher you $XXX,XXX I be wondering but a How revenue, your ASP but expect of ASP if to year, imagine the blade you give quarter for might XXX,XXX Staying topic, in modeling Bill, non-blade by trend more could for the us for just was of order quarter going on

Bill Siwek

Phil. thanks, Yes,

the start provided point, by think you $XXX,XXX. have going given quarter we $XXX,XXX don’t to but it I at haven’t are full We to this what done for we and is year that

gradually going can will. rather number of lower-priced XXXX. to it’s number a quarter end had the you through the So the you blade ramp a up – at – anticipate if models quarters and We of of that

to will you a see So, a QX will and gradual average. in jump that increase then you see

Philip Shen

Thank me might ramping us to what up where for great Great. That’s the be and a where then last ramp similar me industry volumes, was of has And wind the very kind you one in from place having helpful. contract to and commercial you? the a to commercial in Navistar you general from as timing are product of long-term of can the are that possible color one what process does today see, going you. give release you tells has in some

Steve Lockard

Phil. Thanks,

is agreement then first TPI will this design will the the work and the of prototypes do development fabrication So, a and go through. where tooling

with the trying strength weight on optimize in to and cost right our customer iterations to degree. Some

to to lanes runway in in guidance markets this one general, stage. considered or strategic through specific at and for from or be continue very wind provide targeting help commercial the business, So, adjacencies position be primarily in program a development period X to two wind of timing are see to of XX clear we time. yet What a it’s not a are working a on now know forward. Phil, years we as in growth kind to we over you

that take plus year market in is and per as the mature. revenue time can going work well times You can other the good of you and our pipeline potential give transportation average line per to pretty see a some lines to under that the picture contract just

Philip Shen

news, thank pass Great Steve, nonetheless, it Bill, Great. you. I’ll on.

Steve Lockard

Thanks, Phil.

Bill Siwek

Phil. Thanks,

Operator

Our with next question. Paul question your Coster, from comes proceed JPMorgan. Please

Paul Coster

Yes, thanks questions. my taking for

million only First about and just $XXX off, seems Navistar your was bit where I incremental gross revenue am increase in it came since the future that of was a much. and from contracts announcement wondering

So, of talk us how comes can through sort just you that about?

Steve Lockard

I generally, materials think as talked are go before about There cases, as the getting more advanced up, customers, we Yes. Paul, so for we in revenues up. drives transitioned therefore have which they many are ASPs blades longer. the

based those new will value on that go larger we pricing update we the as contract in through lines, So, transitions as we new of add blades. and

the So primarily. where are seeing incremental that’s increase you

Paul Coster

action new gotten or in with like there be you. then seems OEMs to you fairly pipeline? prospects, existing Thank it it. is it going is OEMs some Got your have quickly, And that pipeline

Steve Lockard

Yes, Steve. Paul, it’s

includes around both us well. onshore pipeline but and continue the will existing customers. some it diversify potential new and to includes geographically help It mostly the opportunities blades, also as world So, offshore

answer is the of all that. So,

Paul Coster

more here this And offshore blade of it kind that like me costly? some any the my great. manufacturing markets, got you brings sounds got blades, – the startup pipeline, is offshore in transition question have which in the of already associated you really is have to it last you are It’s with longer and

Steve Lockard

volume have X-year pipeline lines has to offshore larger a production are the about couple to offshore of in know, Paul, build or that way a blades very but in manufacturing we access. blades facility that. water The today, the a blades you not want are immediate you at as We is do think would near

hopefully, go never a the So water. of kind straight and to they touch truck

that So, bigger, be are the larger, tooling, that. would facility, much blades different all not but the of necessarily beyond the

of the of just number tonnage lines yes, ramp generally be but physical model So emphasize to be and per probably done we a there, megawatts little to fewer longer would be because the I what the higher line today are just doing actually per that what revenue size, a would similar to of take and quite year should significant. would get

Paul Coster

Thank good. Very you very much.

Steve Lockard

Paul. Thanks,

Bill Siwek

Thanks, Paul.

Operator

proceed Company. of Jeff from Cowen comes Our your & next question Osborne Please with question.

Jeff Osborne

appear led second want just guys. given QX? an seeing of the had the revenue to be transition then stabilizing for you industry you flesh into can line the on in Hey, the customer late expand good shortfall. part whatnot questioning a out Philip’s of And the it that and to price of quarter that, just I the XXXX? afternoon same linger is the that auctions in point, One, the doesn’t in a urge compression just more which and to are transitions

Steve Lockard

Yes.

really from any in comment to assume there longer should anymore impact that. the in late about talk you Jeff, we term a I position So, is not detail are think QX, about don’t that.

in as was you Day Investor November Our know.

then it we have And about transitions, much that’s way one. but little number was our a of to bit and it and left startups the that time in did folded So, and XX transitions terms the tweak in already December, of into XX. think

already have and for additional that. game are already a underway at been while. our pretty built So, And of little this they expect point. don’t into those much acceleration It’s really underway plan I

Jeff Osborne

where at, back you November commentary worse That’s getting it I gave haven’t it as then? just the was things to to relative gotten relates

Steve Lockard

all. No not

Jeff Osborne

big tariffs, blades, putting or head-on a piece have not maybe but taken towers your seen? as are stand head-on obviously, you that AWEA as big AWEA cost the as of Perfect. on a And steel just either the with that, TPI the

Steve Lockard

Yes.

favor most basic companies like manufacturing trade the would AWEA and think industry position company open and industries free we tend I do a and would to well. I as think and as

be commentary I unfortunate It proceeds of some far. to legislative try the thus of narrow to the on is would think if the some impact. it seems path angles like there this

if company. you that and at head-on, it broadly a will, – the look composites way TPI from are think we is putting a I standpoint that though to

So, form but for else a and for would attachment structure metallic of hardware the P&L buy we steel cost terms of be that come the little bolts, product, nothing us. would our very in our example, that in

installations. You fair it’s are would I but think other of an also so to that say technologies way, parts natural a machine the have wind with solar out would to in gas affected right point competes similar of and be impact, the more also

this degree, our And which be to just it standpoint, costs from the So, then not of is from recent. the a all chain if chain adapt think a want I like going. policy in new U.S. need kind more some supply to supply chains up would going of to, TPI relatively and supply and is industry, the we they wind be direction and

then deeply be We entrenched manufacturing It are this parts local and come haven’t up content chains world from requirements local and that that’s along adapt the as the do in things and while. pretty time-to-time what supply does conversation at of if industries. a chains incentives, policy other had supply pretty stick, line, global but we in

Jeff Osborne

a revenue ramp out to you from from CapEx question of some of there facilities in new up And in can the XXXX. we that terms just ‘XX sense should the perspective sense. ramping the these is construction some are delays candor ‘XX appreciate give last about saw that you is there. modeling I the lines? any us pushed of then of Make I think

Bill Siwek

No, all, not Jeff. at

on right Matamoros. with target are We

It’s close We so are in that looking to expected piece it. push-out was vertical QX piece QX, there one some great. additional Taicang and was plant. we our close that facility a expand – in land on The push-out to that of the acquired to in we of

than before was we dime normal just it a and But spend time. don’t want other quite frankly, yesterday. closed it’s to timing it fact, In that,

off far so we as as And push we it can.

Jeff Osborne

Makes sense. Thank you. I it. appreciate

Bill Siwek

yes. But no delays,

Steve Lockard

Iowa on as Proterra, startup is schedule well.

track. on are we think I So,

Jeff Osborne

hear. to Great

Operator

comes your with proceed Please Genuity. question Moore, Chip Canaccord next from question. Our

Chip Moore

Yes, hey, guys.

Steve Lockard

Hi, Chip.

Chip Moore

competitor, bit those Any Maybe that your dynamics? about are more in change that? where pipeline, talk a mainly primary competitive environment on how you thinking against particularly prioritized

Steve Lockard

the falloff is we than our the there change put as any opportunity prioritized significance. set that hit for is similar compete we It’s extremely going lines list Again, on it we list something that environment the to of what rate behind we dynamic other there some on. our to are ones there the our think I have in we the is would if we that does high competitive use the close pretty that listed just be Yes, are more reason, have into that don’t have of generally, list belief is that our has backfill. lines are XX will opportunities But it been.

Chip Moore

Thanks. that everything on on is sounds we more got about think it. like into ramp track it Proterra, Yes, Thanks, facility the just guys. how And next so should year? remind us

Steve Lockard

Yes, sure Chip.

ramp our of gradual We by are is we ‘XX. a and the see for throughout to track and at second will the of on full there in of – end quarter end plan and that you the steam now right ‘XX manufacturing be are mid facility be to that end the by

are track, great local expanding excited are there. cooperation there the things and from TPI folks on people about So,

So everything is on track.

Chip Moore

guys. great. Alright, Thanks,

Steve Lockard

you. Thank

Operator

Raymond proceed Pavel your James. Our next Molchanov, question from question. Please comes with

Pavel Molchanov

just few did of ago, you year? mentioned you that utilization hear on you guys. facility Hey, are there new movements to in I a composite bus Iowa right this body by full One, that end the the planning at be

Steve Lockard

be will – Bill. to Good Pavel it’s Yes, talk you.

got what have will with now planned by on lines but building in again, ramp we will – full, won’t speed operating that We of at be that the the facility be normal we for the year. the end at be will have

Pavel Molchanov

at plant initially are the X-year it the for have that a designed bodies, be mean ramps, year Does that from a you I last but rather is is of made Proterra have essentially bus as expand guess several physical strategy? thousand sales to capacity kind that scale, ramp. going that’s Proterra loaded agreement clear Okay. given the with And out you you building back-end to started smaller

Steve Lockard

it’s facility expansion into, there. Yes, to need got the to Maytag it’s extent and refurbished expand that that’s capability we are an capacity old the being facility we moving

Pavel Molchanov

it. Appreciate understood. Okay,

Steve Lockard

You bet. Thanks, Pavel.

Bill Siwek

Thanks Pavel.

Steve Lockard

Thanks, Pavel.

Operator

with JMP question. Our next question comes Please from proceed Joseph Securities. Osha, your

Joseph Osha

Hi, there.

Steve Lockard

Joe. Hi,

Bill Siwek

Joe. Hi,

Joseph Osha

issue this of estimates function throughput couple ASP? I go it just wanted of to and up a relative that So to going line just or back previous just is ASP clarify is and to improving per revenue

Steve Lockard

It’s a the over in an blades well it’s combination, those Joe. evolution have more the I materials throughput. and the both past blade several getting mean, is been as years increasing, we in talked what as last lengths about advanced

it’s So, throughput of combination length. a blade and

Joseph Osha

being that and in, is pass out should have and steady of them or number through Is of about model as kind state? legs this of try think does is new this sort sort we something dynamic as XX we this ‘XX

Steve Lockard

if we years how been about just to if to over X they think seem X – several No. correct. the have I you mean years, you increasing blades every just a plant over flipping be last

not to large build generally are blades. generally being asked are blades, they we smaller So, always

to per that So, throughputs blade, that with anticipate of line can the smaller as you the I go as blade we increase. would continue to the long we larger when continue will see revenue

Joseph Osha

Okay. the mean And composite but that says rails the I it what the seem important composite in is composite, think frame is to Does reference frame tractor to composite it are off-the-wall, or this second, may Navistar tractor are it’s rails. frame steel? rails your understand and

Steve Lockard

made chassis will of and trailer, tractor composite will body materials. which you be go out if under and both Yes, frame tend advanced rails, the back to the

Joseph Osha

enough? can are the composite Well, out frame they of so strong build rails you and

Steve Lockard

Yes.

Joseph Osha

your rate, should this? then the than is got positive can’t And this as you impact” just some, be result behind impressive. of treat lower are last the ‘XX tell Okay, that implications once that XX% issue have XXXX that’s comments “overall tax how now or whether the a on question of I NOL would we quite

Bill Siwek

Yes, forward. Joe, a range range, anomaly I an moving XX% of bit think is good XX% a to just… ‘XX is that little

Joseph Osha

there whether over I to at some yes, am leave trying just yes. there whether after it is is that’s goodness XX%? judge should Sure, – we

Bill Siwek

will forward XX% XX% and Yes, to is certainly, a be good going it positive number.

Joseph Osha

you very much. Okay, alright. Thank

Bill Siwek

Thanks, Joe.

Steve Lockard

Joe. Thanks,

Operator

from Craig-Hallum. Stine, comes question Eric your next Please question. Our proceed with

Eric Stine

Bill. Steve. Hi, Hi,

Steve Lockard

Hey, Eric.

Bill Siwek

Eric. Hey,

Eric Stine

it’s in think I pretty what of in the today. just than if most answered, OEMs, it terms or your whether is so maybe where think you and of do Hey, high higher level, all do can questions can have an so percentages the you what is you about it outsourced you you it estimate outsourcing, mean of I mean seems go are asked just of customers I this I obviously be and think and a lot go, this today early mean, will

thoughts helpful? any would So, there be

Steve Lockard

more made roughly are still of about volume globally they that that trend growth it. outsourcing again means over GE reason we the years The helping developing that to for after CAGR outsourced adjustment main acquisition for the a Eric, at than is to captively where growing and mature trend XX is Yes, versus of of LM opportunities markets, the of a in-house XX% brought kind next X.X% higher and the includes new to at are more the enable are way XX% markets roughly which is generally served. we think their the need be some

in places rooftop new is going that’s growth build a for say exact or it’s don’t think where of lot are you a see we growth outsourced good captive estimate generally outsourcing either to strategy, And the on forecast for going we the our I except are continue. versus consider outsourcing that to make your that’s the in will So, for to which if have where if we new continuing growth to an OEMs percentage profile. a that means investment buy

pipeline period, So, you of get of company, you share market our we TPI scaling think and can will, in XX, over get what if will become just a a the few plus X-year the megawatts mold lines you about of if others. if the a XX XX would a own that sense the

speak a It’s continuing back way, strong a at terms So that supporter wind not it’s but perfectly our trend. our growth. so to as in it’s supporting of

Eric Stine

more, the with in-sourced that is Yes, of of mean, or could market potentially as increase moved And mean, where way? the are market maybe it view blades, in you is quality mean as changes that valued is move see it’s to stays do something change majority larger theme, it kind that China just I and that in-source it. to I obviously sticking that market okay. that something are that I you captive that or increased offshore.

Steve Lockard

a a and it. is bit No, per as better are way kilowatt hour that gap than could basis the a well. There China per recognition that we our price a definite a drive turbines on of nameplate to for price quality down need more is megawatt think rather valued close to are costs installed changing. capacity see continuing in about we as And and being

see it’s we So, on able something crack the will market if as are code our that we there working well. are to and we and open

Eric Stine

Okay thanks.

Steve Lockard

Thank you, Eric.

Bill Siwek

Thanks, Eric.

Operator

and question-and-answer Steve the gentlemen, reached for session. the to call like back the end we And I Lockard closing to Ladies of have would remarks. turn

Steve Lockard

Thanks all look our very on diversified of our forward for again. in much you to global continuing update again growth. to your We toward thanks strategy interest Thanks, and progress TPIC.

Operator

concludes conference. This today’s

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

TPI Composites (TPIC) 8 Mar 182017 Q4 Earnings call transcript