TPIC - Earnings call transcript Q3 2018

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Operator

Good afternoon, and welcome to TPI Composites' Third Quarter 2018 Earnings Conference Call. Today's call is being recorded, and we have allocated 1-hour for prepared remarks and questions and answers. At this time, I'd like to turn the conference over to Anthony Rozmus, Investor Relations for TPI Composites. Thank you.

You may begin.

Anthony Rozmus

operator. you, Thank welcome earnings to TPI third Composites' I'd everyone XXXX call. quarter like to

and be or comments during assumptions be the also in to filings release update during presentation We on site includes forward-looking Today's reports conference any factors not our the materially making to will statements each found can any discussed forward-looking statements do forward-looking undertake or measures. Web and Actual could with if which and call and which because from in uncertainties. references other our Commission, current our made this our Exchange news assumptions, are www.tpicomposites.com. to Securities We incorrect statements. financial any and duty today's subject key latest this of earnings risks of results on differ are expectations non-GAAP based call of

the definitional Steve non-GAAP You the let contained Composites' information today's measure. With to the in should me historical CEO. and President of TPI accompanying reconciliations that, turn for to call refer measures GAAP and financial over slides presentation Lockard, closest the to information

Steve Lockard

financial the our QX, blades. second lines well some over new the we this growth I'm transitioning by joining Good before XXXX our a XXXX to guidance I'll call. quarter you our as up X. call Please and foundation to will Bill we provide update to of the year believe joined continued open for call results, brief as continued new provide investment In our Q&A. CFO. and turn a full I'll the start-ups XXXX larger investment highlights with quarter financial XXXX in for Slide We beyond. discussed Siwek, in in turn afternoon, targets to today market. for our preliminary we begin from then earnings the by XXXX followed everyone, outlook, thank and third quarter review wind introduce the Bill

and and We complexity plan, results our process, in on transition are amount the effort with the notwithstanding to be tracking significant of our line and guidance. XXXX to are start-up involved in pace

of both sales start-ups transitions large which net blade the were resulted for to adjusted process, million. dollars quarter-over-quarter, were reduced million loss from of volumes, a impact number Due high $XX.X due start-ups. relatively of and our and lower adjusted with contribution margin transitions during volume to in our decline EBITDA in Our our blade EBITDA transitions specifically The QX flat. $XXX coupled cost sales the in was

of reductions cost-out margins However, margins and manufacturing both start-up adjusted gross in efforts strength improvements XX% the the the before and productivity, U.S. costs material remained times, dollar. of in of a as result continued EBITDA impact of cycle and north transition

capacity TPI invest of line new to the in customers with Our outsourced XXXX. we new guidance continue ahead blade adding provided for

are planned LCOE In up processes. they than and auction models response to larger new in blade quickly to driven tooling tender drive down in global addition, economically order aggressively more initially

decision-making programs volume pilot high-volume process TPI rates. to will our to create IP technology, This quarter. commit process product derisk investment at Iowa, in Proterra the million manufacture $XX.X help customers our automotive we at be of adjacent business. for highly investment to located line recently pilot for approximately automated develop cost in to composite announcing vehicle bodies enable and future. capability manufacturing demonstrate our will further current second line components side transportation electric the Today, our This XXXX in manufacturing an manufacturing for effectively plant develop defensible On of This our will to line we also of market. to us the and and opened pilot to are a began the bus Newton, potential the where end the

lines Turning these our agreements to net few bring blade contracts of of net total the well as to the XXXX, have X dedicated a beginning transactions potential of long-term terms as supply of to back a of over our amendments The new to existing represent contract added lines of $X.X XX. business. to revenue billion under wind Since we these as today up guidance agreements. putting Furthermore, at XX were and the XXXX, in far so extending XX. new the XXXX us on billion we prioritized of a of $X.X range to now of potential of up at now XX pipeline contract have XXXX. through value closed new lines of total year, start which our midpoint XX the in lines our We have between for in

robust develop with this blades. in pipeline prioritized global the offshore was year. of XX XX both our lines, At we beginning far so the onshore and We continue customers and which have our of of current opportunities to closed year, wind new on pipeline

We updated prioritized our between end intend XX an incremental includes of lines end lines be total updated have to now XXXX. by of This pipeline now converted pipeline and the XXXX. lines X of include to the to a we today or close

our negotiations of convert lines additional prior closing pipeline the be and to the with Slide X. in this Please to ability to of expectation confident are We turn end continue to in XXXX. active

we and moved updated X is EBITDA XX one as the that estimate that discussed year a not the we of those during lines result XXXX articulated the during to may future increased is and and the a We What have for we've XXXX as our anticipated XX, lines timing last from As for potential the revenue the year into talked costs adjusted by lines revenue. start-up impact held of XXXX these unchanged. customers. transition change in investment remains of of the clearly earnings start-ups And accommodate on incremental QX transitions of previously, have volume an in guidance to at year about TPI. and quarter down profitability corresponding our near-term our follow

to XXXX potential respect opportunity today, opportunity to those to under the this expect that approximately approximately With start-up is from XXXX. lines we contracts transition and year contracts through XXXX XXXX. through under we and contract $X.X XXXX we million lines those contract year revenue for for in costs XXXX incur under this that potential As today, revenue think the the billion $XXX in is the under costs expect incremental from incur about

to to right normalized our fact not potential the historical with same pace. more prefer for done transitions and our Given the Notwithstanding from way true the a TPI growth believe a slow costs returns but whole. would for on the future future policy, and investment only capital fuel start-up as TPI and translate wind and we customers transitions. is our industry most the that rigorous growth help invested start-ups transition to profitability

that evaluate We have it's continue our and to TPI, of in we'll transition the of stakeholders customers interest best course, our and to request ensure our from customers. every

start-ups year, While therefore, start-ups to at we're more our with of getting transitions faster future, we transitions we've families less the had for and both this changes. near designed costly. blade delays some better customer making execution both and relating and In anticipate challenges and support rapid happen them models

example, or changes as modular as well For full-mold changes instead split blades. tip of

blade outweigh ground over technologies, blade transportation blade time expect competitive new models incremental as reach for drops the impact. cost below of also limits LCOE lengths and practical reduce transitions the incremental LCOE We to

diversify this in Our markets. non-wind customers, the we on the market, in geographies ongoing of take growth blade outsourcing wind U.S. wind trend. wind And we We intact. and and strategy and to market global our advantage traction sources stability growth across continue execute strategy revenue remains plan to see of the as the

X. and X Slide to Turning

time long-term agreements our billion. today, At revenue this of of As under billion supply $X.X potential potential provide up year, agreements our approximately supply last to our through was XXXX. revenue $X.X

total prior blade $X.X $XXX year billings at billings to contract of realized that in up added The time In minimum $X.X our billion, year. since from that increased the last the under by what of other value last to supply have net amount of last considering grown million $X.X since has We through $X at new transitions billion words, amendments approximately billion. approximately this deals, year over guaranteed over time. this impact agreements volume and billion approximately is time we've

to or the XXXX nearly between gigawatts Turning to CAGR also additions of of X.X% forecast according wind wind XXXX. are XX the at expected will markets XX.X% XXXX CAGR This XXXX top-XX capacity between emerging estimates that Global XX-year annual Consulting. power market. a a and MAKE and to average grow

and be Our too one our and execute strategy dependent growth remain mature Turkey. to not U.S., to demand any of take low-cost well diversify global serve continue is our footprint to advantage manufacturing on and in believe China, facilities emerging strategy to positioned the this hubs and from our we in We market. leverage Mexico to both markets

and demand a We geography also to even global chain to our and enter to customer supply footprint new further. XXXX diversify during accommodate expect

of in participants by industrial XXXX. drive wind to the the over current The utilities, and decarbonization utilities sunsets continue retail we've will this with years through after annual fleet X the the XXXX penetration to the gigawatts expect We according outlook is gigawatts many believe next economics the the like and U.S. that to PTC averaging market both drive through from electrification of along XX.X several the over installations outsourcing global XXXX expected trend We strengthening UBS. customers, from wind last with then and averaging initiatives just demand long industries wind vehicle continue and years. over growth XX seen XXXX to in

list recent as levied the China. XXXX. is turbines increases covered of I including the import TPI. briefly other U.S. by components to China when U.S. then blades be components call to on well the by strong, products turn initially blades government many imported blades other turbine XX% of which over manufactured the including January of demand used to U.S. the number and on market components and I'll XX% by touch the blades in some in on X, included as from wind tariffs Before to from Wind OEMs tariff, are A wind turbine Bill, the those goods

may levelized to how impact the by XX%, U.S. don't suggest the in be steel. others including on long the tariffs cost wind the of overall initial be tariffs we know Although energy place, estimates X% in could these on

than cost from the let blades requirements. less into U.S. of added world-class best that, customers the global our in other China over further even our me the we shifting blades turn that effectively the blades advantage on geographies China, source have over recognize meet still will footprint We of can serve allow demonstration they from. of which by are for cost This facilities shipped XX% shift locations. with our other we cost volumes us tariff today, the factory the to or U.S. in be their of globally it and customers though XXXX to result having While produce manufacturers. customers may manufacturing is our TPI important other hubs benefit strong is our The that is customers to delivery demand an large to many manufacturing our With call most Bill. the and to blade by provides imported

Bill Siwek

consolidated contract in same and $X.X lower decrease Turkey currency and months third in offset loss margin the million, against in basis higher the a start-up margins $XXX slides compared X.X% the were or million costs, in and or volume a same XXXX. in of decrease million Net volume to the RMB year X.X% by XX, increase profit XX.X% increased the X.X%. $XXX.X capacity. to net generate of a of average Thanks, for and in driven fluctuating gross respectively, XXXX. and the total primarily the compared in X.X% Steve. a XXXX, bus X.X% that September of over sales which customer transition, sales. for driven due in hours same by in was lower period until period produced $X.X of same costs of in the by sales margin before and and as dollar expired our decreased same stage start-up, transitions decreased increase administrative million labor General the decline increase same XXXX net currency $XXX.X X for of the wind compared in and fluctuations. gross $XX of period increase favorable billings same Net totaled period models and costs the XXXX due Total by to to to a during expense as during compared to X.X% million our the of XXXX lost direct to and in dollars for and million as quarter higher quarter Please sales XX.X% delayed X.X%, wind to was operations million from or ended our blade was of a the as a for foreign lines the sales XXXX the by quarter the non-blade was XXXX. quarter the of due primarily ramp-up the period XXXX on decrease $XX.X compared the during period usage primarily quarter of XX.X% in the or were blade were QX revenue of partially from contribution compared at of constant are of to quarter period an compared Gross million net produced refer blades and to impact and currency third quarter in the in end price lines movements. profit in margin of XXXX. sales XXXX to compared transition the wind On million million mix period billings volume at The a in and same full XXXX. decrease to for transition blade quarter the XX. was offset the the operations and the lower euro The U.S. $XX.X China gross Chinese The material an to increase $XXX.X start-up of This XX an a result blades $X.X of million compared was that the the number $X.X amount of net third of to ago those of impact to foreign margin by typically

$X.X EBITDA the attributes taxed positive low this be With of that current future. to fully be of period GILTI, XXX, in earnings XXXX. U.S. a operating period and the of loss for impact Before adoption X.X% we to or share-based XXXX to and income item. of compensation, the XXXX. ASC million due compared the share as of of the offset XXXX. million and as respectively. per The in Net was per the earnings decision the from decrease position intangible of $XX.X allowance net same Adjusted discussed $XX.X quarter for for against U.S. period realized of of cumulative $XX evidence the in X.X% cease a was a net partially share global our compared was to to above, the losses. the million same income, during was tax sales $X.XX This XXXX during million in G&A in results of release same for a to compared to million QX period operating result as valuation by approximately U.S. is the a election will $X.XX percentage benefit QX in decreased valuation primarily the $XX.X XXXX in allowance quarter and the quarter our Diluted the in release have we our account

quarter Our of XX% The from adjusted EBITDA was was for margin X.X%, transition quarter start-up 'XX. in primarily activity and resulting driven and decline the the the the loss by volumes. down third

Before XX.X% start-up respectively. QX margins EBITDA in and XXXX our in of both and costs were periods adjusted and XXXX, transition XX.X%

million as strong during $XXX.X and, CapEx. the our of well the to to the transition growth $XX.X therefore, with in equivalents, $XX.X small ability demonstrates to cash XX, at related decrease Slide We business start-up total of capability compared quarter on of our as level fund net December of XX. million $XXX.X and relatively debt cash million million cash ended debt our the Moving and generation and activities XXXX. of cash cash increased significant of quarter The net position

of the million. free provided $XX.X spending flow had net activities CapEx, while cash of $X.X we resulting the For in $X.X million quarter, by on million for cash operating quarter

to under and our generated demonstrate remains primarily have significant strong our facilities. from credit ability sheet our the fund current continue availability operations and cash to with Our balance we growth the we

guidance to Please to metrics I'd update XX. for Slide XXXX. turn like key our Now

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

We year to $XX the the be EBITDA expect upper range. $XX of adjusted for full end our towards to million million

be wind million between and and between sets year-end We million; between the between capital and and lines will and million the be will per $XX.X expenditures expect will and to $XX net $XXX,XXX costs in between for Total million to be in X,XXX $XX XX; deliver $XX dedicated blade $XX transition be X,XXX interest Blade million; XXXX. will at ASP year be range will of $XX and XX million. $XXX,XXX expense start-up blade.

like take the some of our guidance. I'd assumptions. Now you would to like XXXX first, introduce drivers to and key through But I

and $XX Mexico. full-mold for will million or of in million; transition, generally in transition XX costs beginning to of understand contract assumed and million are $XX incremental estimated is the providing these resulting contract by expect of line We fees transition and XX margin $X.X sales investment of metric in XX XXXX increase or range. that drive order manufacturing XX% XX, help end investments GE transition year between impact incremental of of over the beyond dedicated of on potential approximately the as based lines X we today minor guidance the approximately impact On start-up of under-absorbed to Eight resulting EBITDA million. X.X follows: under whether midpoint of a a lines and considering the loss the costs contribution extensions growth year XX, which from our XX% $XX Utilization total of of depending community over paid during This to between estimate the overhead on the million and to of year Overall, the revenue to lines. million by in This planned the on $XX average, is our XXXX. Significant adjusted sales in million takes we're $XXX growth customers of are dollars and and the approximately XX% during EBITDA growth and in the XXXX it lines XXXX Iowa lines be Net transitions between $X.X on start-up XXXX complete. and in under to in to the in is represents as of billings. transition the new the introducing better of before or utilization a net volume start-ups during quarters a agreements. terms to transition. transaction U.S. of approximately during expected range lost our will outside lines

of range and needed new based rigorous efforts strategy. on for dedicated growth are that flow we the and with assumption remainder management sheet, the calculations in million the start of any cash the year use line and in selective our working will sales will our needed be XXXX flexibility during to XX and capital utilization Our execute along the or on facilities development Free lines our $XX XXXX. balance and XXXX used with signed until us that provide billings not million provide XXXX to of the with will $XX fund net to cash of when credit

million. drive $XXX,XXX blade will $XX to and range to from expected million $XXX,XXX in and and start-ups and an between between XXXX in $XXX,XXX Transitions We ASP XXXX. per the increase to $XXX,XXX those in in expenditures up $XXX expect capital XXXX

accommodate footprint a this of manufacturing We further and during in another world-class entering the and conversion facility labor infrastructure XXXX pipeline expect on skilled supply of have additional the tooling We Mexico low-cost, expansion globally for facility campus highly continued a diversify supply location already plan to advantage or market. geography constraint in new will global our customer low-cost demand to our XXXX new during we and tooling for to necessitate and to chain. place expect Juárez, we that take open capitalize to in and the

resources and start-ups. and our expand assure scale to execution also global transitions this constraint We expect of to a on tooling lift

continue cycle innovation driving pricing, raw volume of drive execution direct and supplier with and each. labor material base certainty our reduce focus on supply costs will ramps of emphasis transitions to and overall and faster We continue to with further on execution and for more loss to a day-to-day down times strong start-ups efficient hours and for collaborating

scale through pilot enable advance the We will contracts. our and to costs provide use flexibility out improvements and Production time to them automated and and reduce of our goals the over to remain with our cost customers' continue protecting LCOE volume same them more driven line the will time. feature share number TPI production the by in Integrated strategy to gain shared to enable our finally, our transportation productivity our throughput margins commit drive us and annual the leverage System gain competitive, expand while manufacturing we diversification and related investment at And in to contracts down

not bridges. However, With adjusted in backdrop, billings diversification further guidance is in EBITDA sales, as as Slide XXXX XX total through or turn a full net guidance revenue included the targets. from XXXX our to XXXX well for additional past, and the for that as potential XX the please as

EBITDA showing major billings between XXXX million between we provided components through we of from billion. and of total can found XX. last Adjusted net Slide $XXX million. bridge increase of range For net The $X.X $XXX $X.X on year, and the XXXX and is the billion a expect sales target XXXX, above the be

lines lines be can was of blade XX; manufacturing of XX; tax target and a XX; primarily lines $XX year-end million. XX, $X.XX Our on installed provided $XX XX% found million XX% to $XX between expense $XXX costs contract of XXXX the what and below of at and amortization XX%; start-up $X.XX. over Slide Average $XX $XX as delivered year targets share costs and transition be X,XXX between and million million; the and when and to expected our between between XX transition expense between at capital a to effective under the is to additional XX. million megawatts sets during utilization, related; transition be $XXX,XXX and per lines of between earnings approximately between between X,XXX. Sets XX,XXX;dedicated and diluted Fully between $XX were result and of through the approximately manufacturing $XXX,XXX; are between of costs and start-up range developed, line estimated between the rate bridge share-based XX; XXXX be $XX on sales million, growth the of between to and $X.X manufacturing start-up which interest in are of $XX invoiced be $XX manufacturing as year-end year of million; and million; million; during XX%; expenditures anticipated depreciation midpoint of and and to XXXX, from XX December to and approximately of originally per million based $XX price million be of million of approximately be lines of to X,XXX we between XX% compensation

wrap net For of XXXX and we $XXX This heavy for million. XX% from the the well XXXX are normalized digits. the XXXX have in to in following commissioning end and midpoint XXX% of to move range double $X.X over the Steve start-up adjusted take our a the track low sales lines XXXX, to sales It on and represents and EBITDA expect approximately midpoint Steve? more market target we assumes the to meet XXXX questions. approximately to of in XX% of assumes our and PTC. XXXX for lines over $X.X between of it million targets: billings back the dedicated This by then providing TPI end is billion. XX and and the XX% as transitions XXXX, With more given top-line billion that, XX% billion over installation will have rate push of in up, in to the utilization I have $X from of to growth we and total also had towards represents Adjusted a of as time. of preliminary approximately this by EBITDA contract XXXX by we'll to deadlines net U.S. in XXXX. transitions the between or turn your XX under continue the than in double level $XXX this

Steve Lockard

the with results Thanks, and of remain supplier TPI's the and very gains the delivery our to outsourcing our take of blade quarter advantage model transition third the trend aggressive of of well regions successful pleased confident Bill. and We're application market start-up programs. by current opportunities for competitive many as of year-to-date the the the as our We and global growing provided position dedicated market, the wind toward competitive share in strength in dynamic.

doubling to current We in of sight have more clear revenue line wind our to than billion $X XXXX.

seeing in programs. development In addition, we we our are pleased traction are transportation with the

and forward line today. and Thank open years in strong for focused exciting to please again, for you, the are operator, XXXX with and looking on an And year questions. that, rewarding are We the XXXX. time finishing growth your

Operator

question from first Great. go ROTH is Thank you. [Operator Instructions] Phil Our Partners. ahead. Please Capital from Shen

Phil Shen

XXXX. really helpful. It's all through detail for Thanks guys. the Hey,

As being we're for talked margin. now, respectively. How XX% margin and we 'XX kind the a conservative do X% you about past, at 'XX on of implied you we've think I think EBITDA the target EBITDA XX% calculate this? guys and In are

still here? turn, Are than for process? by you factored the for higher that and there's some and lines 'XX? the accounting we have transitions the in could of lines left Maybe potential time effectively or that transitions the what get accounted in not for 'XX start-ups all through then expected this we are And risk nothing is So there's transition.

to put there, a Thanks. table. but want I know the lot I So there's out it on

Bill Siwek

in Phil, one That's question. Yes. pretty Thanks, a good. you lot put

pretty unexpected. I our standpoint. year, as think transition and start-up on both the asking a got can some this what these conservatism we at a be good in But beat think, point we on this from numbers. clearly, learned a But are sometimes there's XXXX transitions we've customers for

prepared the lines blade But given a reasons be little XXXX, level or start-up. we're there harder remarks, to what in majority and heavy be the For a tell. market-specific vast this a of expecting very of we size our for will either both transition, XXXX, at in the about a from it's blade talked year the brand-new will

for in So reason will U.S. installation in and XXXX, for in as think of last the the well seen level that market less than we couple we be the think the as push years. we've commissioning

Phil Shen

just And color able about now add that feel 'XX. how of decided What it you And geography? had might matter this? talk could in about you be Has actually with to likely on a geography? -- that and the will sometime that announcements? then, lines geography both great. potential you parties Okay, guys it's give little Can share when be more a mentioned you many a been in characteristics us comfortable

Steve Lockard

about of particular even site we've Yes. the X of with what then make minimum and we some Consistent -- Most going saying additional with diversification we further capable specific we Phil, all about Steve. we as would think We're to and land that expansion a of that it's point. been doing the and for diversification we footprint time not at expect more. be though, let's a location the world, probably the pretty geographically additional some that roughly, would X a way. then sure markets next the able to would another today from around is low-cost X through anticipate to say But world sure you be our in certain some can do hub campuses geography, start, start have. idea well blanket that. We're like the serve cost-effective to lines, multiple be make move that the this

then you the for more are today. ready. And So us announce to best we'll as it we that's scope for probably way

Phil Shen

will Steve. provides That nice Great. it Phil. on. Thanks I color. pass Thanks

Steve Lockard

Phil. Thanks

Operator

JMP is Joseph question next go ahead. from Our Osha from Please Securities.

Hilary Cauley

actually growth on ask just be the kind if how and/or is prioritize to quick you This these Joe. existing it expansion. avenues, the Hilary continue you I thoughts for with expanding the different or give to want customers, geographic customers new geography follow-up and the on -- just could to some balance a new of either

Steve Lockard

frame. we that is of lines of opportunities. current some some will least at through more now new potential convert mostly customers lines. on includes -- as a new each look onshore one Yes, as It expanded combination offshore pipeline a well includes, Hilary. we've of that The We we've as balance of time through said, a customer those. expanding XXXX geography new that It and at

balanced sure so they're players serve. in very major We with strong that. just matching We're to that And a customers to make wind it's view the up to that the we're want in grow regions continue space. of the to exactly with going keen

for cut, we and then what purpose, cut-line We makes prioritized order we way the speak. going and pipeline to we're so rank have them on think we it's decide to us that set the best a do, a them and what

we rationale the years. that's last the few consistently So applied. for We've that, really, applied

Hilary Cauley

thinking could been we've also just a more then outsourcing if either or kind seeing. on about on And looking taking great. Okay, you color think share trend about growth, little that more to how of that provide you capitalize

Steve Lockard

Yes.

overhead, continues strong and TPI ends been such up has facility that main have backdrop growth for our it spread our growth that for in customers, from in-house if are could our business. global outsourcing. driver outsourcing tap that's our help right? main But the the hub low-cost actually, new to be think folks So an multiple cost, driver drive share, markets providing I a customers a to is So

through result the additional share. that up being ends the we're And is ultimate driver. The main mechanism. that of market that drive gigawatts each to continuing So year

Hilary Cauley

Okay, great. Thank you.

Steve Lockard

you. Thank

Operator

go question Eric next from Please ahead. is Stine from Our Craig-Hallum.

Eric Stine

Bill. Hi, Steve. Hi,

Steve Lockard

Eric. Hey,

Eric Stine

Yes.

industry commentary the interested blades. in to of about So moving just your families

as Just to decide they're a in curious, start that of that OEM an they make that a decision that way transition, to big there's think part that sort and is when a just change transition people or where you would this that's of blade going really length think. I about as change, do pretty because

Steve Lockard

takes a the more EBITDA rapid tip the of will. Eric, downtime, blade length for more last have an if evolution, a little actually to that it. you than to It's implemented sharpen burn the time, on Yes. during bit extension over major add to few years more through more molds, a is, rather investment just the focus reason be pulling been which, the full transition, ideas the out able us, from And to

really The talking about that's choice, customer tariffs you idea. time where is by about a much being economics. the a to good news more about or news we're feed-in really economics over as And implemented not But more not it's think is it orchestrated in that about driven way. being and a regulations much government trade if now so for market it's So of good battle brand-new our economics.

introductions really all LCOE. customers for our drive to so product hard And new are driving

to the think if return costs. introduction running it, shareholders, you about if business to their their and product capital run to want invested you'd reduce were new business, So you

smarter then where And to orchestrate a conditions cheaper to wind of so that's capitalize add a for various little smart length, and it's and just on them move. families easier on to faster blades

So them, transitions. speed and in of and it through the cost helpful of us it's for a for be smart will terms

Eric Stine

on Got make it. then helpful. to just correctly. sure investment, it the And just I want That's new understand maybe

to but an So for a a of in about you incorporate programs? that it's future that, then demonstration facility specific or think necessarily program, more is right investment would it a that's not development

Steve Lockard

right. That's Yes.

As we It's said, not pilot a it's production ultimate an facility. line.

it tons, blades will not XX be in physical expect cycle will some for hours mean, also will have purpose we're to be to shorter revenue to fabricated Wind it of But us and means from in technology which it type the is capacity XX-plus These some Eric, XX make it means products, minutes develop initially automotive smaller parts, I when to parts are but much parts We these done. times. that that be weigh few made a them. minutes. hours. takes

process, know-how demonstrate and say, new scale. to and customers making then ready materials technology. point to you we intellectual process create to So would we both using that need can it's sure the we're if will. We're IP, property at-rate the our that it also And to product production demonstrate

then that us our to decisions it's in customers a made demonstrate very with ready right way at be production the ramp fully, get it to and for So time. important feeds our growth revenue

objective stage. that's So the this at

Eric Stine

Okay.

part, say, least mean, have? fair I at that you to at that some programs So in targeted current is,

Steve Lockard

Yes.

before, But driven. just handful equates other is before, space, primarily There even more Navistar opportunity truck value, and weight EV We on for in this that's our a as believe added EV EV the development the to where market we've that savings program to also, as related. is high-strength of EV range. penetrate TPI. have largely And initiatives and we offers a or lightweight, mentioned couple reported we may be of not programs

from that could We're working described past. the on multiple so supported We've are line. And there pilot this programs be customer in those already. them

So yes, process think and of programs. could generic that it technology equipment as support multiple

Eric Stine

Thanks Okay. a lot.

Steve Lockard

bet. You

Operator

go Paul Coster is Please from JPMorgan. question head. from next Our

Paul Coster

Yes. Thanks Couple for quick my of ones. taking questions.

in to In base? diversified expect your or likely Just your the terms XX today? logos X wind we pipeline, new more now, are your it And existing they lines these should include to of customer the years be revenues than context. in is within are from

Steve Lockard

Paul. Yes,

Our is existing XX molds, new customers. couple pipeline, of customers the made a up and of

would yes, X or add over time. to we So expect X logos

customers. grow with our current to expect of some also We

of those. of So it's both a combination

of all onshore think diversified those we little said And of are against go really of and growth geographies, of bit solid this of combination As well. I a as but goal forward, mostly but we kind new then, a offshore.

diversity, offshore and bit would a of more expect diversity onshore and both further geographic as we yes, diversity So a well. customer little

Paul Coster

look just as from was 'XX in the that bumping comment the to can you I that So new is, potential of manner it lined 'XX roll customers expected. those we couple the relationship it's a a new Perhaps you question one geography, given up. as well. up the I currently logos you'll then adding imagine more things fact that have characterize Can other CapEx my stand, the nature just as and didn't like of than thinking with be you've got would wishful on

Bill Siwek

I'll Yes, of -- a A that relationships of with actually of the speak Paul, the don't nature lot project the sits on books. think be if But first up new portion that specifically side, a on that. books but we geography, the take think bumps a you logos. of it some we'll our potential the think I about about about doesn't year the it, the bit. the a developer real on sit XXXX, CapEx -- partners' if will new of estate fair

facilities the to that have CapEx new we'll has begin expansion So that in put we'll for Mexico Mexico our as carryover CapEx towards into in Yangzhou from well end our as as as it. But some be that related this But CapEx itself. we That's some XXXX well Matamoros, plant building doing in as of to yes. well. as CapEx some additional 'XX in existing some

Steve Lockard

us new Paul, can Bill's estate a the not mostly And And project. CapEx so in so. point, is not I with do to of another, what year CapEx all know do to can I'd And developed first time. been calendar then not in a point discussing we lot would Yes. targets or are of terms for TPI. necessarily new imagine, in the well, are one a 'XX, you number think our of to the about I for to And limited that the terms or imagine, guess say is for all relationships you customers, and some important so real there relationships of a all for in follows the what targets are spending ideas brand-new be we've really of that as location generally customers location, actually, or that

but much really let's the then logo decks. in key a say, customer right? ready, convert new we on from go our says, customer relationship the to we're close a to If on where not to So we where we we deals pipeline is a a so close, announce and develop scratch, it's --

introductions, converting, would about you more if it's So will. say, than I

Paul Coster

All right. Thank you.

Steve Lockard

Thanks You Paul. bet.

Operator

Pavel question next James. Please go ahead from Our Raymond is from Molchanov

Pavel Molchanov

for Thanks taking the question.

quarter quarters. around per I million or think they've so running As $XX your sales, last the been X about for at non-blade

the guides or revenue should at line revenue is next year up in overall overall for a be with more faster XX%, increases rate XX%? that average your should non-blade that it than Given we assume

Bill Siwek

Yes.

$XX at it's this over to guidance year. $XX our to will, I increase So this $XXX We right? you Pavel. pretty million next about it's million of for this million looked non-blade, million million $XXX -- year year, mean, is year, $XX a good if So

Pavel Molchanov

that the the in Right. of I'm wind, wouldn't opened middle grow faster Newton, it than Iowa given right? facility curious only XXXX, why particularly

SteveLockard

Steve. Yes. Pavel, it's

the you will. how terms transportation this of related of years four one sure in business. remind we about over I in developing to handful thing think making is just $X.X thinking growth we're mission We're a company if beyond, of revenue build try next billion you years. might we're that and The

And the that's So some going as segment, got We've is the okay. of development to growth. time. take related transportation wind shared we've of short-term plenty

don't think take It's that some for one time we're time. going to at just -- I develop. to a be going to it's So win

not, space, automotive but if time. time. going develop that greater growth an some So you just It's technology. case, investment. line rate so to the that come take some up. take customers, it it's expect probably less And We'll that the all much work to to takes going in time us really we for I to convert make this think scaling will in to We'll could as we're spoke transportation than, think just it you whether one not more about, of, about wind. is probably than our equal pilot to, It's

Pavel Molchanov

just Can and the pricing quick latest that epoxy I inflation? input get a on comment of on resin source what's Okay.

Bill Siwek

Yes.

And through it on So was 'XX to and as down our have 'XX. 'XX compared compared we basis per price in latest just a pricing XXXX. for is year-over-year 'XX our recently of to been kilogram round

our So based And supplier so. the impact for XXXX on a notwithstanding arrangements, spot the bit and moving have relationships stabilized any prices seeing prices. our we're not spot year, resin forward, over on

Pavel Molchanov

guys. you Thank helpful. Very Okay.

Steve Lockard

Yes. Thanks Pavel.

Operator

[Operator Instructions] question ahead. from go our Moore Chip Please Canaccord. is from next And here

Chip Moore

Good evening. guys. Hey,

Steve Lockard

Hey, Chip. are you? How

Chip Moore

good. I'm

you're versus for can tick-up talk in wondering a the XQ you transition. about 'XX, aligned just On prior transition the slight start-up costs if with view and

color I delayed more being a could little talked that. a think customer But little you if you a just on just about provide bit.

Bill Siwek

about a the of rate to up phase the of get a And the XX% least transitions leave up a tick line in at bit. phase we them capacity. did we and/or little or It we Sure. way Yes. think until is start-ups start-up transition

had result a couple that, during the a of we've of reason the up. delays so transitions a and that's And the as of tick for start-ups few the

a we tick little bit a if time. will the So up of push the in start-up cost have

So the it. primary that's for reason

Chip Moore

And in it. the tooling facility was you Juárez? the talked new of to related when any it Got about

Bill Siwek

team was tooling -- That building already we down it think new of of seamlessly. in That and very in about I really. talked started we've force there. not going a Juárez. We're out have great move done. facility here the a the skilled into Juárez XXXX. to That We No, half first highly was labor done

So will, just there up start-up you picked it no in We cost, quickly. traditional if and there. was went pretty

Chip Moore

just one for And last me. one Okay.

potential and tariffs about impact. in all of contemplating Are for the talked shifting You any modest blades the you at outlook?

Steve Lockard

Yes.

So customers they and with Chip, them be them I put deal they the in that to build and we and think, a our the we logistics for are up world the really going question shipped various blades blades comment outside, pick that in to. that's the decide there is, where made

strong. if even to So our be still a though customer number. the tariff stay up bigger we've blades may location, operations tick is, number, our place, blades made were the is to demand just point a for could there is in a big But China this choose coming China on cost the even XX% is another to XX%

other or have XX%, from components I come doubt, U.S. So to. to they at China that of a blades lot the unless

point of provides our more in from elsewhere. and the for Mexico, there And the U.S. in blades more global the that example, pulled footprint might flexibility China get so made and perhaps strength go blades And more is for market. a is,

profile likely is for there strong tariff period though on in of So a time. the to some is XX% even XXXX, very China demand be

the we've going would XX%, if by over up been with if moving that. when XX% the reduction free be you're cost we our that We bit. from able that that are. the U.S., last be shame be idea. So were bad what shame to a in think that'd as we're years, It support to wrong materialize desired. Supply trade. tariffs go a just chains be to in are past It it adapt from We're a direction would a perspective. X able global We the along adapt would X% or

shifting I supply is, of chain increases think you'll reality of some see the mitigation over the time. cost and

Chip Moore

Thanks it. Appreciate guys. Perfect.

Steve Lockard

Thank you, Chip.

Operator

from is from question and Cowen Company. next Our Jeff Osborne

Jeff Osborne

the a U.S., afternoon, Good the are is on the Maybe but XX% about China Can of going sounded it where talk guys. question. blades you. are in Thank you to blades where follow-up China other just the XX% going? like going outside, produced

Steve Lockard

various go choose. within will various we've Yes, Australia. a customers Jeff, or even They'll blades India. blades countries to to to where to given They And our Europe go go examples in had period, South markets. that pockets go Africa, the

on are moved can water, distance blades cost. the without transportation some much once they quite be So the additional

don't we decisions. think I point those So the us make is, for

customers Our demand is factory strong the on is, perhaps happening. location? enough The question world China Meaning, strong? is from the their around still is what's to pull our to volume would shift where do. they another That blades and the

that's What So options might each case. their our win for make countries, is the customers the make its be. with And depending strong. on based moves that's demand They them. we our about the case. where projects, of to care sure Even footprint pull on on the the remains different tariffs, most cost-effective operations really what other what's still

Jeff Osborne

A the my detail if from end, appreciate you Makes more don't sense. mind. I there. few

own perspective was across or exact about is it little a called just sense a out? the handicapping sure It X assume, you've the what EBITDA how customer maybe going massive can molds, challenge bit have, us had should of transitions that's timing, On specific than give the I'm the sounded to growth the what anticipated. But transition like you two-quarter not you've three-quarter I as think -- molds a maybe that it that a that you with slower we relates versus process, process? is. geographies your just issue

Bill Siwek

called any general, in they'll But Jeff, take... haven't specific ones. really out We

Jeff Osborne

actually, call XXXX. Sorry but out I to interrupt, think you in GE, did

Bill Siwek

That's Yes. right.

Jeff Osborne

it and X-month or no? So transition. Iowa how long process that take do Is will to you think a Mexico

Bill Siwek

transitions, tip will. transitions, these quarter -- X.X Generally, it to to fully you minor and transition if takes are a quarter

takes stop full production quarters quarter to each from we back generally a get time until to it mold. So X.X capacity we the on

that's the time. So general Yes.

Jeff Osborne

with wind the Iowa guess, That's And ex-PTC call, of you the the guess, endorsement world. in extended is of I helpful. still to be think competitiveness of six or on facility could two. a the think then, transition last on which I the I do anticipating Midwest blades, contract. press X, changing an alluded -- in the of an the I But I closing the I the for certainly was downtime X was was you just quarters, about for only to should given the expecting transition guidance, a Newton in or contract investment quarter that release still we on be Is the going you that year of a have type five or guess, your today that on X that had you'll now versus GE something or I and about that How included some to like the in of XXXX? lines end GE anticipating was X.X you've sounds left at down surprised return quarters it Iowa sorry, X

Steve Lockard

model, transition as think, in we Steve. period. don't It's they're terms specific specifically place kind new investment could we're making as are customer transitioning EBITDA general, it's of on invests But in comment that one if true in our you're during customer that a that of we I dilution Jeff. at blade as where an Yes, I think asking. to a in

ourselves, kind on capital imagine, would customer invested runway to see our and of both return So makes sense. can we you reasonable have to make the

question's on factory individual will is your Individual be So correct. based for right. That decisions point individual customer, TPI. location an an

right we can way we to one think about say don't it. is think that more about I the location except So be that specific the

Jeff Osborne

a XXXX last But global surge PTC You Got for demand, you're be unclear me expiring in either had there'll in on one period? you many it. is on likely the which transition out agree rule-of-thumb is And lines it or and company. mentioned for was I the that in I a just a How -- are particular. with. calling to basis, that

And a XX any other be just have, so XXXX would modeling methodology of or if have year specific helpful. lines sure if operation, be is you XX% the sense you I in if there's commentary about or to back-of-the-envelope XX% transition that every we should there to with in math wasn't any facilities XX the

Bill Siwek

Yes.

XX So those we be thought fact to talked lines we of about those of XXXX. XX XX% utilization to lines, we'd during about that the XX at

pretty number there'll So could low feel -- we low start-up that can stated. be be reasons double think in some that's give there XXXX, transition. you in But that some we is little we And -- point. get talked we be as that a in as again, will we lines specific there about also year, the at so digits about this during for of the can think

Steve Lockard

right, be transition and shown. simpler Jeff, overall move about getting a we've for things bit, utilization some in is number every little terms around XX% every model start-up way this of to Those maybe of timing And you that a rather as said, or to Bill how little than guys impact. thinking as perfect

utilization XX% think the to is So right it. probably the way about

Jeff Osborne

to the many operation. or new out hoping at as one. are any for. which I'm had be over there designs maybe in transition, specific got old? And a X-years last cycle can customers. you a the lifetime that XX stripping way Got life to some GE, obviously, as if know lines the you've But perspective about Is producing offer, don't look how blade, is in you you're And blade of I you. the of can Is you've there

some You've existing had customers.

helpful moving and would about the hear And will lot at shorter investor onetime be that market look auctions tip a But, we blade getting if shorter to and to a that provide if life average would be that the changes. that the that know that items. don't to just it got blade ease of that over You've just there's can be investor we fear data these if any fear an of way certainly just and changes from nature perpetuity in time. you I because given there's of seems or fear changes folks dynamic that's not a concern.

Steve Lockard

a have I the be true, don't reasons, going a for of more prove to to will kind bunch that get say of a example, of reasons. the we of time Jeff, and two are need to for is a will be it's they number combination sense that slow we think What tried for transitions Yes. on and over over years, I lines it's specific that think to exact today. direction can

the truth other is, doing The more make terms families getting as the transitions. to of of related is, than major when a to our blades related, in thing we impact. are a minutes we in of transitions of faster more are and be the at And all few ago, customers said right tip the direction minor other so the kind the get that But to go particular perhaps blades blades, moving by no some move it's, the mitigate sense help blades. split that's length in to the that as at and not longer the it's or to same going new effective modular modular build blade, we say, ideas, to we cost larger factories point remodel which truck to that make next the blade next will if to a build of remodel, to way, big that's reason a could

In smaller pieces fact, molds. to be quicker the they'll and sense transition easier, and small-part a in

So we'll the on see direction to cheaper transition and all it inertia to this some is then faster, make in a transition.

answer, like. as But specific that's that the as you we direction a general that's So might not see.

Jeff Osborne

That's have. appreciate it. all I Great. I

Steve Lockard

Thanks Jeff.

Operator

to I'd back turn question-and-answer management the the concludes for This you. Thank session. floor to any comments. closing like

Steve Lockard

Thanks, on your again. thanks forward update you to in look We progress. to interest and TPI of for continuing Composites. our all again operator, you Thanks,

Operator

This concludes today's teleconference.

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

TPI Composites (TPIC) 11 Nov 182018 Q3 Earnings call transcript