TPIC - Earnings call 3 2023 | TPI Composites, Inc.

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Operator

Hello, and welcome to the TPI Composites Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Jason Wegmann of Investor Relations. Please go ahead, sir.

Jason Wegmann

operator. you, Thank to XXXX like to Composites' TPI I Call. welcome Quarter Earnings Third would everyone

We forward-looking could which Exchange be of reports to our to will and making on materially. can applicable risks are call differ tpicomposites.com. the in website, and be subject risks that filings is found uncertainties, our detailed with Commission, which A cause included results statements actual discussion during latest this and Securities

references to non-GAAP Today's presentation measures. will include financial

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

William Siwek

and our for everyone, thank Thanks, you Jason, call. good joining and afternoon,

to Slide Jason, X. Despite more operational overall here market I'll results, our will third quarter, financial Miller, our to call for results highlights the addition and broadly. we'll unexpected and our were market operations Q&A. our then climate, Ryan I'm third wind expectations, by turn in from impacted bankruptcy. incremental warranty our charges global CFO. Today, an and related challenging and negatively to with the with energy economic was Ryan execution our the open our the discuss and review quarter results In then wind but charge Proterra in the line Please the global

and focus as controls. cash sheet ended cash balance $XXX strong The quarter by to of performance we due on third was cost continued quarter highlighted efficiency unrestricted million the our with

is runway our to financial the deal will position us execute and with We near-term the our enable required are liquidity provide that challenges targets. industry the and to with facing long-term attain us confident

summarize of visibility contracts final during progress number part end capacity volume by and beyond pathway of gain the targets. Therefore, to in into extensions, also customers a in Slide for challenges announce to India work to produced we exceptionally with signed a year business, turn blade We quarter expect to through operations utilization to we start-ups our although X. XXX that the long-term the our XXXX quarter continue are sets transitions. Please and our Globally, Türkiye Mexico, perform for those blade several needs our fronts in on with and facilities made in the To have of or X.X well. and we continue of some to rate the XX%. gigawatts

working service a warranty global As our business the technicians due revenue-generating in deployed campaign anticipated, we year-over-year on. reduction are to to down to projects due is

expect For about to the year, down full we revenue be XX% year-over-year.

Things continue in nicely progress our business. to automotive

now primarily sales cash However, meaningful due a were have and be Proterra full of of EBITDA XXXX not Proterra note and does their bus bankruptcy. on Proterra that to given to sales TPI's to the achieved operating never was that XXXX, year from volumes about reduction we down body impact revenue breakeven. flow the at because bus important program go-forward by forecasted lower to anticipate the It's automotive

products barriers full the battery and truck. a large quarter. panels programs due automotive business for in X high-voltage truck Class structural our product constraints delays light-duty fourth new other launch and X to and addition, programs These battery customers a planning production said, are in that automotive experiencing lower-than-expected new With for include is a automotive supply sales commercial enclosure In thermal customer the X we also to in chain launches. pack

different each Our X with them these X being initiative to customer a launches is are dividends customer new paying as TPI. with of diversification

automotive the market. technologies our needs as the In aligned addition, innovation the and products of manufacturing being launched in investment with through new

by the to strategic encouraged the expect have have by to the are of made We and progress business alternatives we end are share the year. and continuing explore for to more automotive information

has supply last trend the cost situation X raw for years. pre-pandemic The levels. As materials while down be our overall compared during of continues to than better to costs returned to continued the significantly logistics XXXX, have chain, to

expect a see excess cost of China. many XXXX to capacity in demand given the in our inputs slowdown savings for additional We in and

could However, eye certain need and cost costs. petroleum on to we have potential Middle the the the prices, of keep impact as events will transportation well as feedstocks an in East on may that the which impact

initiatives government course policy few that speed of the U.S. expected policy passage of including the and have accelerate permitting promote EU in of use Europe. the are renewable Act several climate expanding to neutrality the projects initiatives Over at past we years, to in and aimed the the numerous regulations, up the in seen energy, Reduction cross-border Inflation simplify

new IRA We the favorable related Despite policy the key an while around demand more that components the policy accelerate industry. will on policies expect robust to until in wind guidance long-term long-term industry the and awaits government don't growth implementation clarity of in wind in XXXX, we increase trends, clarity Europe. these the expect

start-up demand stronger limiting X chain transition the industry lines underutilization volumes we customers permitting, of levels from rising transmission, inventory and contemplate during in addition, are geographic that to our the broader of cost expected one output customer. consider of ability expected as as their from the market in wind In changes for interest availability TPI, recovery. Specific term beginning prepare will transmission demand, to in timing XXXX, down near capital further are overall which the rates volume, supply ramp we customers reduction and lines during impact lines and the of in factors lower existing queues, be XXXX. wind in certain of a currently expect our inflation, they the and from and lines expect which the demand have in XXXX to and X and Furthermore, to result in utilization to

lines, improvements do lines X growth for and in in to of XXXX significant XX we do back expect we make XXXX. So including will transition EBITDA we not EBITDA Nordex we the our year to Mexico be them to of margin. Today, the to TPI, while that a are operating middle for expect

new to a lines blades, plan with the completion larger of of contract exit transition the the Nordex lines Mexico is XX of current dedicated production reset the start-up lines. to of Vestas, With lines XXXX and with in and

EBITDA working be start-ups through by adjusted mid- we'll have we XXXX. With free in cash long-term With that and approach backdrop, couple wind and EBITDA years. production resulting digits of the XXXX, and billion, single-digit to over a in and of flow to revenue free targets. continue our the as lines $X as transitions capacity to a high During stand contract our we sales, additional our margin our mid-single a all current percentage under cash capacity expect flow of we gigawatts, XX exit adjusted of to expect nearly manufacturing next yielding XX all

financial Now review with that, I'll Ryan to the our results. turn to call over

Ryan Miller

in All of information shut on for at segment a just prior our XXXX. In sales, wind million turn which $XXX.X other to third $X.X to million note, the X.X% or Slide same third period our sales net compared be wind down I'll increased as Please X%. Net same blades, in tooling been has of of in exclude year-over-year comparisons in manufacturing today compared XXXX. operations will X. the continuing year to Please hereafter, refer the for to decrease compared wind-related discussed reporting China to as in end a operations we sales sales, Asia XXXX, to discontinued the were from our restated of quarter XXXX, $XXX.X XXXX by the the financial million basis of the same period and cost the quarter average as conditions to work were lower the due of by with XXXX raw wind blade higher driven union line impact Mexico brief and by blade and was and period plants the preparation prices increase blade a the prices. comparative quarter favorable logistic reductions to prior higher lower blades on to in material XXXX produced, Türkiye one third in These pressures tooling our of offset on The as third wind blade partially in temporary a currency and fluctuations sales the production start-ups in primarily inflationary an disruption in stoppage a resolve our of implemented due sales we increase labor of in due XXXX production for sales foreign in volume customer in manufacturing wages. to redesign the transitions. quarter period

in $XX.X in quarter third due bodies time quarter activities. Automotive to due an decreased to nonrevenue million a XXXX. million produced projects sales to to number period quarter in mainly $X.X of in during technicians the to by revenue-generating to the Services bankruptcy of reduction third composite XXXX. same in decrease the increase decrease sales same The on inspection compared repair by Proterra's spent the compared deployed in bus due is on in the a Field was XXXX. decreased and third This due period the reduction

$XX.X a credit primarily the to period million million was period automotive XXXX. of customer in $XX.X the to to million due during to stockholders $XX.X million the XXXX compared estimates the due EBITDA loss losses the constraints warranty quarter charges and a net decrease quarter quarter. the during the product XXXX. million in and loss of products of compared of incremental adjusted down launches. Net delays the from of charge EBITDA related of a for second $XX.X in attributable In adjusted loss new transitions XXXX was to operations $XX.X as campaign EBITDA Proterra addition, were same in sales to million continuing revised of and quarter in common warranty our of The supply $X.X same related other announced third to in was third Adjusted third in chain we bankruptcy of

or items, X $X.X been these adjusted would of EBITDA X.X% have sales. million Excluding

ended cash in We and had with equivalents. to and includes manage capital. X. We issued Slide and we $XXX convertible working which Türkiye million notes to quarter we cash debt, facilities of of India utilized the in Moving $XXX.X million unrestricted $XXX credit the March million

flow XXXX. levels same million cash improvements. the negative debt quarter. We cash last was working $XX.X third stable loss offset net XXXX The EBITDA to end costs use flow incurred, in negative the partially XXXX by the to quarter our were capital Our in due in of had compared and free of third of of million quarter cash the $XX.X of primarily from of free the period in warranty

and warranty burn We initiatives cash for capital significant working level place balance satisfy modest ensuring of preserving do invest commitments, make as comfortably execute on we growth. continue we quality improvement move We a expect of year implement our our can cash initiatives as to we the to deploy sure key and during efficiently we a focus forward. the

we as to you liquidity. The return some mirror. a is our of remain in in beyond positive provide XXXX, EBITDA in change As we XXXX commentary a I biggest confident expect rearview look get want we the why on should number items significant to

example, million hand we costs, Nordex the to over we to period significantly expect losses additionally on a XXXX include single it million $XX.X year to contract in facility XXXX. the will Matamoros to anticipated $XX in Nordex For charges June We avoid from expect of approximately related end warranty reduce which back at the this since campaign. of XX, primarily

I EBITDA be our warranty positively We customer experience are as operating our and million. will sales have growth we the EBITDA invest CapEx another achieve work. Other and payments start-up work navigate and Offsetting that our primarily We expect our and transitions bankruptcy adjusted targets our plus working we to we mid- down facilitate believe we optimize work-in-process wind work and $XX by almost related high sources finally, position taxes; don't will interest to service more lines; from as And less cash to capital advances to balance to be also revenue-generating will start-ups flows technicians non-revenue inventory are help Oaktree the back XXXX and to to of us business and to transitions enable sheet, to move continuing customers mentioned, Field short-term previously executing preferred in XXXX; to efficiency. Services our now, in our expect of and cash to challenges impacted charge areas and results for impacted expect be liquidity billion margins. single-digit of these of long-term idle in and dividends. our projected $X our cash

Moving Slide on XX. to

near-term be all the to is billion. guidance the levels $XX million we which are X in begin guidance, weakened in second, quarter fourth third sales wind provided We previously working as customers down our of midpoint rationalization X on the by some of lines than some to we our the factors: demand; expect customers, to discussions will transitions Given experiencing about adjusted our for result, revised of the year. quarter, ourselves in driven a financial and of X%. production year their with our also a be sales we through matured updating This transpired full of we our to EBITDA own in ready the lines our being loss to as XXXX. We've are first, inventory process that are now $X.X decommissioning is transitions for and approximately in lower about guidance for

driven Our field nonrevenue bankruptcy Nordex the warranty diverting loss of warranty repairs, Proterra charge, to Matamoros the technician service the losses, by increased work. of and campaign, and is cost impact facility inspections our the

back to As modest a quarter, will fourth look the production. Nordex plant full loss expecting we Matamoros our be I'm as in scale

reduce are sales have inventory levels into negatively work-in-process will sheet cost absorption temporarily is balance our drive factories. sheet. significantly driven Bill. previously harvest impact us planning EBITDA cash in the inventory negatively transition will our previously by The quarter year also balance down in we allow which impacts work-in-process negative I'll that, to and head impact inventory, adjusted the to back the in This in they to reduction create will adjusted lower factor another lean turn to we but that other will over call reductions the line from our expected fourth is mentioned EBITDA, work-in-process transitions, as plan we than XXXX. With and our to These that out

William Siwek

to positioned believe vital for now excited the loyalty TPI turn we the in are managing and play and We challenges role again our are will transition. the our remain of ultimate dedication for to success Ryan. on pace and the thank in the Slide their the transition about once TPI. I'll capitalize it Thanks, want open growth and to a the remain We operator on coming energy how continue Please of the we through in to focused XX. the the questions. bullish call to industry on industry long-term well short-term years. I to significant all associates to up turn commitment, back business expects

Operator

And Instructions] from come will Craig-Hallum. Eric the [Operator first with Stine question

Eric Stine

that you expectations, you're were So 'XX. think your talking XX call, last know I about I expecting line when exiting

like sounds 'XX. XX it Now exiting that's

longer? being maybe can walk for So out us. you Is simply now kind pushed and that walk just of of just the takes? through puts that us timing taking start-ups just Or through

Ryan Miller

over I'd been of And and a the say few lot last our just part we've from the matured we a about of big last picture has that with perspective, on discussions course the started to months, customers lines talk what going. where of quarter. they're

be puts 'XX, start-ups with are longer there grow moving some that's at And a expect and consume a seeing takes, Also, we changed we XX. when we -- look 'XX. We still lines to start-ups that we and exit factories where exited. we'd as throughout We XX we'll additional think of expect transitions at right few bring don't we as expect now, some some through is timing but to transitions The right. We of now. be where there'll blades, and in in think today. start-ups with to be transitions, at space. thought when XX and in be we'll last around. I'd those there's those whereby longer then more blades of we're we and slide at to talked -- were a 'XX We right lot quarter, there'll around the we say,

we're still parts, still of actually seventh we're sixth that. But probably And a because I'd and lots down of or I'd so of moving the a in lines of lot inning we say go few say where pace be and is will customer negotiations and on 'XX be plus today at exiting we be we'll EBITDA $X And billion single-digit margins. that high to at in these and discussions. sales

Eric Stine

Got it.

'XX, you position a exiting that? be mean You to in you'd think do

Ryan Miller

be rate is Yes, we our expectations. run exit a it will on as 'XX current

Eric Stine

Got it.

mean and I know something this also quarter, the the and with but past with -- conversations. not contained, relatively more just it's know customer felt dealt issues it's like in you've there. that necessarily there Okay. I maybe And sticking I there then quality was the

I'm I customers. of Just I are larger their based confidence look like this issue. cases, part the what know these mean is curious your that that, designs. in on not conversations a some with

is much and is And much the customers? of so how this how on TPIC on

William Siwek

in Yes. Eric, you. it's when talk the that. Bill. to Good put to we quarter, warranty still pretty When of announced -- early the we last were we provision execution

to it why so we added quarter. that's this And

nothing there's we if different. warranty Eric, let's us. talked with charge, I time. And customers, conversations with on be it's our we just would information today So did have It's that. our it's last we we better say, when clear a believe than

there charge warranty we've about, Now our taken it's issues fails systems, we've in that blade I quality design, to or can improve press many then say. the is not are there's a with is of and talked today But systems then conversations us. But -- number us. be -- steps issue, there's that are sensitive say to that the a a industry but times design that's for the it's complicated on us. by very everything customers would our quality seen It OEMs. issue should and blade when to I if on a warranty given we quality from enhance our a

We're that so to We're can the together constructive. in sure processes conversations their we working meet our make design And that very specs. this with customers together. have are

an that design they're manufacturable very with working effective process in and sure them way. designing the are is in early We to what efficient make

we last issues, announced quarter. we as there we very the believe course. because to disclose And that our it's anything, them we to we they're discussions If and did. and disclose have normal not don't around extent material material we we they're just extent the the constructive -- issue So are arms

Operator

Your America. come Bank Reid next question will with from of Morgan

Morgan Reid

new about the the I we collective industry all were lot and and productive that industry. quality of of through issues product you're with OEMs conversations a some the talking of in you sort know that as work of opportunities just kind having

with Just back of of curious of if sort of competitors commitments product their emerging market near quality potentially you're one seeing or sort and your own opportunities as pulling emerging deals some near-term kind opportunities any on term. of issues share the for its

pick there. up you there's if to an all curious Just demand opportunity some for

William Siwek

be would at that as so challenges clearly, again, us well. there's particular the a that be that Well, by customers as to share said, of space. gain if that OEM's result with market our looking share certainly would expanded our gains that market onshore opportunity customers, provides for an share With

So but our opportunity to gaining clear. is customers us to that long your I share, extent the absolutely, answer an as for sure wanted gain yes, certainly to we're to question make But are well. share

Morgan Reid

expectation Got still that? is side? around like improving any And it. kind sense. XXXX in of sort is That makes inside TPI on of timing your plus expectation the and an for Or of falling there communication of demand that environment sort

William Siwek

Yes.

it's mean I see transition our as customers, in needs their an continued we've a we're we're on that, evaluating XXXX are. existing said, flux. the of to with as not I counting at. And in specifically are I inflection still mean we think with looking what little bit a frank. we probably is working be what XXXX

for We're single we how successful. control on what specifically on help we we're OEMs more focused be a today not challenges the we're OEM. can and working can of them So the focused and

Morgan Reid

are in that Makes issues. where And you from one just a servicing curious your a as warranty that process. taking I just up you was more you're lot charge mentioned know sense. you're just me. later bit I own that in of

from update expectations if an left was up on as you different So maybe here just can charges. and provide what's maybe for you've taken expectation that curious your what warranty

William Siwek

Yes.

dealing along further you at the challenges. more process, with the in think the I get you experience the have

to which fair our the blade what us amount we've customer's get to with worked there's if tower. left closely done quite But of developing think of have challenging be than very customer over up warranty I the we've I is customer tends tower, you, -- behind a is a our tell couple work frankly. and more next on efficient this very a little quarters, down we would program

this technicians we -- So but billable end onto year. work into will shifting 'XX, some back work already begun our we've for have the for going the of

first early see the as So half work, that into of year. wind next have year. that more more next we'll much billable and down work warranty get we We'll of the we'll of part in

Operator

The Pavel come next from question Molchanov Raymond with James. will

Pavel Molchanov

XXXX I a growth mentioned that not know but at stage, year. you you're formal think giving you're this of So guidance I not kind expecting

So down? the $X.X just zooming top What in XXXX total on flattish, of magnitude? that line, in from kind billion

William Siwek

slightly I'd down. say to flattish

Pavel Molchanov

Okay.

like opposite. Okay. Because kind weighted? That's the clear. more And the has of trajectory quarter-to-quarter back-end XXXX been

You and ended started higher lower.

William Siwek

back say half because the the I'd that and the it's transitions more have we'll start-ups of probably in first end of year.

Pavel Molchanov

follow-up Okay. preferred. question Absolutely on A the clear.

that, said that, starting arrangement? this a X Are at amending moving about payment-in-kind to You words, dividend you other be stage, agreement in cash will per talks the Oaktree years with from prolonging you in next the ago, year.

William Siwek

Yes. right constructive in flexibility you, we about tell very with I of are us with Oaktree discussions year. middle next providing the more would

at that. it leave Let's

Operator

Instructions] next [Operator TD Osborne come Cowen. Jeff from question with Our will

Jeffrey Osborne

and update bit first themselves of year aside there's through will I then the the flow some Oaktree be won't what next a through issues first dividend. on cash should just more cash especially You Maybe putting the particular CapEx. us uses cash next when repeat about the year, through might call potential half that the and be imagine the challenged. how give facility the in an think on you things folks Newton we can burn half? of you in the year walk walked all Can

Ryan Miller

Yes.

I transitions they providing of what challenged. funding than tell half, when is a start-ups the with going period have time be news, to help is us point, good been have those a customers bit will our The they are to your I and to going past. you, amiable more to more be think in the first to much

that good happen through will probably at right we're But cash with the do in customers, our amount. where subsidized by help you're going so we're for transitions. our see feeling low we're think a now I performance as to half pretty those we plan. getting out watermark going are fair that our So about first

and are saw a bit We up dollars, to little year CapEx a this of tick quarter. you already starting this spend some

You'll workhorse see We'll that where quarter continue couple be be first facility, gate out to quarter. going be then the we to GE next one going will the producing a to the -- blade. starting going the we from up shorter be last that Probably is facility. is the transitions where with what announced have Juarez going longer other on that we're And blades of of blades.

in and for mean, good billion watermark all us full it's because So need through think, to old of these in get want coming just we we low go transitions. plus in sales sales get going the the rate. But those. And to everything. and where process slowdown us, the to half is as not cash you're lines when to through you for be, dollars just first decommissioning go we order a this It's get I of the to at that will $X stuff. the in I for to

the will first here starting transitions. lines. we're for of and into in that we'll quarter those move the handful So into continue That quarter, then fourth a

Jeffrey Osborne

you would share would CapEx then Newton year? for full And comments the be you sense. be helpful. that any on what And an Makes update the can can us anticipated give on

Ryan Miller

transitions, fine-tuning in timing still right I'll that a what anything tell bit about buying we're for may OpEx, that CapEx are it's our just going just think 'XX start-up from I we're impact of won't would next bare be and especially historically as or maybe and we're we're quite sales. is normal transitions of to What you We've the we of kind of get you the our on to wind to CapEx. where directionally what at and definitely has year, a in but tell to I thinking bones the you, X% at least start-ups is going we transition that that not CapEx 'XX things kind been year, guide and the but than of would about probably -- we beyond be. turbines full little And -- where some into going timing CapEx, happen will ready be Yes. without generally kind year start-up perspective, combinational now, have be we OpEx, CapEx. I Türkiye, we because transition more but spending a this tell

William Siwek

as Newton, one. working still Jeff, it on customer to And it's still timing that our with for -- relates we're

far not yet do start when have we facility. type down So that locked as that as exactly in the we blade will or

Jeffrey Osborne

production per very might there made on when then start vehicle the Is Bill, the quickly, the around associated And barrier truck. thermal comments you of any with light-duty be? content anything CapEx EV in that? And and you can share

William Siwek

light. CapEx relatively that is for The Yes.

of for started here that those frankly. it's fourth got ramps more small year quite been how next the already CapEx will be to a it fast relatively quarter. If depend on ramp there CapEx we've will it it It Some little faster, spent. programs but of in amounts bit ramps

Operator

like Siwek question-and-answer Bill for to concludes over closing This any I go the turn our session. would to conference ahead. Mr. remarks. back Please

William Siwek

Thank you, I you. today Thank look of again operator, your next and and thank quarter. and the to support you all forward for interest continued time TPI.

Operator

conference Thank now today's you has attending concluded. The presentation. for

You may disconnect. now

TPI Composites (TPIC) 2 Nov 232023 Q3 Earnings call transcript