Broadwind, Inc. (NASDAQ:BWEN) Q1 2023 Earnings Conference Call May 11, 2023 11:00 AM ET Company Participants Thomas Ciccone - VP & CFO Eric Blashford - CEO, President & Director Conference Call Participants Eric Stine - Craig-Hallum Justin Clare - ROTH MKM Amit Dayal - H.C. Wainwright & Co. Operator Greetings, and welcome to Broadwind's First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Ope ...

Table of Contents The Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Financial instrume ...

Broadwind, Inc. (NASDAQ:BWEN) Q4 2022 Earnings Conference Call March 9, 2023 11:00 AM ET Company Participants Tom Ciccone - Chief Financial Officer Eric Blashford - Chief Executive Officer Conference Call Participants Eric Stine - Craig-Hallum Justin Clare - ROTH Amit Dayal - H.C. Wainwright Martin Malloy - Johnson Rice Operator Greetings, and welcome to Broadwind's Fourth Quarter and Full Year 2022 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answe ...

(1,423) 230 NET INCREASE (DECREASE) IN CASH (2,520) 852 CASH end of the period . 852 Supplemental cash flow information: Interest paid 741 1,638 $ Income taxes paid SAFE-HARBOR STATEMENT 4Q22 PERFORMANCE SUMMARY • Improved margin outlook. Will complete lower-margin project activity in backlog in Q1 '23; improved demand, operating leverage, price discipline support margin expansion in 2023 4Q22 Performance Strategic Progress Points Three months ended Dec. 31 2022 As of March 2023 Record, high-margin backlog. ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Indicate by check mark whether the Registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34278 88-0409160 (I. ...

Financial Data and Key Metrics Changes - The company reported consolidated sales of $44.8 million in Q3 2022, an increase of 11% compared to $40.4 million in the prior year quarter [15] - EBITDA for Q3 was $1.9 million, up from $0.4 million in the prior year, reflecting improved operating leverage due to higher volume levels [16][22] - Total backlog at the end of Q3 was $132 million, a 73% increase year-over-year [10] Business Line Data and Key Metrics Changes - Heavy Fabrication segment orders were $62.9 million, a 137% increase year-over-year, driven by a $40 million increase in tower orders [17] - Gearing segment orders totaled $15.5 million, up 34% year-over-year, with sales increasing to $10.2 million from $7.6 million [19] - Industrial Solutions sales decreased marginally, contributing to an overall decline in that segment [15] Market Data and Key Metrics Changes - The company booked $85 million in new orders in Q3, more than double the prior year period, with significant increases across all segments [7] - Wind orders more than doubled from last year, attributed to the Inflation Reduction Act and a decline in select raw material prices [7] - Quoting activity in non-wind markets remains strong, indicating continued demand [10] Company Strategy and Development Direction - The company aims to expand into adjacent clean tech markets, including solar, clean fuels, and power infrastructure, while maintaining its legacy in wind [26][30] - Plans to enhance automation in the Heavy Fabrication segment to improve throughput and reduce costs [27] - The company is focused on building a precision manufacturing operation to support the transition to cleaner energy [30][31] Management's Comments on Operating Environment and Future Outlook - Management views the Inflation Reduction Act as a significant positive catalyst for the wind sector, expecting increased installations starting in 2023 [24] - The company anticipates a gradual ramp-up in wind development activity due to the extension of the Production Tax Credit [12][24] - Labor challenges persist, but the company is taking steps to improve recruitment and retention [8][29] Other Important Information - The company expects Q4 EBITDA to be approximately $0.2 million to $0.5 million, reflecting competitive pricing pressures [22] - Net debt increased by $4.6 million due to working capital build and capital expenditures [22] Q&A Session Summary Question: Are you comfortable with your balance sheet outlook to meet higher order activity? - Management expressed comfort with the current liquidity situation, noting approximately $15 million in cash and availability [34] Question: How should we think about costs through 2023 and 2024? - Management indicated costs are increasing due to inflation but are able to achieve price realization to offset these increases [36] Question: What are you doing with respect to solar? - The company is involved in manufacturing replacement inverter skids for solar projects through its Industrial Solutions segment [40] Question: What is the outlook for the Manitowoc facility regarding wind tower demand? - Management expects a ramp-up in demand for the Manitowoc facility in the latter half of 2023 into 2024 [42] Question: How much of your capacity is booked for 2023 and 2024? - No wind orders have been booked for 2024 yet, but discussions are ongoing [54] Question: What is the expected value of the manufacturing tax credit per tower? - The expected credit is $0.03 per watt, potentially amounting to about $90,000 for a 3-megawatt turbine tower [56] Question: How will the tax credit flow through your financials? - The company will be able to monetize the credits through direct payments, with guidance expected from the IRS [58]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Broadwind, Inc. and its subsidiaries for the period ended September 30, 2022, including balance sheets, statements of operations, stockholders' equity, cash flows, and comprehensive notes detailing accounting policies, revenue recognition, debt, leases, and segment information [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------- | :-------------------------- | :-------------------------- | | **ASSETS** | | | | Total Current Assets | $59,674 | $52,325 | | Total Assets | $126,064 | $118,047 | | **LIABILITIES & EQUITY** | | | | Total Current Liabilities | $48,876 | $42,683 | | Total Long-Term Liabilities | $28,574 | $21,230 | | Total Stockholders' Equity | $48,614 | $54,134 | | Total Liabilities & Equity | $126,064 | $118,047 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenues | $44,843 | $40,389 | $136,699 | $119,608 | | Cost of sales | $41,095 | $38,315 | $128,545 | $115,054 | | Gross profit | $3,748 | $2,074 | $8,154 | $4,554 | | Operating loss | $(520) | $(1,997) | $(4,505) | $(8,619) | | Net (loss) income | $(1,772) | $(2,105) | $(6,879) | $6,937 | | Net (loss) income per share-Basic | $(0.09) | $(0.11) | $(0.34) | $0.38 | | Net (loss) income per share-Diluted | $(0.09) | $(0.11) | $(0.34) | $0.36 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | Metric (in thousands) | Dec 31, 2021 | Sep 30, 2022 | | :---------------------------- | :----------- | :----------- | | Common Stock, Issued Amount | $20 | $21 | | Treasury Stock | $(1,842) | $(1,842) | | Additional Paid-in Capital | $395,372 | $396,730 | | Accumulated Deficit | $(339,416) | $(346,295) | | Total Stockholders' Equity | $54,134 | $48,614 | - Total stockholders' equity decreased from **$54,134 thousand** at December 31, 2021, to **$48,614 thousand** at September 30, 2022, primarily due to net losses incurred during the period[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(10,271) | $(10,823) | | Net cash used in investing activities | $(2,757) | $(1,336) | | Net cash provided by financing activities | $13,685 | $11,122 | | Net increase (decrease) in cash | $657 | $(1,037) | | Cash at end of period | $1,509 | $2,335 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures supporting the condensed consolidated financial statements, covering the basis of presentation, significant accounting policies, revenue recognition by segment, earnings per share calculations, inventory and intangible asset breakdowns, accrued liabilities, debt and credit agreements, lease information, fair value measurements, income taxes, share-based compensation, legal proceedings, recent accounting pronouncements, and segment reporting [NOTE 1 — BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%20%E2%80%94%20BASIS%20OF%20PRESENTATION) This note outlines the basis for preparing the unaudited condensed consolidated financial statements, including the consolidation of subsidiaries, adherence to GAAP for interim reporting, and management's use of estimates, also providing a company description, liquidity management details, and COVID-19 impact - Broadwind, Inc. is a precision manufacturer of structures, equipment, and components for clean technology and other specialized applications, primarily serving energy, mining, and infrastructure sectors in the U.S.[26](index=26&type=chunk) - Wind energy industry accounted for **51% of the Company's revenue** during the first nine months of 2022, down from **66% in 2021**, indicating diversification efforts[26](index=26&type=chunk) - The Company's liquidity is managed through cash from operations, available cash balances, credit facilities (2016 and 2022 Credit Facilities), equipment financing, and access to public/private debt/equity markets[27](index=27&type=chunk) | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Total Debt & Finance Lease Obligations | $28,966 | N/A | | Current Outstanding Debt & Finance Leases | $17,596 | N/A | - The Company utilizes supply chain financing arrangements to accelerate receivable collections and manage cash flow, selling accounts receivable without recourse[35](index=35&type=chunk) | Supply Chain Financing (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Accounts Receivable Sold | $30,662 | $23,998 | $77,099 | $78,661 | | Discount Fees Applied | $615 | $47 | $1,110 | $183 | - The COVID-19 pandemic has adversely impacted business, operations, and financial results due to declining order activity, manufacturing inefficiencies associated with supply chain disruptions, and employee staffing constraints[124](index=124&type=chunk) [NOTE 2 — REVENUES](index=10&type=section&id=NOTE%202%20%E2%80%94%20REVENUES) This note details the Company's revenue recognition policies, which generally involve recognizing revenue when promised goods or services are transferred to customers, also providing a breakdown of revenues by segment and explaining specific recognition methods | Segment (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Heavy Fabrications | $30,640 | $28,675 | $93,486 | $87,282 | | Gearing | $10,190 | $7,562 | $30,890 | $20,315 | | Industrial Solutions | $4,020 | $4,213 | $13,142 | $12,357 | | Eliminations | $(7) | $(61) | $(819) | $(346) | | Consolidated | $44,843 | $40,389 | $136,699 | $119,608 | - Revenue for Gearing and Industrial Solutions segments, and industrial fabrication products, is generally recognized at a point in time upon physical transfer of goods/services[43](index=43&type=chunk) - For many tower sales in Heavy Fabrications, revenue is recognized under bill-and-hold arrangements when specific criteria are met, such as goods being identified, ready for transfer, and customer accepted[44](index=44&type=chunk) | Revenue Recognized Over Time (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Heavy Fabrications | $5,927 | $1,791 | $13,336 | $4,220 | | Gearing (ceased Q4 2021) | — | $499 | — | $2,444 | [NOTE 3 — EARNINGS PER SHARE](index=11&type=section&id=NOTE%203%20%E2%80%94%20EARNINGS%20PER%20SHARE) This note provides a reconciliation of basic and diluted earnings per share, detailing the net loss and weighted average common shares outstanding for both basic and diluted calculations, also clarifying the exclusion of restricted stock units from diluted EPS due to their anti-dilutive effect | EPS Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss) income | $(1,772) | $(2,105) | $(6,879) | $6,937 | | Basic Net (Loss) Income Per Share | $(0.09) | $(0.11) | $(0.34) | $0.38 | | Diluted Net (Loss) Income Per Share | $(0.09) | $(0.11) | $(0.34) | $0.36 | | Weighted Average Common Shares Outstanding (Basic) | 20,505,884 | 19,417,675 | 20,155,548 | 18,460,444 | | Weighted Average Common Shares Outstanding (Diluted) | 20,505,884 | 19,417,675 | 20,155,548 | 19,218,420 | - Restricted stock units (**811,342** as of Sep 30, 2022) were excluded from diluted EPS calculation due to their anti-dilutive effect resulting from the Company's net loss[48](index=48&type=chunk) [NOTE 4 — INVENTORIES](index=12&type=section&id=NOTE%204%20%E2%80%94%20INVENTORIES) This note provides a breakdown of the Company's inventory components, including raw materials, work-in-process, and finished goods, along with the reserve for excess and obsolete inventory | Inventory Component (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--------------------------------- | :----------- | :----------- | | Raw materials | $21,512 | $16,148 | | Work-in-process | $10,634 | $13,639 | | Finished goods | $4,252 | $6,575 | | Total | $36,398 | $36,362 | | Less: Reserve for excess and obsolete inventory | $(2,496) | $(2,985) | | Net inventories | $33,902 | $33,377 | [NOTE 5 — INTANGIBLE ASSETS](index=12&type=section&id=NOTE%205%20%E2%80%94%20INTANGIBLE%20ASSETS) This note details the Company's intangible assets, which include trade names and customer relationships from past acquisitions, amortized on a straight-line basis, providing their cost basis, accumulated amortization, net book value, and remaining amortization periods - Intangible assets primarily consist of trade names and customer relationships from the acquisitions of Brad Foote GearWorks, Inc. (2007) and Red Wolf Company, LLC (2017)[51](index=51&type=chunk) - Intangible assets are amortized on a straight-line basis over estimated useful lives ranging from **0 to 5 years**[51](index=51&type=chunk) | Intangible Asset (in thousands) | Sep 30, 2022 Net Book Value | Dec 31, 2021 Net Book Value | Sep 30, 2022 Remaining Weighted Average Amortization Period (years) | Dec 31, 2021 Remaining Weighted Average Amortization Period (years) | | :------------------------------ | :-------------------------- | :-------------------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | Noncompete agreements | $9 | $31 | 0.3 | 1.1 | | Customer relationships | $874 | $1,103 | 3.3 | 4.0 | | Trade names | $2,019 | $2,319 | 5.0 | 5.8 | | Total Intangible Assets | $2,902 | $3,453 | 4.5 | 5.2 | [NOTE 6 — ACCRUED LIABILITIES](index=12&type=section&id=NOTE%206%20%E2%80%94%20ACCRUED%20LIABILITIES) This note details the components of accrued liabilities, including payroll and benefits, property taxes, income taxes payable, professional fees, warranty liability, workers' compensation reserve, and other accrued amounts | Accrued Liability (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :------------------------------- | :----------- | :----------- | | Accrued payroll and benefits | $3,355 | $2,992 | | Fair value of interest rate swap | — | $27 | | Accrued property taxes | $546 | — | | Income taxes payable | $39 | $1 | | Accrued professional fees | $109 | $129 | | Accrued warranty liability | $128 | $125 | | Self-insured workers compensation reserve | $31 | $166 | | Accrued other | $689 | $214 | | Total Accrued Liabilities | $4,897 | $3,654 | [NOTE 7 — DEBT AND CREDIT AGREEMENTS](index=13&type=section&id=NOTE%207%20%E2%80%94%20DEBT%20AND%20CREDIT%20AGREEMENTS) This note provides a comprehensive overview of the Company's debt structure, including the transition from the 2016 Credit Facility to the new 2022 Credit Facility with Wells Fargo, detailing the terms, covenants, collateral, and outstanding balances of the credit facilities and other notes payable | Debt Component (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :---------------------------- | :----------- | :----------- | | Line of credit | $14,406 | $6,350 | | Current portion of term loan | $1,083 | — | | Other notes payable | $2,198 | $274 | | Long-term debt | $6,431 | $203 | | Less: Current portion | $(15,629) | $(6,650) | | Long-term debt, net of current maturities | $8,489 | $177 | - On August 4, 2022, the Company entered into a new **$35,000 thousand** senior secured revolving credit facility and a **$7,578 thousand** senior secured term loan (2022 Credit Facility) with Wells Fargo, replacing the 2016 Credit Facility[61](index=61&type=chunk) - The 2022 Credit Facility matures on August 4, 2027, and includes financial covenants such as a Fixed Charge Coverage Ratio and minimum EBITDA requirements[62](index=62&type=chunk)[63](index=63&type=chunk) - As of September 30, 2022, **$21,893 thousand** was outstanding under the 2022 Credit Facility, with an additional **$13,315 thousand** available for borrowing, and the Company was in compliance with all financial covenants[69](index=69&type=chunk) - The Company has a **$570 thousand** loan agreement with the Development Corporation of Abilene, with **$114 thousand** forgiven annually, leaving a balance of **$114 thousand** as of September 30, 2022[71](index=71&type=chunk) [NOTE 8 — LEASES](index=16&type=section&id=NOTE%208%20%E2%80%94%20LEASES) This note outlines the Company's accounting for leases under Topic 842, including the application of practical expedients and the short-term lease exception, providing quantitative information on lease costs, cash flows, weighted-average lease terms, and discount rates for both finance and operating leases, along with future minimum lease payments - The Company applies ASC 842 for leases and uses a short-term lease exception to all leases of one year or less[72](index=72&type=chunk)[73](index=73&type=chunk) | Lease Cost Component (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total finance lease costs | $375 | $360 | $1,128 | $974 | | Total operating lease costs | $1,057 | $1,080 | $3,128 | $3,307 | | Total lease cost | $1,432 | $1,440 | $4,256 | $4,281 | | Lease Metric | Sep 30, 2022 | Sep 30, 2021 | | :------------------------------------------ | :----------- | :----------- | | Weighted-average remaining lease term-finance leases (years) | 2.5 | 2.0 | | Weighted-average remaining lease term-operating leases (years) | 8.3 | 9.1 | | Weighted-average discount rate-finance leases | 6.0% | 6.4% | | Weighted-average discount rate-operating leases | 8.7% | 8.6% | | Future Minimum Lease Payments (in thousands) | Finance Leases | Operating Leases | Total | | :----------------------------------------- | :------------- | :--------------- | :---- | | Total lease payments | $5,444 | $27,507 | $32,951 | | Present value of lease obligations | $4,848 | $19,051 | $23,899 | | Long-term portion of lease obligations | $2,881 | $17,180 | $20,061 | [NOTE 9 — FAIR VALUE MEASUREMENTS](index=17&type=section&id=NOTE%209%20%E2%80%94%20FAIR%20VALUE%20MEASUREMENTS) This note discusses the fair value of the Company's financial instruments, noting that carrying amounts approximate fair values for short-term instruments and long-term debt, also detailing the fair value measurement of an interest rate swap, which expired in February 2022, and categorizes financial assets and liabilities within the fair value hierarchy - The carrying amounts of cash, accounts receivable, accounts payable, and customer deposits approximate their fair values due to their short-term nature[78](index=78&type=chunk) - The interest rate swap, used to mitigate LIBOR variability, expired in February 2022; its fair value was previously reported in "Accrued liabilities" and changes in "Interest expense, net"[80](index=80&type=chunk) | Liabilities Measured on a Recurring Basis (in thousands) | Sep 30, 2022 Total | Dec 31, 2021 Total | | :----------------------------------------------------- | :----------------- | :----------------- | | Interest rate swap | $0 | $27 | | Total liabilities at fair value | $0 | $27 | [NOTE 10 — INCOME TAXES](index=18&type=section&id=NOTE%2010%20%E2%80%94%20INCOME%20TAXES) This note explains the Company's income tax provisions, including the impact of valuation allowances and net operating loss (NOL) carryforwards, detailing the Section 382 limitation on NOL usage and the Stockholder Rights Plan designed to preserve these tax assets - The Company has a full valuation allowance against deferred tax assets as of September 30, 2022[84](index=84&type=chunk) | Income Tax Provision (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $36 | $101 | - As of December 31, 2021, the Company had federal and unapportioned state NOL carryforwards of **$277,310 thousand**, with **$227,781 thousand** beginning to expire in 2026[85](index=85&type=chunk) - A Section 382 ownership change in 2010 limits annual NOL usage to **$14,284 thousand**; the Stockholder Rights Plan is in place to deter further ownership changes that could trigger additional limitations[86](index=86&type=chunk)[88](index=88&type=chunk) [NOTE 11 — SHARE-BASED COMPENSATION](index=19&type=section&id=NOTE%2011%20%E2%80%94%20SHARE-BASED%20COMPENSATION) This note details the Company's share-based compensation activities, including restricted stock units and performance awards, summarizing the activity for the nine months ended September 30, 2022, and the associated compensation expense recognized in the statements of operations - No stock option activity occurred, and no stock options were outstanding during the nine months ended September 30, 2022[91](index=91&type=chunk) - The Company recorded **$425 thousand** in share-based compensation expense for liability awards to be settled in shares in 2023[91](index=91&type=chunk) | Restricted Stock Unit & Performance Award Activity | Number of Shares | Weighted Average Grant-Date Fair Value Per Share | | :----------------------------------------------- | :--------------- | :----------------------------------------------- | | Unvested as of December 31, 2021 | 918,448 | $2.72 | | Granted | 734,077 | $1.75 | | Vested | (815,734) | $2.23 | | Forfeited | (25,449) | $2.60 | | Unvested as of September 30, 2022 | 811,342 | $2.39 | | Share-Based Compensation Expense (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $106 | $103 | | Selling, general and administrative | $1,079 | $754 | | Net effect on net income | $1,185 | $857 | [NOTE 12 — LEGAL PROCEEDINGS](index=20&type=section&id=NOTE%2012%20%E2%80%94%20LEGAL%20PROCEEDINGS) This note states that the Company is involved in various legal proceedings in the normal course of business, with management believing the outcomes will not have a material adverse effect on financial results, though acknowledging the inherent uncertainty of litigation - The Company is party to various legal proceedings arising in the normal course of business[94](index=94&type=chunk) - Management believes the final outcome of these proceedings will not have a material adverse effect on the Company's results of operations, financial condition, or cash flows[94](index=94&type=chunk) [NOTE 13 — RECENT ACCOUNTING PRONOUNCEMENTS](index=20&type=section&id=NOTE%2013%20%E2%80%94%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note indicates that the Company reviews new accounting standards as issued and believes that none of the new standards effective in the current fiscal year have a significant impact on its condensed consolidated financial statements - The Company reviews new accounting standards and believes none of the recently issued or effective standards have a significant impact on its condensed consolidated financial statements[95](index=95&type=chunk) [NOTE 14 — SEGMENT REPORTING](index=20&type=section&id=NOTE%2014%20%E2%80%94%20SEGMENT%20REPORTING) This note provides financial information by the Company's three reportable segments: Heavy Fabrications, Gearing, and Industrial Solutions, along with Corporate and Eliminations, detailing their product and service offerings, and presenting segment-specific revenues, operating income/loss, depreciation, amortization, and capital expenditures for the three and nine months ended September 30, 2022 and 2021, as well as total assets [Heavy Fabrications](index=20&type=section&id=Heavy%20Fabrications) - Provides large, complex, and precision fabrications, primarily for the U.S. wind energy industry (**51% of 9M 2022 revenue**) but diversifying into mining, construction, material handling, and O&G[97](index=97&type=chunk) - Production facilities in Manitowoc, Wisconsin, and Abilene, Texas, have a combined annual tower production capacity of up to approximately **550 towers**[97](index=97&type=chunk) [Gearing](index=20&type=section&id=Gearing) - Provides gearing and gearboxes to diverse markets including O&G fracking/drilling, mining, wind energy, steel, and material handling[98](index=98&type=chunk) - Utilizes an integrated manufacturing process with machining and finishing in Cicero, Illinois, and heat treatment and gearbox repair in Neville Island, Pennsylvania[98](index=98&type=chunk) [Industrial Solutions](index=20&type=section&id=Industrial%20Solutions) - Offers supply chain solutions, light fabrication, inventory management, kitting, and assembly services, primarily for the combined cycle natural gas turbine market, as well as other clean technology markets[99](index=99&type=chunk) [Corporate](index=21&type=section&id=Corporate) - "Corporate" includes assets and selling, general, and administrative expenses of the Company's corporate office; "Eliminations" comprise adjustments to reconcile segment results to consolidated results[102](index=102&type=chunk) | Segment Financials (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Net Revenues** | | | | | | Heavy Fabrications | $30,640 | $28,675 | $93,486 | $87,282 | | Gearing | $10,190 | $7,562 | $30,890 | $20,315 | | Industrial Solutions | $4,020 | $4,213 | $13,142 | $12,357 | | Corporate | — | — | — | — | | Eliminations | $(7) | $(61) | $(819) | $(346) | | **Operating Income (Loss)** | | | | | | Heavy Fabrications | $372 | $(445) | $(11) | $(1,873) | | Gearing | $624 | $(219) | $(73) | $(2,090) | | Industrial Solutions | $(191) | $(108) | $(368) | $(169) | | Corporate | $(1,322) | $(1,248) | $(4,050) | $(4,487) | | Eliminations | $(3) | $23 | $(3) | — | | **Capital Expenditures** | | | | | | Heavy Fabrications | $976 | $294 | $2,176 | $942 | | Gearing | $64 | $306 | $540 | $343 | | Industrial Solutions | $20 | — | $38 | $26 | | Corporate | — | $4 | $3 | $58 | | Segment Assets (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :---------------------------- | :----------- | :----------- | | Heavy Fabrications | $38,975 | $37,131 | | Gearing | $51,356 | $46,219 | | Industrial Solutions | $11,277 | $10,825 | | Corporate | $241,385 | $228,219 | | Eliminations | $(216,929) | $(204,347) | | Total | $126,064 | $118,047 | [NOTE 15 — COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=NOTE%2015%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the Company's environmental compliance and remediation liabilities, allowance for doubtful accounts, collateral pledges, and potential liquidated damages, highlighting the ongoing monitoring of environmental regulations and the methodology for estimating allowances - The Company's operations are subject to environmental laws and regulations, with potential liabilities for cleanup costs and third-party claims[106](index=106&type=chunk) - An allowance for doubtful accounts is established based on factors like individual customer circumstances, payment history, and aging of receivables[107](index=107&type=chunk) | Accounts Receivable Allowance Liability (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $47 | $473 | | Write-offs | $(8) | $(432) | | Other adjustments | $(10) | $(2) | | Balance at end of period | $29 | $39 | - The Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations[109](index=109&type=chunk) - Liquidated damages in customer contracts for delivery or production delays are typically limited, and the Company does not expect a material adverse effect from this potential exposure[110](index=110&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, discussing key metrics, operational results by segment for the three and nine months ended September 30, 2022, compared to 2021, and an analysis of liquidity, financial position, and capital resources, also including a cautionary note on forward-looking statements [Key Metrics Used by Management to Measure Performance](index=23&type=section&id=KEY%20METRICS%20USED%20BY%20MANAGEMENT%20TO%20MEASURE%20PERFORMANCE) - Management uses non-GAAP financial measures like adjusted EBITDA and free cash flow to evaluate performance, growth trends, operational efficiencies, and liquidity[113](index=113&type=chunk) | Key Financial Measures (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net revenues | $44,843 | $40,389 | $136,699 | $119,608 | | Net (loss) income | $(1,772) | $(2,105) | $(6,879) | $6,937 | | Adjusted EBITDA | $1,897 | $401 | $2,259 | $14,418 | | Capital expenditures | $1,060 | $604 | $2,757 | $1,369 | | Free cash flow | $223 | $(3,251) | $(8,169) | $(1,913) | | Operating working capital | $26,306 | $19,554 | $26,306 | $19,554 | | Total debt | $24,118 | $5,673 | $24,118 | $5,673 | | Total orders | $84,457 | $42,597 | $163,196 | $103,252 | | Backlog at end of period | $132,213 | $76,531 | $132,213 | $76,531 | | Book-to-bill | 1.9 | 1.1 | 1.2 | 0.9 | - Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, share-based compensation and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses[114](index=114&type=chunk) - Free cash flow is defined as adjusted EBITDA plus or minus changes in operating working capital less capital expenditures net of any proceeds from disposals of property and equipment[115](index=115&type=chunk) [Our Business](index=25&type=section&id=OUR%20BUSINESS) This section provides an overview of the Company's business performance during the third quarter of 2022, highlighting significant increases in new orders across segments, revenue growth, and a reduced net loss, also addressing the ongoing impact of the COVID-19 pandemic on operations [Third Quarter Overview](index=25&type=section&id=Third%20Quarter%20Overview) - New orders in Q3 2022 significantly increased to **$84,457 thousand**, up from **$42,597 thousand** in Q3 2021[121](index=121&type=chunk) - Heavy Fabrications segment saw a **223% increase** in wind tower orders, while industrial fabrication orders decreased by **41%**[121](index=121&type=chunk) - Gearing segment orders increased **34%** due to higher demand from O&G, industrial, and mining customers; Industrial Solutions segment orders also increased **34%** due to new gas turbine orders[121](index=121&type=chunk) - Revenue increased **11%** to **$44,843 thousand** in Q3 2022, driven by a **95% increase** in industrial fabrications revenue and a **35% increase** in Gearing segment revenue, partially offset by a **26% decrease** in tower sections sold[122](index=122&type=chunk) - Net loss decreased to **$1,772 thousand** (**$0.09 per share**) in Q3 2022 from **$2,105 thousand** (**$0.11 per share**) in Q3 2021, primarily due to higher sales, partially offset by increased material costs and interest expense[123](index=123&type=chunk) [COVID-19 Pandemic](index=25&type=section&id=COVID-19%20Pandemic) - The COVID-19 pandemic has adversely impacted business, operations, and financial results due to declining order activity, manufacturing inefficiencies associated with supply chain disruptions, and employee staffing constraints[124](index=124&type=chunk) - The Company continues to monitor financial health and liquidity, serving customers while implementing health and safety measures based on CDC guidance[125](index=125&type=chunk) [Results of Operations](index=26&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed comparison of the Company's consolidated and segment-specific financial performance for the three and nine months ended September 30, 2022, against the corresponding periods in 2021, highlighting key revenue drivers, gross profit changes, operating expenses, and net income/loss [Three months ended September 30, 2022, Compared to Three months ended September 30, 2021](index=26&type=section&id=Three%20months%20ended%20September%2030%2C%202022%2C%20Compared%20to%20Three%20months%20ended%20September%2030%2C%202021) This sub-section analyzes the Company's consolidated and segment-specific performance for the third quarter of 2022 compared to 2021, detailing revenue changes, gross profit improvements, and shifts in operating income/loss, primarily driven by increased sales volumes and higher material costs [Consolidated (3 months)](index=26&type=section&id=Consolidated%20%283%20months%29) | Metric (in thousands) | 2022 | % of Total Revenue (2022) | 2021 | % of Total Revenue (2021) | $ Change | % Change | | :-------------------------------- | :---------- | :------------------------ | :---------- | :------------------------ | :------- | :------- | | Revenues | $44,843 | 100.0% | $40,389 | 100.0% | $4,454 | 11.0% | | Cost of sales | $41,095 | 91.6% | $38,315 | 94.9% | $2,780 | 7.3% | | Gross profit | $3,748 | 8.4% | $2,074 | 5.1% | $1,674 | 80.7% | | Operating expenses | $4,268 | 9.5% | $4,071 | 10.1% | $197 | 4.8% | | Operating loss | $(520) | (1.2)% | $(1,997) | (4.9)% | $1,477 | 74.0% | | Total other (expense) income, net | $(1,238) | (2.8)% | $(84) | (0.2)% | $(1,154) | (1373.8)% | | Net loss | $(1,772) | (4.0)% | $(2,105) | (5.2)% | $333 | 15.8% | - Revenues increased by **$4,454 thousand (11.0%)** YoY, primarily due to a **95% increase** in industrial fabrications revenue and a **35% increase** in Gearing segment revenue, partially offset by a **26% decrease** in tower sections sold[129](index=129&type=chunk) - Gross profit increased by **$1,674 thousand (80.7%)** YoY, driven by higher sales volumes in Gearing and Heavy Fabrications, partially offset by higher material costs[130](index=130&type=chunk) - Operating expenses as a percentage of sales decreased to **9.5%** from **10.1%** due to higher revenue levels[130](index=130&type=chunk) [Heavy Fabrications Segment (3 months)](index=26&type=section&id=Heavy%20Fabrications%20Segment%20%283%20months%29) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | | Orders | $62,873 | $26,539 | | Tower sections sold | 145 | 197 | | Revenues | $30,640 | $28,675 | | Operating income | $372 | $(445) | | Operating margin | 1.2% | (1.6)% | - Wind tower orders increased **223%** YoY as customers secured production capacity for 2022 and 2023; Industrial fabrications orders decreased **41%** due to lower mining demand[132](index=132&type=chunk) - Revenues increased **7%** YoY, driven by a **95% increase** in industrial fabrication revenues, partially offset by a **26% decrease** in tower sections sold[132](index=132&type=chunk) - Operating income improved by **$817 thousand** YoY, with operating margin increasing to **1.2%** from **(1.6)%**, due to higher sales volumes and labor efficiencies, partially offset by higher material costs[134](index=134&type=chunk) [Gearing Segment (3 months)](index=27&type=section&id=Gearing%20Segment%20%283%20months%29) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | | Orders | $15,523 | $11,546 | | Revenues | $10,190 | $7,562 | | Operating income (loss) | $624 | $(219) | | Operating margin | 6.1% | (2.9)% | - Orders increased **34%** YoY due to higher demand from industrial, mining, and O&G customers[135](index=135&type=chunk) - Revenue increased **35%** YoY, primarily from higher order intake from O&G customers, partially offset by decreased aftermarket wind revenue[135](index=135&type=chunk) - Operating income improved by **$843 thousand** YoY, with operating margin increasing to **6.1%** from **(2.9)%**, mainly due to higher sales[136](index=136&type=chunk) [Industrial Solutions Segment (3 months)](index=27&type=section&id=Industrial%20Solutions%20Segment%20%283%20months%29) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | | Orders | $6,061 | $4,512 | | Revenues | $4,020 | $4,213 | | Operating loss | $(191) | $(108) | | Operating margin | (4.8)% | (2.6)% | - Orders increased **34%** YoY due to timing of new gas turbine orders[139](index=139&type=chunk) - Revenue decreased **5%** YoY, primarily due to global logistics delays[139](index=139&type=chunk) - Operating loss increased YoY due to lower sales and higher freight and packaging costs[139](index=139&type=chunk) [Corporate and Other (3 months)](index=28&type=section&id=Corporate%20and%20Other%20%283%20months%29) - Corporate and Other expenses increased YoY primarily due to higher compensation-related expenses[140](index=140&type=chunk) [Nine months ended September 30, 2022, Compared to Nine months ended September 30, 2021](index=28&type=section&id=Nine%20months%20ended%20September%2030%2C%202022%2C%20Compared%20to%20Nine%20months%20ended%20September%2030%2C%202021) This sub-section analyzes the Company's consolidated and segment-specific performance for the first nine months of 2022 compared to 2021, detailing significant revenue growth, improved gross profit and operating loss, and the impact of the absence of prior-year government benefits [Consolidated (9 months)](index=28&type=section&id=Consolidated%20%289%20months%29) | Metric (in thousands) | 2022 | % of Total Revenue (2022) | 2021 | % of Total Revenue (2021) | $ Change | % Change | | :-------------------------------- | :---------- | :------------------------ | :---------- | :------------------------ | :---------- | :-------- | | Revenues | $136,699 | 100.0% | $119,608 | 100.0% | $17,091 | 14.3% | | Cost of sales | $128,545 | 94.0% | $115,054 | 96.2% | $13,491 | 11.7% | | Gross profit | $8,154 | 6.0% | $4,554 | 3.8% | $3,600 | 79.1% | | Operating expenses | $12,659 | 9.3% | $13,173 | 11.0% | $(514) | (3.9)% | | Operating loss | $(4,505) | (3.3)% | $(8,619) | (7.2)% | $4,114 | 47.7% | | Total other (expense) income, net | $(2,338) | (1.7)% | $15,657 | 13.1% | $(17,995) | (114.9)% | | Net (loss) income | $(6,879) | (5.0)% | $6,937 | 5.8% | $(13,816) | (199.2)% | - Revenues increased by **$17,091 thousand (14.3%)** YoY, driven by a **52% increase** in Gearing segment revenue and a **7% increase** in Heavy Fabrications revenue (**101% increase** in industrial fabrications)[143](index=143&type=chunk) - Gross profit increased by **$3,600 thousand (79.1%)** YoY, with gross margin improving to **6.0%** from **3.8%**, due to higher sales volumes in Gearing and Heavy Fabrications, partially offset by higher material and ramp-up costs[144](index=144&type=chunk) - Net loss of **$6,879 thousand** in 9M 2022 compared to net income of **$6,937 thousand** in 9M 2021, primarily due to the absence of **$6,965 thousand** ERC benefit and **$9,151 thousand** PPP loan forgiveness recognized in the prior year[146](index=146&type=chunk) [Heavy Fabrications Segment (9 months)](index=28&type=section&id=Heavy%20Fabrications%20Segment%20%289%20months%29) | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Orders | $110,022 | $62,096 | | Tower sections sold | 668 | 940 | | Revenues | $93,486 | $87,282 | | Operating loss | $(11) | $(1,873) | | Operating margin | (0.0)% | (2.1)% | - Wind tower orders increased **106%** YoY, securing 2022 and 2023 production capacity; Industrial fabrications orders increased **10%** due to demand for PRS units and industrial products[148](index=148&type=chunk) - Revenues increased **7%** YoY, driven by a **101% increase** in industrial fabrication revenue, partially offset by a **29% decrease** in tower sections sold[148](index=148&type=chunk) - Operating loss improved by **$1,862 thousand** YoY, with operating margin improving to **0.0%** from **(2.1)%**, due to higher sales and the absence of prior-year one-time events (weather, project delay), partially offset by higher material costs and workforce transition costs[150](index=150&type=chunk) [Gearing Segment (9 months)](index=30&type=section&id=Gearing%20Segment%20%289%20months%29) | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Orders | $38,526 | $29,325 | | Revenues | $30,890 | $20,315 | | Operating loss | $(73) | $(2,090) | | Operating margin | (0.2)% | (10.3)% | - Orders increased **31%** YoY due to increased demand from O&G, mining, and industrial customers[151](index=151&type=chunk) - Revenue increased **52%** YoY, primarily from higher order intake from O&G, industrial, and mining customers, partially offset by decreased aftermarket wind revenue[151](index=151&type=chunk) - Operating loss improved by **$2,017 thousand** YoY, with operating margin improving to **(0.2)%** from **(10.3)%**, mainly due to higher sales, partially offset by higher material and ramp-up costs[152](index=152&type=chunk) [Industrial Solutions Segment (9 months)](index=30&type=section&id=Industrial%20Solutions%20Segment%20%289%20months%29) | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Orders | $14,648 | $11,831 | | Revenues | $13,142 | $12,357 | | Operating loss | $(368) | $(169) | | Operating margin | (2.8)% | (1.4)% | - Orders increased **24%** YoY due to timing of aftermarket projects[154](index=154&type=chunk) - Revenue increased **6%** YoY, primarily from aftermarket projects[154](index=154&type=chunk) - Operating loss increased YoY due to higher variable expenses, including freight costs[154](index=154&type=chunk) [Corporate and Other (9 months)](index=31&type=section&id=Corporate%20and%20Other%20%289%20months%29) - Corporate and Other expenses decreased YoY primarily due to lower salaries and benefits[155](index=155&type=chunk) [Liquidity, Financial Position and Capital Resources](index=31&type=section&id=LIQUIDITY%2C%20FINANCIAL%20POSITION%20AND%20CAPITAL%20RESOURCES) This section discusses the Company's cash position, debt obligations, and access to capital, including the new 2022 Credit Facility and equity sales agreements, also analyzing cash flows from operating, investing, and financing activities and addressing potential liquidity challenges related to production, sales, and the COVID-19 pandemic - Cash totaled **$1,509 thousand** as of September 30, 2022, an increase of **$657 thousand** from December 31, 2021[156](index=156&type=chunk) - Total debt and finance lease obligations were **$28,966 thousand** as of September 30, 2022, with an additional **$13,315 thousand** available under the 2022 Credit Facility[156](index=156&type=chunk) - The Company entered into a Sales Agreement on September 12, 2022, to sell up to **$12,000 thousand** of common stock through agents, with **$11,667 thousand** remaining available as of September 30, 2022[158](index=158&type=chunk) - The 2022 Credit Facility with Wells Fargo, providing a **$35,000 thousand** revolving credit facility and a **$7,578 thousand** term loan, replaced the 2016 Credit Facility on August 5, 2022[159](index=159&type=chunk) - Management anticipates current cash, available credit, cash from operations, equipment financing, and proceeds from equity sales will be adequate to meet liquidity needs for at least the next twelve months[160](index=160&type=chunk) - Potential cash flow and liquidity issues could arise if production, sales, customer collections, or new orders are materially inconsistent with expectations, especially given the COVID-19 pandemic[161](index=161&type=chunk) [Sources and Uses of Cash](index=32&type=section&id=Sources%20and%20Uses%20of%20Cash) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(10,271) | $(10,823) | | Investing activities | $(2,757) | $(1,336) | | Financing activities | $13,685 | $11,122 | | Net increase (decrease) in cash | $657 | $(1,037) | [Operating Cash Flows](index=32&type=section&id=Operating%20Cash%20Flows) - Net cash used in operating activities decreased to **$10,271 thousand** in 9M 2022 from **$10,823 thousand** in 9M 2021, primarily due to improved operating performance and less working capital build, partially offset by the absence of prior-year ERC and PPP loan forgiveness benefits[164](index=164&type=chunk) [Investing Cash Flows](index=32&type=section&id=Investing%20Cash%20Flows) - Net cash used in investing activities increased to **$2,757 thousand** in 9M 2022 from **$1,336 thousand** in 9M 2021, primarily due to an increase in net purchases of property and equipment[165](index=165&type=chunk) [Financing Cash Flows](index=32&type=section&id=Financing%20Cash%20Flows) - Net cash provided by financing activities increased to **$13,685 thousand** in 9M 2022 from **$11,122 thousand** in 9M 2021, primarily due to increased net borrowings under the 2022 Credit Facility, partially offset by prior-year proceeds from the Equity Distribution Agreement[166](index=166&type=chunk) - The Company collected the remaining **$497 thousand** Employee Retention Credit (ERC) benefit in January 2022, which was recorded as "Other income (expense), net" in 2021[168](index=168&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) - There have been no material changes in critical accounting estimates during the three months ended September 30, 2022, compared to those described in the Annual Report on Form 10-K for the year ended December 31, 2021[170](index=170&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=34&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - This section contains forward-looking statements based on current expectations, subject to risks and uncertainties, many of which are amplified by the COVID-19 pandemic[172](index=172&type=chunk) - Key risks include the impact of global health concerns (COVID-19), regulatory frameworks, customer dependencies, economic stability of customers/suppliers, ability to grow, IT failures, liquidity sufficiency, and market volatility[172](index=172&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Broadwind, Inc. is not required to provide quantitative and qualitative disclosures about market risk under Item 305I of Regulation S-K - As a smaller reporting company, Broadwind, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness as of September 30, 2022, and reports no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, under the supervision of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2022[175](index=175&type=chunk) - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2022[175](index=175&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes in internal control over financial reporting during the three months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[176](index=176&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This item incorporates by reference the information on legal proceedings from Note 12 of the condensed consolidated financial statements, stating that the Company is involved in various legal matters but does not expect a material adverse effect on its financial condition - Information on legal proceedings is incorporated by reference from Note 12, "Legal Proceedings" of the condensed consolidated financial statements[179](index=179&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This item states that the risk factors identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, remain the most significant risks to its future results and financial condition, without further modification - The risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021, continue to be the most significant risks to the Company's future results of operations and financial conditions[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports that there were no unregistered sales of equity securities or use of proceeds to disclose for the period - No unregistered sales of equity securities or use of proceeds to report[182](index=182&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[183](index=183&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[184](index=184&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This item reports that there is no other information to disclose for the period - No other information to report[185](index=185&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including corporate documents, credit agreements, severance agreements, sales agreements, certifications, and XBRL financial information - The exhibits include corporate organizational documents, credit agreements (e.g., 2022 Credit Agreement with Wells Fargo), severance agreements, sales agreements (e.g., with Roth Capital Partners), CEO/CFO certifications, and XBRL financial data[188](index=188&type=chunk) SIGNATURES - The report is signed by Eric B. Blashford, President and Chief Executive Officer, on November 8, 2022, in accordance with the requirements of the Securities Exchange Act of 1934[194](index=194&type=chunk)

Broadwind, Inc. (NASDAQ:BWEN) Q2 2022 Earnings Conference Call August 9, 2022 11:00 AM ET Company Participants Tom Ciccone - Vice President & Principal Accounting Officer Eric Blashford - Chief Executive Officer Conference Call Participants Justin Clare - ROTH Capital Sameer Joshi - H.C. Wainwright Eric Stine - Craig-Hallum Capital Group Operator Greetings. Welcome to Broadwind's Second Quarter 2022 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now t ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section details the filing specifics of the Quarterly Report on Form 10-Q for Broadwind, Inc., including its filer status and common stock outstanding [Filing Details](index=1&type=section&id=Filing%20Details) Broadwind, Inc. filed this Quarterly Report on Form 10-Q for Q2 2022, identifying as a non-accelerated and smaller reporting company - The report is a Quarterly Report on Form 10-Q for the period ended **June 30, 2022**[3](index=3&type=chunk) - Broadwind, Inc. is classified as a **non-accelerated filer** and a **smaller reporting company**[4](index=4&type=chunk) Common Stock Outstanding | Metric | Value | | :--------------------------- | :---------- | | Common stock outstanding | 20,471,051 | | As of | August 4, 2022 | [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Broadwind, Inc.'s unaudited condensed consolidated financial statements, covering balance sheets, income, equity, cash flows, and notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show an increase in total assets and liabilities from December 31, 2021, to June 30, 2022, with a notable rise in accounts receivable and line of credit balances, while cash significantly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Cash | $49 | $852 | | Accounts receivable, net | $21,161 | $13,802 | | Total current assets | $61,534 | $52,325 | | Total assets | $126,867 | $118,047 | | **LIABILITIES & EQUITY** | | | | Line of credit and other notes payable | $17,178 | $6,650 | | Accounts payable | $26,105 | $16,462 | | Customer deposits | $4,293 | $12,082 | | Total current liabilities | $55,856 | $42,683 | | Total stockholders' equity | $49,676 | $54,134 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss for both the three and six months ended June 30, 2022, contrasting with net income in the prior year periods, primarily due to the absence of PPP loan forgiveness and employee retention credit benefits recognized in 2021 Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $50,012 | $46,491 | $91,856 | $79,219 | | Gross profit | $2,394 | $2,198 | $4,406 | $2,480 | | Operating loss | $(1,912) | $(2,311) | $(3,985) | $(6,622) | | PPP loan forgiveness | $0 | $9,151 | $0 | $9,151 | | Net (loss) income | $(2,703) | $10,252 | $(5,107) | $9,042 | | Net (loss) income per share—Basic | $(0.13) | $0.55 | $(0.26) | $0.50 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from December 31, 2021, to June 30, 2022, primarily due to net losses incurred during the period, despite additional paid-in capital from share-based compensation and 401(k) plan issuances Stockholders' Equity Changes (in thousands) | Metric | December 31, 2021 | June 30, 2022 | | :--------------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $54,134 | $49,676 | | Net loss (Six Months Ended) | N/A | $(5,107) | | Additional Paid-in Capital | $395,372 | $396,021 | | Accumulated Deficit | $(339,416) | $(344,523) | - The company issued **480,595 shares** for restricted stock and **146,790 shares** under its 401(k) retirement savings plan during the six months ended June 30, 2022[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased, while net cash used in investing activities increased due to higher property and equipment purchases. Net cash provided by financing activities decreased, primarily due to the absence of proceeds from common stock sales seen in the prior year Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(8,264) | $(9,987) | | Net cash used in investing activities | $(1,697) | $(742) | | Net cash provided by financing activities | $9,158 | $12,114 | | Net (decrease) increase in cash | $(803) | $1,385 | | Cash at end of period | $49 | $4,757 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on significant accounting policies, financial instrument specifics, and operational segment information [NOTE 1 — BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%20%E2%80%94%20BASIS%20OF%20PRESENTATION) The condensed consolidated financial statements are prepared in accordance with GAAP for interim information, including the accounts of Broadwind, Inc. and its wholly-owned subsidiaries. The company is a precision manufacturer for clean technology and other specialized applications, with 53% of its H1 2022 revenue from the U.S. wind energy industry (down from 68% in H1 2021) - The financial statements are prepared in accordance with **GAAP** for interim financial information and include Broadwind, Inc. and its wholly-owned subsidiaries[22](index=22&type=chunk) - The company is a precision manufacturer of structures, equipment, and components for clean technology and other specialized applications, primarily in the U.S. energy, mining, and infrastructure sectors[26](index=26&type=chunk) Revenue from U.S. Wind Energy Industry | Period | % of Revenue | | :----------------- | :----------- | | First six months of 2022 | 53% | | First six months of 2021 | 68% | [NOTE 2 — REVENUES](index=9&type=section&id=NOTE%202%20%E2%80%94%20REVENUES) Revenue is recognized when promised goods or services are transferred to customers. The Heavy Fabrications segment saw a 47% decrease in tower sections sold in Q2 2022, offset by a 154% increase in industrial fabrications revenue. Gearing revenue increased 37% in Q2 2022, and Industrial Solutions revenue increased 43% in Q2 2022 - Revenue is recognized when promised goods or services are transferred to customers, reflecting the consideration expected[39](index=39&type=chunk) Revenues by Segment (in thousands) | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Heavy Fabrications | $35,575 | $35,830 | $62,847 | $58,607 | | Gearing | $10,115 | $7,404 | $20,700 | $12,753 | | Industrial Solutions | $5,049 | $3,541 | $9,121 | $8,145 | | Consolidated | $50,012 | $46,491 | $91,856 | $79,219 | - The company recognizes revenue over time for certain Heavy Fabrications projects where products have no alternative use and there's an enforceable right to payment[43](index=43&type=chunk) [NOTE 3 — EARNINGS PER SHARE](index=11&type=section&id=NOTE%203%20%E2%80%94%20EARNINGS%20PER%20SHARE) Basic and diluted net loss per common share for the three and six months ended June 30, 2022, was $(0.13) and $(0.26) respectively, compared to net income per share in the prior year. Restricted stock units were excluded from diluted EPS calculation due to their anti-dilutive effect Net (Loss) Income Per Common Share | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net (loss) income per share | $(0.13) | $0.55 | $(0.26) | $0.50 | | Diluted Net (loss) income per share | $(0.13) | $0.53 | $(0.26) | $0.48 | | Weighted average common shares outstanding—BASIC | 20,244,176 | 18,760,910 | 19,977,477 | 17,973,896 | - Restricted stock units of **829,890** as of June 30, 2022, were excluded from diluted earnings per share computation due to their anti-dilutive effect resulting from the company's net loss[46](index=46&type=chunk)[47](index=47&type=chunk) [NOTE 4 — INVENTORIES](index=12&type=section&id=NOTE%204%20%E2%80%94%20INVENTORIES) Net inventories increased to $34,929 thousand as of June 30, 2022, from $33,377 thousand at December 31, 2021, driven by an increase in raw materials, partially offset by decreases in work-in-process and finished goods Inventories, Net (in thousands) | Component | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | Raw materials | $23,251 | $16,148 | | Work-in-process | $10,494 | $13,639 | | Finished goods | $3,315 | $6,575 | | Less: Reserve for excess and obsolete inventory | $(2,131) | $(2,985) | | Net inventories | $34,929 | $33,377 | [NOTE 5 — INTANGIBLE ASSETS](index=12&type=section&id=NOTE%205%20%E2%80%94%20INTANGIBLE%20ASSETS) Net intangible assets decreased to $3,086 thousand as of June 30, 2022, from $3,453 thousand at December 31, 2021, primarily due to ongoing amortization of customer relationships and trade names - Intangible assets represent fair value assigned to definite-lived assets like trade names and customer relationships from acquisitions[49](index=49&type=chunk) Intangible Assets, Net Book Value (in thousands) | Intangible Asset | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | Noncompete agreements | $17 | $31 | | Customer relationships | $950 | $1,103 | | Trade names | $2,119 | $2,319 | | Total Intangible assets | $3,086 | $3,453 | - Intangible assets are amortized on a straight-line basis over estimated useful lives, ranging from **1 to 5 years**[49](index=49&type=chunk) [NOTE 6 — ACCRUED LIABILITIES](index=12&type=section&id=NOTE%206%20%E2%80%94%20ACCRUED%20LIABILITIES) Total accrued liabilities increased to $4,312 thousand as of June 30, 2022, from $3,654 thousand at December 31, 2021, mainly due to higher accrued payroll and benefits and accrued property taxes Accrued Liabilities (in thousands) | Component | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | Accrued payroll and benefits | $3,380 | $2,992 | | Fair value of interest rate swap | $0 | $27 | | Accrued property taxes | $376 | $0 | | Total accrued liabilities | $4,312 | $3,654 | [NOTE 7 — DEBT AND CREDIT AGREEMENTS](index=13&type=section&id=NOTE%207%20%E2%80%94%20DEBT%20AND%20CREDIT%20AGREEMENTS) The company's line of credit increased to **$17,037 thousand** by June 30, 2022, with a new **$35,000** revolving credit facility established in August 2022 Debt and Credit Agreements (in thousands) | Component | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | Line of credit | $17,037 | $6,350 | | Other notes payable | $638 | $274 | | Long-term debt | $190 | $203 | | Long-term debt, net of current maturities | $687 | $177 | - On August 4, 2022, the company entered into a new **$35,000** senior secured revolving credit facility and a **$7,578** senior secured term loan (2022 Credit Facility) with Wells Fargo Bank, replacing the 2016 Credit Facility[60](index=60&type=chunk) - The 2022 Credit Facility matures on **August 4, 2027**, and includes financial covenants such as a Fixed Charge Coverage Ratio and minimum EBITDA requirements[62](index=62&type=chunk) [NOTE 8 — LEASES](index=15&type=section&id=NOTE%208%20%E2%80%94%20LEASES) Total lease costs for the six months ended June 30, 2022, were $2,824 thousand. The weighted-average remaining lease term for operating leases is 8.5 years, with a weighted-average discount rate of 8.7% Total Lease Cost (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :----------------------------- | :----------------------------- | | Total finance lease costs | $752 | $613 | | Total operating lease costs | $2,072 | $2,228 | | Total lease cost | $2,824 | $2,841 | Weighted-Average Lease Terms and Discount Rates | Metric | June 30, 2022 | June 30, 2021 | | :--------------------------------------- | :------------ | :------------ | | Weighted-average remaining lease term—finance leases (in years) | 2.7 | 2.2 | | Weighted-average remaining lease term—operating leases (in years) | 8.5 | 9.3 | | Weighted-average discount rate—finance leases | 6.0% | 8.6% | | Weighted-average discount rate—operating leases | 8.7% | 8.5% | [NOTE 9 — FAIR VALUE MEASUREMENTS](index=16&type=section&id=NOTE%209%20%E2%80%94%20FAIR%20VALUE%20MEASUREMENTS) The company's financial instruments approximate fair values, and the interest rate swap, previously a Level 2 liability, expired in February 2022, resulting in a zero fair value - The carrying amounts of cash, accounts receivable, accounts payable, and customer deposits approximate their fair values due to their short-term nature[76](index=76&type=chunk) Fair Value of Financial Liabilities (in thousands) | Liability | June 30, 2022 (Level 2) | December 31, 2021 (Level 2) | | :--------------------------- | :---------------------- | :-------------------------- | | Interest rate swap | $0 | $27 | - The interest rate swap, previously used to mitigate LIBOR variability, expired in **February 2022**[78](index=78&type=chunk) [NOTE 10 — INCOME TAXES](index=17&type=section&id=NOTE%2010%20%E2%80%94%20INCOME%20TAXES) The company recorded a provision for income taxes of $22 thousand for the six months ended June 30, 2022, with a full valuation allowance against deferred tax assets and substantial NOL carryforwards Provision for Income Taxes (in thousands) | Period | Provision for Income Taxes | | :--------------------------- | :------------------------- | | Six months ended June 30, 2022 | $22 | | Six months ended June 30, 2021 | $77 | - The company has a **full valuation allowance** recorded against deferred tax assets[83](index=83&type=chunk) - As of December 31, 2021, the company had federal and unapportioned state NOL carryforwards of **$277,310 thousand**, with an annual usage limitation of **$14,284 thousand** under Section 382 of the IRC[84](index=84&type=chunk)[85](index=85&type=chunk) [NOTE 11 — SHARE-BASED COMPENSATION](index=18&type=section&id=NOTE%2011%20%E2%80%94%20SHARE%20BASED%20COMPENSATION) Share-based compensation expense for the six months ended June 30, 2022, was $580 thousand, with a decrease in unvested restricted stock units Share-Based Compensation Expense (in thousands) | Component | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $83 | $76 | | Selling, general and administrative | $497 | $588 | | Net effect on net income | $580 | $664 | Restricted Stock Unit Activity | Metric | Number of Shares | | :--------------------------- | :--------------- | | Unvested as of Dec 31, 2021 | 918,448 | | Granted | 734,077 | | Vested | (808,734) | | Forfeited | (13,901) | | Unvested as of Jun 30, 2022 | 829,890 | [NOTE 12 — LEGAL PROCEEDINGS](index=19&type=section&id=NOTE%2012%20%E2%80%94%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, but management believes the outcomes will not materially adversely affect its financial condition - The company is party to a variety of legal proceedings that arise in the normal course of its business[93](index=93&type=chunk) - Management believes the final outcome of these proceedings will not have a **material adverse effect** on the company's results of operations, financial condition, or cash flows[93](index=93&type=chunk) [NOTE 13 — RECENT ACCOUNTING PRONOUNCEMENTS](index=19&type=section&id=NOTE%2013%20%E2%80%94%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) The company has reviewed new accounting standards and believes none have a significant impact on its condensed consolidated financial statements - The company reviews new accounting standards as issued[94](index=94&type=chunk) - None of the new accounting standards issued or effective in the current fiscal year are believed to have a **significant impact** on the company's condensed consolidated financial statements[94](index=94&type=chunk) [NOTE 14 — SEGMENT REPORTING](index=19&type=section&id=NOTE%2014%20%E2%80%94%20SEGMENT%20REPORTING) The company operates through three reportable segments: Heavy Fabrications, Gearing, and Industrial Solutions, each serving distinct industrial markets - The company is organized into three reportable segments: **Heavy Fabrications**, **Gearing**, and **Industrial Solutions**[95](index=95&type=chunk) - Heavy Fabrications provides large, complex fabrications, primarily for the U.S. wind energy industry (**53% of H1 2022 revenue**) and other industrial markets[96](index=96&type=chunk) - Gearing supplies gearing and gearboxes to diverse markets including O&G, mining, and wind energy[97](index=97&type=chunk) - Industrial Solutions offers supply chain solutions, light fabrication, and assembly services, mainly for the combined cycle natural gas turbine market[98](index=98&type=chunk) [NOTE 15 — COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%2015%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) The company is subject to environmental laws and establishes an allowance for doubtful accounts, which increased to $77 thousand as of June 30, 2022 - The company's operations are subject to environmental laws and regulations, which may impose remediation liabilities[102](index=102&type=chunk) - An allowance for doubtful accounts is established based on factors like individual customer circumstances, history, and past due status[103](index=103&type=chunk) Accounts Receivable Allowance Liability (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $47 | $473 | | Bad debt expense | $40 | $9 | | Write-offs | $0 | $(429) | | Balance at end of period | $77 | $52 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, liquidity, and capital resources for Q2 and H1 2022, including segment results and external factors [KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE](index=22&type=section&id=KEY%20METRICS%20USED%20BY%20MANAGEMENT%20TO%20MEASURE%20PERFORMANCE) Management uses non-GAAP financial measures such as Adjusted EBITDA and Free Cash Flow, alongside GAAP metrics, to evaluate business performance, growth trends, operational efficiencies, and liquidity. Adjusted EBITDA for the six months ended June 30, 2022, was $363 thousand, a significant decrease from $14,017 thousand in the prior year - Management uses non-GAAP **adjusted EBITDA** and **free cash flow** to evaluate business performance, growth trends, operational efficiencies, liquidity, and overall financial performance[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) Key Financial Measures (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $50,012 | $46,491 | $91,856 | $79,219 | | Net (loss) income | $(2,703) | $10,252 | $(5,107) | $9,042 | | Adjusted EBITDA | $372 | $12,800 | $363 | $14,017 | | Capital expenditures | $1,205 | $153 | $1,697 | $765 | | Free cash flow | $(3,903) | $5,645 | $(8,391) | $(376) | | Total debt | $17,865 | $6,620 | $17,865 | $6,620 | | Total orders | $26,046 | $26,441 | $78,739 | $60,655 | | Backlog at end of period | $93,249 | $74,338 | $93,249 | $74,338 | | Book-to-bill | 0.5 | 0.6 | 0.9 | 0.8 | [OUR BUSINESS](index=24&type=section&id=OUR%20BUSINESS) The company experienced a net loss in Q2 2022 due to the absence of prior-year stimulus benefits. New orders decreased slightly in Q2 2022, with wind tower orders down 82% due to market uncertainty, while industrial fabrications, gearing, and industrial solutions segments saw increased orders. Revenue increased 8% in Q2 2022, driven by industrial fabrications and other segments, despite a 47% decrease in tower sections sold - Net loss of **$2,703 thousand** in Q2 2022, compared to net income of **$10,252 thousand** in Q2 2021, primarily due to the absence of **$3,593 thousand** in employee retention credit and **$9,151 thousand** in PPP loan forgiveness[119](index=119&type=chunk) New Orders and Revenue (in thousands) | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--------------------------- | :-------- | :-------- | :--------- | | Total new orders | $26,046 | $26,441 | -1.5% | | Wind tower orders (Heavy Fabrications) | N/A | N/A | -82% | | Industrial fabrications orders (Heavy Fabrications) | N/A | N/A | +242% | | Gearing segment orders | N/A | N/A | +14% | | Industrial Solutions orders | N/A | N/A | +8% | | Total revenue | $50,012 | $46,491 | +8% | - The COVID-19 pandemic continued to adversely impact business through June 30, 2022, leading to declines in order activity, manufacturing inefficiencies, and employee staffing constraints[121](index=121&type=chunk) [RESULTS OF OPERATIONS](index=25&type=section&id=RESULTS%20OF%20OPERATIONS) Consolidated revenues increased for Q2 and H1 2022, driven by industrial fabrications, gearing, and industrial solutions, but net loss occurred due to absent prior-year stimulus [Three months ended June 30, 2022, Compared to Three months ended June 30, 2021](index=25&type=section&id=Three%20months%20ended%20June%2030,%202022,%20Compared%20to%20Three%20months%20ended%20June%2030,%202021) Consolidated revenues increased by 7.6% to $50,012 thousand, but net loss was $(2,703) thousand due to the absence of prior-year PPP loan forgiveness and ERC benefits Consolidated Financial Performance (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--------------------------- | :-------- | :-------- | :-------- | :-------- | | Revenues | $50,012 | $46,491 | $3,521 | 7.6% | | Cost of sales | $47,618 | $44,293 | $3,325 | 7.5% | | Gross profit | $2,394 | $2,198 | $196 | 8.9% | | Operating loss | $(1,912) | $(2,311) | $399 | 17.3% | | PPP loan forgiveness | $0 | $9,151 | $(9,151) | -100.0% | | Net (loss) income | $(2,703) | $10,252 | $(12,955) | -126.4% | - Heavy Fabrications segment revenues were **flat**, with a **154% increase** in industrial fabrications offset by a **47% decrease** in tower sections sold. Operating income decreased by **$193 thousand** due to lower sales volumes and workforce transition costs[125](index=125&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk) - Gearing segment revenue increased **37%**, driven by higher order intake from O&G and industrial customers. Operating loss decreased by **$297 thousand**, improving operating margin from **(11.9%) to (5.8%)**[125](index=125&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Industrial Solutions segment revenue increased **43%**, primarily due to new gas turbine and aftermarket projects. Operating income improved from a loss of **$(47) thousand** to a profit of **$32 thousand**[125](index=125&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk) [Six months ended June 30, 2022, Compared to Six months ended June 30, 2021](index=27&type=section&id=Six%20months%20ended%20June%2030,%202022,%20Compared%20to%20Six%20months%20ended%20June%2030,%202021) Consolidated revenues increased by 16.0% to $91,856 thousand, but net loss was $(5,107) thousand due to the absence of prior-year stimulus benefits Consolidated Financial Performance (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--------------------------- | :-------- | :-------- | :-------- | :-------- | | Revenues | $91,856 | $79,219 | $12,637 | 16.0% | | Cost of sales | $87,450 | $76,739 | $10,711 | 14.0% | | Gross profit | $4,406 | $2,480 | $1,926 | 77.7% | | Operating loss | $(3,985) | $(6,622) | $2,637 | 39.8% | | PPP loan forgiveness | $0 | $9,151 | $(9,151) | -100.0% | | Net (loss) income | $(5,107) | $9,042 | $(14,149) | -156.5% | - Heavy Fabrications segment revenues increased **7%**, driven by a **105% increase** in industrial fabrication revenues, despite lower tower demand. Operating loss decreased by **$1,046 thousand**, improving operating margin from **(2.4%) to (0.6%)**[139](index=139&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - Gearing segment revenue increased **62%**, primarily due to strong order intake from O&G and mining customers. Operating loss decreased by **$1,174 thousand**, improving operating margin from **(14.7%) to (3.4%)**[139](index=139&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Industrial Solutions segment revenue increased **12%**, due to new gas turbine and aftermarket projects. Operating loss increased due to higher variable expenses, including freight costs[139](index=139&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) [LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES](index=30&type=section&id=LIQUIDITY,%20FINANCIAL%20POSITION%20AND%20CAPITAL%20RESOURCES) Cash decreased to **$49 thousand**, total debt was **$22,975 thousand**, and a new credit facility was secured in August 2022 for future liquidity Cash and Debt Overview (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--------------------------- | :------------ | :---------------- | | Cash | $49 | $852 | | Total debt and finance lease obligations | $22,975 | N/A | | Available under 2016 Credit Facility | $10,178 | N/A | - The company entered into a new **$35,000** senior secured revolving credit facility and a **$7,578** senior secured term loan with Wells Fargo on August 4, 2022, replacing the previous credit facility[154](index=154&type=chunk) - Management expects current cash resources, the new credit facility, cash from operations, and equipment financing to be adequate for liquidity needs for at least the next twelve months[155](index=155&type=chunk) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=32&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that forward-looking statements are subject to various risks and uncertainties, including COVID-19 impacts and regulatory changes - The report contains forward-looking statements regarding future growth, results of operations, financial condition, cash flows, performance, business prospects, and opportunities[166](index=166&type=chunk) - These statements are subject to various risks and uncertainties, including the impact of the **COVID-19 pandemic**, regulatory frameworks, customer dependencies, economic stability, and market volatility[166](index=166&type=chunk) - The company is under no duty to update any of these forward-looking statements, and they should not be relied upon as a predictor of actual results[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Broadwind, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this quarterly report - Broadwind, Inc. is a **smaller reporting company** and is not required to provide information under this item[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of **June 30, 2022**, and concluded they were effective[169](index=169&type=chunk) - There were **no material changes** in internal control over financial reporting during the three months ended June 30, 2022[170](index=170&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, sales of equity securities, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 12, with management believing no material adverse effect will occur - Information on legal proceedings is incorporated by reference to **Note 12, 'Legal Proceedings'** in Part I, Item 1[173](index=173&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The risk factors from the 2021 Annual Report on Form 10-K remain the most significant risks to the company's future results - The risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021, are still considered the **most significant risks**[174](index=174&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[176](index=176&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - No defaults upon senior securities to report[177](index=177&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are **not applicable**[178](index=178&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information to report[179](index=179&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including financial information formatted in iXBRL - The exhibits listed are filed as part of this Quarterly Report on Form 10-Q[180](index=180&type=chunk) - Exhibit 101 includes financial information formatted in **iXBRL** (Inline eXtensible Business Reporting Language)[183](index=183&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) This section contains the authorized officer's signature for the Form 10-Q filing [Signature of Authorized Officer](index=37&type=section&id=Signature%20of%20Authorized%20Officer) The report is signed on behalf of Broadwind, Inc. by Eric B. Blashford, President, CEO, and Interim CFO, on August 9, 2022 - The report was signed by **Eric B. Blashford**, President, Chief Executive Officer, and Interim Chief Financial Officer[189](index=189&type=chunk) - The signing date for the report was **August 9, 2022**[189](index=189&type=chunk)

Broadwind, Inc. (NASDAQ:BWEN) Q1 2022 Results Conference Call May 6, 2022 11:00 AM ET Company Participants Tom Ciccone - VP and Principal Accounting Officer Eric Blashford - CEO Conference Call Participants Justin Clare - ROTH Capital Partners Aaron Spychalla - Craig-Hallum Amit Dayal - H.C. Wainwright Martin Malloy - Johnson Rice Operator Greetings, and welcome to the Broadwind First Quarter 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now ...