Broadwind(BWEN) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, showing Q2 2020 net income of $0.5 million and total assets of $138.5 million Condensed Consolidated Balance Sheets Total assets increased to $138.5 million by June 30, 2020, driven by receivables and inventory growth, with equity at $42.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $67,588 | $54,713 | | Total Assets | $138,452 | $122,866 | | Total Current Liabilities | $64,373 | $64,293 | | Total Long-Term Liabilities | $31,280 | $17,813 | | Total Liabilities | $95,653 | $82,106 | | Total Stockholders' Equity | $42,799 | $40,760 | | Total Liabilities & Equity | $138,452 | $122,866 | Condensed Consolidated Statements of Operations Q2 2020 net income reached $529 thousand, a turnaround from a $1,018 thousand loss in Q2 2019, driven by 33.4% revenue growth Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $54,926 | $41,169 | $103,560 | $82,829 | | Gross Profit | $5,417 | $3,892 | $11,589 | $7,429 | | Operating Income (Loss) | $1,035 | $(206) | $2,715 | $(700) | | Net Income (Loss) | $529 | $(1,018) | $1,482 | $(2,060) | | Net Income (Loss) per Share - Basic | $0.03 | $(0.06) | $0.09 | $(0.13) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $42.8 million by June 30, 2020, primarily due to $1.5 million net income - Total stockholders' equity rose to $42,799 thousand at June 30, 2020, up from $40,760 thousand at December 31, 2019, mainly due to net income earned in the first half of the year[20] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $8.2 million for H1 2020, with $8.9 million from financing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,238) | $(14,611) | | Net cash used in investing activities | $(929) | $(1,182) | | Net cash provided by financing activities | $8,870 | $14,690 | | Net decrease in cash | $(297) | $(1,103) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment performance, and the $9.53 million PPP loan, with U.S. wind energy comprising 72% of H1 2020 revenue - The company is a precision manufacturer for clean technology and other specialized applications, with the U.S. wind energy industry accounting for 72% of its revenue during the first six months of 2020[25] Revenues by Segment (in thousands) | Segment | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Heavy Fabrications | $43,614 | $28,970 | $81,983 | $57,264 | | Gearing | $6,922 | $9,266 | $13,149 | $19,293 | | Industrial Solutions | $4,397 | $2,933 | $8,435 | $6,272 | | Consolidated | $54,926 | $41,169 | $103,560 | $82,829 | - In April 2020, the company received $9.53 million in funds under the U.S. Paycheck Protection Program (PPP) and plans to apply for forgiveness[28][45] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2020 revenue growth, net income of $0.5 million, COVID-19 impacts on orders, and adequate liquidity with a $9.5 million PPP loan Key Financial & Operational Metrics (in thousands) | Metric (in thousands) | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $54,926 | $41,169 | $103,560 | $82,829 | | Net Income (Loss) | $529 | $(1,018) | $1,482 | $(2,060) | | Adjusted EBITDA | $2,863 | $1,899 | $6,468 | $3,614 | | Total Orders | $39,558 | $104,612 | $73,367 | $128,618 | | Backlog | $112,062 | $144,661 | $112,062 | $144,661 | - The COVID-19 pandemic has had an adverse impact, causing a significant decline in order activity for the Gearing and Heavy Fabrications segments, as well as customer postponements of scheduled purchases and project delays[86] - The Heavy Fabrications segment saw a 59% increase in tower sections sold in Q2 2020 compared to Q2 2019, driving revenue growth, though new orders for the segment decreased significantly as customers had secured production capacity in the prior year[90][91] - The Gearing segment experienced a 33% decrease in orders and a 25% decrease in revenue in Q2 2020, primarily due to reduced demand from the Oil & Gas market affected by the pandemic and oil price declines[94] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Broadwind, Inc. is not required to provide quantitative and qualitative disclosures about market risk[121] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[122] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[123] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings, with no expected material adverse effect on financial condition or operations - The company is party to routine legal proceedings but believes their final outcome will not have a material adverse effect on its financial results[61][126] Item 1A. Risk Factors Key risks include potential non-forgiveness of the $9.5 million PPP loan and ongoing adverse impacts from the COVID-19 pandemic on operations - A significant risk is associated with the $9.53 million PPP loan received under the CARES Act, as it may not be forgiven, could be subject to audit (as it exceeds $2 million), and may need to be repaid, which would impact cash flows[127][128][130] - The COVID-19 outbreak has already adversely affected operations, causing a decline in order activity and customer postponements, and future negative impacts from weaker demand, supply chain issues, or government restrictions could be material[131][132][133] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None[135] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - None[135] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[135] Item 5. Other Information No other information is reported for the period - Not Applicable[135] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications - The exhibits index lists all documents filed with the report, including CEO and CFO certifications and notes related to the PPP loans[135][137] Signatures Signatures The quarterly report was signed and authorized on August 5, 2020, by the President and CEO, and VP and CFO - The report was signed on August 5, 2020, by the company's Principal Executive Officer and Principal Financial Officer[141]