Broadwind(US:BWEN)2025-08-12 16:59PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's H1 2025 financial statements show a decline in profitability and liquidity, alongside the reclassification of certain assets as held for sale Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Balance Sheet Items | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $130,511 | $128,290 | | Cash | $1,037 | $7,721 | | Inventories | $51,432 | $39,950 | | Assets held for sale | $3,849 | $0 | | Total Liabilities | $71,558 | $68,890 | | Line of credit | $19,099 | $1,454 | | Customer deposits | $4,341 | $18,037 | | Total Stockholders' Equity | $58,953 | $59,400 | - Key changes from Dec 31, 2024 to June 30, 2025 include a significant decrease in cash from $7.7 million to $1.0 million, a substantial increase in inventories by $11.5 million, and a large draw on the line of credit, which increased from $1.5 million to $19.1 million Customer deposits also saw a major reduction from $18.0 million to $4.3 million9 Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $39,235 | $36,452 | $76,073 | $74,068 | | Gross Profit | $3,975 | $5,566 | $8,301 | $12,203 | | Operating (Loss) Income | ($165) | $1,257 | $19 | $3,335 | | Net (Loss) Income | ($989) | $482 | ($1,359) | $1,992 | | Diluted EPS | ($0.04) | $0.02 | ($0.06) | $0.09 | - For the six months ended June 30, the company's performance shifted from a net income of $2.0 million in 2024 to a net loss of $1.4 million in 2025, despite a slight increase in revenues The decline was primarily driven by a significant increase in the cost of sales, which reduced gross profit by 32% year-over-year11 Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($20,498) | ($3,427) | | Net cash used in investing activities | ($2,115) | ($2,375) | | Net cash provided by financing activities | $15,929 | $5,641 | | Net Decrease in Cash | ($6,684) | ($161) | - The significant increase in cash used in operating activities in H1 2025 was mainly due to an $11.5 million increase in inventories and a $13.7 million decrease in customer deposits This was partially offset by a $17.6 million net draw from the line of credit under financing activities16 Notes to Condensed Consolidated Financial Statements - The company's revenue from the U.S. wind energy industry constituted 52% of total revenue in the first six months of 2025, up from 40% in the same period of 202421 Revenue by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Heavy Fabrications | $24,989 | $19,611 | $50,236 | $41,628 | | Gearing | $7,284 | $10,454 | $13,251 | $18,791 | | Industrial Solutions | $7,363 | $6,463 | $13,010 | $14,456 | | Consolidated | $39,235 | $36,452 | $76,073 | $74,068 | - On June 4, 2025, the company entered into an agreement to sell certain assets from its industrial fabrication operations in Manitowoc, Wisconsin for up to $13.8 million in cash The transaction is expected to close in Q3 2025 The related assets are now classified as held for sale42 Advanced Manufacturing Production (AMP) Credits Recognized (in thousands) | Period | Gross AMP Credits | | :--- | :--- | | Q2 2025 | $3,132 | | Q2 2024 | $1,848 | | Six Months 2025 | $5,904 | | Six Months 2024 | $3,720 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights a challenging financial period, impacted by operational inefficiencies and legislative changes, with liquidity managed through credit facilities and asset sales Key Financial Metrics (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $39,235 | $36,452 | $76,073 | $74,068 | | Net (Loss) Income | ($989) | $482 | ($1,359) | $1,992 | | Adjusted EBITDA | $2,085 | $3,642 | $4,453 | $7,811 | | Total Orders | $20,956 | $18,372 | $49,090 | $47,368 | | Backlog | $95,279 | $139,060 | $95,279 | $139,060 | - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, eliminates AMP credits for components produced after December 31, 2027 This shortens the benefit period and is expected to adversely impact the profitability of the Heavy Fabrications segment108 - The company entered into a definitive agreement to sell assets of its industrial fabrication operations in Manitowoc, Wisconsin for up to $13.8 million The transaction is expected to close in Q3 2025112 Results of Operations: Three Months Ended June 30, 2025 vs. 2024 - Consolidated revenues for Q2 2025 increased by 7.6% to $39.2 million, driven by a 27% revenue increase in the Heavy Fabrications segment However, gross profit decreased by 28.6% to $4.0 million due to manufacturing inefficiencies and higher fixed costs114115116 - The Heavy Fabrications segment saw a 27% revenue increase, but operating margin declined from 7.9% to 6.8% due to inefficiencies with a new, larger wind tower model119120 - The Gearing segment experienced a 30% revenue decline to $7.3 million, primarily from reduced shipments to O&G customers, causing operating income to swing from a $482 thousand profit to an $819 thousand loss121122 - The Industrial Solutions segment orders more than tripled to $13.9 million, and revenue grew 14% to $7.4 million However, operating income decreased due to a less profitable product mix123124 Results of Operations: Six Months Ended June 30, 2025 vs. 2024 - For the first six months of 2025, consolidated revenues increased 2.7% to $76.1 million Despite this, gross profit fell 32% to $8.3 million, and the company recorded a net loss of $1.4 million compared to a $2.0 million net income in the prior year period127130 - Heavy Fabrications segment revenue grew 21% to $50.2 million in H1 2025, driven by a 39% increase in wind revenue Operating income increased slightly to $4.0 million from $3.6 million131132 - Gearing segment revenue decreased 29% to $13.3 million in H1 2025, leading to an operating loss of $1.7 million compared to a $0.5 million profit in H1 2024133134 - Industrial Solutions segment orders more than doubled to $24.0 million in H1 2025 However, revenue decreased 10% to $13.0 million, and operating income fell sharply to $0.8 million from $2.4 million due to lower sales and a less profitable product mix135136 Liquidity, Financial Position and Capital Resources - As of June 30, 2025, the company had $1.0 million in cash, a decrease of $6.7 million from year-end 2024 Total debt and finance lease obligations stood at $31.4 million138 - The company has a $35 million senior secured revolving credit facility As of June 30, 2025, $24.7 million was outstanding, with an additional $13.8 million available for borrowing138 - The company utilizes an at-the-market (ATM) equity offering program with approximately $11.7 million remaining available for issuance as of June 30, 2025 No shares were issued under this program in H1 2025142 Summary of Cash Flows for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | ($20,498) | ($3,427) | | Investing activities | ($2,115) | ($2,375) | | Financing activities | $15,929 | $5,641 | | Net decrease in cash | ($6,684) | ($161) | Quantitative and Qualitative Disclosures About Market Risk The company is classified as a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Broadwind, Inc. is exempt from the requirement to provide information regarding market risk under Item 305I of Regulation S-K155 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the quarter ended June 30, 2025156 - No material changes were made to the internal control over financial reporting during the three months ended June 30, 2025157 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings that arise in the normal course of business, with management not expecting a material adverse effect on financial outcomes - The company is party to various legal proceedings arising in the normal course of business, but management believes the outcomes will not be materially adverse82160 Risk Factors The company highlights a significant updated risk factor related to changes in U.S. tax and economic incentives for the wind energy industry, particularly the OBBBA's impact on AMP credits and project eligibility - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, significantly shortens the eligibility windows for federal tax incentives crucial to the U.S. wind energy industry162 - The OBBBA eliminates the Advanced Manufacturing Production (AMP) credits for wind components produced and sold after December 31, 2027, which could materially and adversely affect the company's business in the near term167 - Under the OBBBA, wind projects starting construction after July 4, 2026, must be in service by December 31, 2027, to qualify for the Production Tax Credit (PTC) or Investment Tax Credit (ITC) This change may lead to a decrease in new wind projects and lower demand for the company's products166 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities or use of proceeds to report for the period171 Other Information During the three months ended June 30, 2025, none of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement in Q2 2025174 Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications by the CEO and CFO, and agreements related to the asset purchase of the Manitowoc facility - The exhibits filed with this report include the Asset Purchase Agreement and Sublease Agreement related to the sale of the Manitowoc facility, as well as CEO and CFO certifications175178