TPI Composites(US:TPIC)2023-02-22 22:02Revenue and Sales Performance - A significant portion of the company's revenue is derived from three wind blade customers: Vestas (36.2%), GE Renewable Energy (20.8%), and Nordex (32.6%) for the year ended December 31, 2022[87]. - Net sales for 2022 reached $1,522,741, a 3.4% increase from $1,472,386 in 2021[223]. - Wind blade sales increased by 2.3% to $1,401,198 in 2022, driven by higher average sales prices and increased volume at manufacturing facilities[223]. - The U.S. segment experienced a significant decline in net sales, dropping 53.6% to $89,170,000 from $192,339,000 in 2021, primarily due to the shutdown of the Newton, Iowa manufacturing facility[226][227]. - Wind blade sales in the Mexico segment increased by 10.7% to $628,607,000, driven by the commencement of production at a new facility and inflationary price increases[228]. - EMEA segment net sales rose by 18.0% to $568,992,000, supported by a 15% increase in wind blade production at Türkiye plants[229]. - India segment's wind blade sales grew by 8.8% to $217,425,000, attributed to increased production volume[231]. - Total net sales for the year ended December 31, 2022, increased by 3.4% to $1,522,741,000 compared to $1,472,386,000 in 2021[225]. Operational Challenges - The company has experienced significant price increases and supply constraints for raw materials, with expectations that supply chain costs will be flat to slightly down in 2023 compared to 2022[95]. - Wage increases in Mexico and Türkiye are approximately 20% and 55%, respectively, effective January 1, 2023, which may impact the company's financial condition[98]. - The company has faced production delays at its Matamoros, Mexico facility, which adversely impacted profitability and financial condition[91]. - The company has experienced a decline in demand for wind turbine blades due to regulatory uncertainty and inflationary pressures affecting customer investments[100]. - The company is facing challenges related to inflation and supply chain performance, which are influenced by the current geopolitical situation and economic environment[122]. - The company has incurred significant losses in its automotive business, particularly related to supplying bus bodies to Proterra, and faces challenges in expanding this segment[115]. Financial Performance - The net loss from continuing operations improved to $(55,550) in 2022 from $(155,894) in 2021, reflecting a significant reduction in losses[222]. - Adjusted EBITDA for 2022 was $37,857, compared to $(20,055) in 2021, indicating a positive shift in operational performance[213]. - Free cash flow for 2022 was $(81,104), worsening from $(62,644) in 2021, highlighting ongoing cash generation challenges[213]. - Total debt decreased to $61,173 in 2022 from $74,646 in 2021, improving the company's leverage position[213]. - The total loss from operations from continuing operations for the year ended December 31, 2022, was $27,809,000, a significant improvement of 69.7% compared to a loss of $91,826,000 in 2021[237]. - The EMEA segment reported an income from operations of $77,195,000 for 2022, a 94.9% increase from $39,609,000 in 2021, driven by increased wind blade production and operational efficiencies[240]. - The India segment achieved an income from operations of $17,479,000 in 2022, compared to a loss of $845,000 in 2021, marking a notable turnaround[241]. Market and Competitive Landscape - The company faces significant competition in the wind blade manufacturing market, with a limited number of customers and increasing pressure from in-house production by wind turbine OEMs[110]. - The U.S. wind energy industry relies on governmental support through incentives like the PTC and ITC, which have been extended until at least 2032, but uncertainty remains regarding their future implementation[111]. - The company is the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint, operating in the U.S., Mexico, Türkiye, and India[180]. Supply Chain and Manufacturing - The company relies on third parties for raw materials, with approximately 20% procured from China, making it vulnerable to supply chain disruptions[97]. - The company has ceased operations at its Yangzhou, China facility at the end of 2022, impacting its manufacturing capacity and customer demand[93]. - The company has entered into agreements to extend supply contracts with GE Renewable Energy and Nordex, enhancing its manufacturing capabilities through 2025 and beyond[188]. - The company expects supply chain costs to remain flat to slightly down in 2023 compared to 2022, despite elevated prices for raw materials and logistics costs[186]. Labor and Compliance - Approximately 35% of the workforce is covered by collective bargaining agreements, which could lead to increased operating costs due to potential labor disruptions[137]. - The company has incurred costs related to compliance with environmental, health, and safety regulations, which may increase in the future[134]. - The company is subject to anti-corruption laws, which could impact operations in countries with high corruption risks, such as Türkiye and Mexico[128]. Corporate Governance and Shareholder Matters - The Series A Preferred Stockholders have significant influence over corporate governance, which may conflict with the interests of common stockholders[144]. - The Series A Preferred Stockholders are entitled to cash dividends after the second anniversary of the Series A Preferred Stock closing date, which could impact the company's liquidity and cash available for operations[170]. - The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the future[170]. - The company plans to shut down its business operations in China within the next 12 months, which may affect its ability to distribute remaining shareholders' equity[171]. Future Outlook - The company expects demand for wind turbine blades in 2023 to be slightly down compared to 2022 due to the discontinuation of operations in China and deferred investments by customers[94][100]. - The company anticipates moderated demand for its wind blades in 2023 due to decreased demand in 2022 compared to 2021, influenced by regulatory uncertainty and the need for IRS guidance on new legislation[113]. - The company plans to focus on expanding manufacturing capabilities and enhancing operational efficiency to address cash flow challenges and improve profitability[222].