Broadwind(US:BWEN)2021-11-10 18:46Financial Data and Key Metrics Changes - The company reported third quarter revenue of $40 million, a decline of 26% compared to the prior year, primarily due to a decrease in wind tower sections sold [8][12] - Adjusted EBITDA for Q3 was $0.4 million, a decrease of 0.9% year-over-year, reflecting lower overall volume and plant underutilization [12] - Operating expenses decreased by over $100,000 year-over-year, mainly due to reduced incentive compensation [12] Business Line Data and Key Metrics Changes - Heavy Fabrication segment sales were $28.7 million, down from $43.4 million in the prior year, driven by reduced wind tower demand [13] - Gearing segment revenue increased by 6% year-over-year, with orders more than tripling to nearly $12 million [10][16] - Industrial Solutions segment recorded $4.5 million in new orders, down from $4.9 million year-over-year, but sales increased slightly to $4.2 million [17] Market Data and Key Metrics Changes - The company expects a stable demand for wind installations at about 10 gigawatts per year over the next decade, supported by a favorable policy backdrop [9] - The Gearing segment backlog has recovered to nearly $24 million, although it represents a decrease of $4 million sequentially and $10 million year-over-year [16] - The company anticipates that commercial and industrial demand for renewable energy will grow significantly in the coming years [7] Company Strategy and Development Direction - The company is focused on diversifying its end market strategy, with near-record growth in non-wind markets helping to offset softness in tower orders [9] - The company is considering bolt-on acquisitions that leverage existing manufacturing expertise and exposure to clean tech markets [10] - The company aims to optimize production facilities and leverage skilled workforce as wind tower orders may vary from quarter to quarter [22] Management's Comments on Operating Environment and Future Outlook - Management highlighted the challenges posed by higher raw material costs and supply chain disruptions, but remains optimistic about the long-term outlook for wind energy [6][7] - The company expects wind development activity to increase materially over the next 24 to 36 months, particularly with a substantial extension of the PTC [10] - Management expressed confidence in maintaining adequate liquidity to support the business through periods of uncertainty [10] Other Important Information - The company reported a net debt increase of approximately $2 million during the quarter, reflecting an increase in working capital [18] - The company expects a fourth quarter EBITDA loss to be between $1 million and $1.5 million [18] Q&A Session Summary Question: What gives confidence in the outlook for tower utilization in 2022? - Management indicated visibility for 2022 through customer conversations and projects in the repowering category, contributing to confidence in utilization metrics [24][25] Question: What drives the anticipated inflection point in demand for onshore wind? - Management noted that wind is one of the lowest cost power generation options and expects the PTC and rationalization of steel prices to drive demand [26] Question: What is the acquisition outlook and focus areas? - Management is investigating acquisition targets in the clean tech space, particularly those that could benefit wind or related technologies [30] Question: What are the current multiples seen in the renewable space? - Management noted that multiples have softened due to policy uncertainty, with bargains seen in the 8-9 range, while higher multiples are still present [31] Question: What is the company's stance on offshore wind development? - Management supports offshore wind development but emphasizes that participation must make sense for all parties involved [32] Question: Will the company need to add capacity to meet demand if the PTC is passed? - Management indicated that adding capacity would be a positive problem to have, with potential for workforce expansion if needed [34] Question: How much pent-up demand exists due to the PTC? - Management suggested that timing of the PTC passing will influence project alignment and lead times, with optimism for the second half of 2022 [35] Question: Are cost increases being passed on to customers? - Management stated that while some costs can be passed on, others are absorbed due to timing issues, but customers are generally accepting price increases [36][37]