Broadwind(US:BWEN)2020-11-05 07:08Financial Data and Key Metrics Changes - Revenue increased by 18% year-over-year to $54.6 million, driven mainly by increased demand for wind towers [7][15] - Gross margins declined by 190 basis points to 6.8%, impacted by supply chain and staffing disruptions, which affected labor efficiencies [17] - Adjusted EBITDA for the quarter was $1.3 million, a decrease of $600,000 compared to the prior year period, while TTM EBITDA improved by $5.8 million to $9.5 million [19] Business Line Data and Key Metrics Changes - Heavy Fabrications revenue increased by 28% year-over-year to $43.4 million, supported by higher wind tower demand [20] - Gearing revenue declined by 11% year-over-year to $7.1 million due to reduced orders from oil and gas markets [10][26] - Industrial Solutions revenue decreased by 7% sequentially and 5% year-over-year, with a segment backlog growing by 38% [12][27] Market Data and Key Metrics Changes - Wind market revenue increased by over 35% year-over-year, with tower section volumes sold up approximately 30% [7] - Non-wind market segments experienced year-over-year declines in orders, with industrial customers doubling revenue year-over-year [8][11] - The total backlog declined by 12% sequentially, while total orders remained flat, except for growth in the steel market [8] Company Strategy and Development Direction - The company is focusing on end-market diversification, operational execution, and pursuing new organic growth opportunities [5] - There is an ongoing effort to expand into offshore wind markets, with evaluations of potential sites on the East Coast [37][55] - The company aims to leverage its engineering and supply chain capabilities to support evolving market demands [49][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that pandemic-related disruptions had a significant impact on operations, but the core wind tower business remains strong [6][13] - The outlook for the wind sector is positive, driven by economic forces such as the PTC and the competitiveness of wind power [42] - Management anticipates a gradual recovery in non-wind market demand heading into 2021, with increased quoting activity observed [9][39] Other Important Information - The company generated $7 million of free cash flow during the quarter, positioning it to reduce debt by approximately $5 million [30] - The company received approximately $9 million under the Paycheck Protection Program, which is expected to be forgiven [32] - Net leverage declined to 0.9x trailing 12-month EBITDA, indicating a strong liquidity position [34] Q&A Session Summary Question: What are the next steps for offshore wind initiatives? - The company is evaluating sites on the East Coast for a potential greenfield plant and expects to make a decision in Q1 or Q2 2021 to meet 2023 installation timelines [55][57] Question: How does the current capacity booking for 2021 compare to typical years? - The current booking of 35% is typical for a normal year, contrasting with the previous year’s anomaly due to advanced orders [58][59] Question: What impact did supply chain constraints have on Q3 revenue? - The company met customer commitments in Q3, but supply chain disruptions resulted in approximately $600,000 to $700,000 erosion in gross profit [63] Question: Are average selling prices (ASPs) expected to continue rising? - ASPs are moving higher due to larger tower designs, but margins are expected to remain consistent [65][66] Question: What is the outlook for non-wind contributions? - The company expects some growth in non-wind markets, with improved quoting activities indicating higher volumes in 2021 [70][71] Question: What is the regulatory outlook post-election? - There is bipartisan support for wind energy, and potential infrastructure bills could benefit various markets served by the company [72][73] Question: What is the status of the antidumping petition regarding wind towers? - The company filed a petition due to a significant increase in imports from certain countries, with preliminary findings expected in December [75] Question: Is there an opportunity in the replacement wind tower market? - The company is actively quoting for repowering initiatives, which are expected to provide additional revenue opportunities [76][77]