TPI Composites(TPIC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2023, net sales were $297 million, a decrease of 26.2$402.3 million in Q4 2022 [52] - Adjusted EBITDA for Q4 2023 was a loss of $28.1 million, compared to a gain of$21.2 million in Q4 2022, primarily due to lower sales and increased costs [55] - Net income attributable to common stockholders from continuing operations improved to $11.6 million in Q4 2023 from a net loss of$41.9 million in Q4 2022, driven by refinancing gains [27] Business Line Data and Key Metrics Changes - Wind sales decreased by $96.9 million in Q4 2023, a decline of 25.6$7.3 million in Q4 2023, primarily due to reduced bus body deliveries linked to Proterra's bankruptcy [54] - Field services sales decreased by $1.1 million in Q4 2023 compared to the same period in 2022, impacted by fewer technicians deployed on revenue-generating projects [26] Market Data and Key Metrics Changes - The company established two new production lines in Türkiye for Nordex, increasing total capacity to approximately 3.2 gigawatts, securing production through 2026 [8] - The wind energy market is expected to see a surge in government support, particularly from the U.S. Inflation Reduction Act and EU policies, which could drive long-term growth [50] - Despite favorable long-term policies, the company does not anticipate increased wind industry installations to fully materialize until 2025 due to pending clarifications on key components of the Inflation Reduction Act [23] Company Strategy and Development Direction - The company aims to preserve cash and improve liquidity, ending 2023 with$161 million in cash, flat from Q3 2023 [5] - A focus on the wind business is prioritized over the automotive sector, with strategic alternatives being explored for the automotive business to ensure sufficient funding [49] - The company expects a significant improvement in EBITDA and EBITDA margin in 2024, targeting a margin range of 1% to 3% for the full year, with a trajectory to exceed $100 million in EBITDA by 2025 [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term energy transition and the company's position to capitalize on industry growth despite short-term challenges [33] - The company anticipates a transition year in 2024, with slight sales declines but significant EBITDA improvements expected [51] - Management noted that warranty campaigns and production transitions would impact the first half of 2024, with expectations for improved performance in the second half [31][58] Other Important Information - The company ended Q4 2023 with$485 million in debt, including a senior secured term loan and convertible notes [56] - A significant focus on reducing operating costs is ongoing, with expectations for continued structural cost reductions [89] - The company plans capital expenditures of $25 million to$30 million in 2024, primarily for startups and transitions [59] Q&A Session Summary Question: What is the visibility into the second half ramp? - Management indicated that the second half ramp is largely set and not dependent on the IRA [62] Question: What is the expected EBITDA for 2025? - Management expects to exceed $100 million in annualized EBITDA in 2025 [63] Question: Can you elaborate on the materials issue and its impact? - The materials issue resulted in a$20 million sales impact and an $8 million EBITDA impact in Q4, but recovery is expected in 2024 [68] Question: How is the warranty issue progressing? - Management feels they have a handle on the warranty issues, with most technicians now engaged in revenue-generating work [69] Question: What is the expected operating expense trend in 2024? - Management expects to continue reducing operating costs as a percentage of revenue [89] Question: How much of the revenue guidance is derisked by current supply agreements? - All revenue in 2024 is considered derisked as it is under contract [99] Question: What clarity is needed regarding the IRA? - Customers are awaiting clarification on domestic content and green hydrogen components, which could significantly impact wind development [119]