Q4 2019 Earnings Call
[music].
Good afternoon, and welcome to T. P I composites fourth quarter and full year 2019 earnings conference call.
Today's call is being recorded and we have allocated one hour for prepared remarks <unk> at this time I really turn the conference over to Christian <unk> Investor Relations for T. P. I composites. Thank you you maybe get.
Thank you operator, I'd like to welcome ever want the team got composites fourth quarter.
29.
We will be making forward looking statements during this call.
Asia that assumption.
And uncertainties.
Actual results could differ materially.
Looking statements.
Oh, sorry right.
Because of other factors discussed in todays earnings release.
Comments made during this conference call Orient our annual report.
Okay.
With the Securities Exchange Commission.
According to latest reports and filings with Securities Exchange Commission.
So what can be found on our website www dot.
Oh, we do not undertake any duty to update any forward looking statement.
Today's presentation also include references to non-GAAP financial measures you should refer to the information contained in the slides accompanying today's presentation.
Additional information.
The only Asian historical non-GAAP measures to comparable GAAP financial matters.
Let me turn the call over to see locker.
Yep.
Thanks, Chris Good afternoon, everyone. Thanks for joining our call. In addition to Chris I'm joined today by Bill.
And Brian Shoemaker Rcs.
This call will provide a summary of the year and comment on our path right.
Brian will then review our financial results at the tail and then we'll open up the call for Q1 <unk>.
Please turn to slide five.
We delivered very good results in the fourth quarter with adjusted EBITDA of $31.8 million, a 226% increase over Q4, 2018, and that's sales of $422 million, a 46% increase over Q4 20 team for the full year, we delivered adjusted EBIT.
$81.9 million, 20% increase over 28 team and that sales of $1.4 billion, 40% increase over 2018.
We ended the year with cash $70 million and that that $72 million and total liquidity of $167 million, including the additional debt capacity added yesterday with the exercising the accordion feature under our senior credit facility.
We have 52 when blade lines currently under contract in a world class locations around the world, representing 15 gigawatt dedicated capacity and we'll have total capacity under roof 18 gigawatts.
So you should have our new Chennai, India facility during 2020.
With anticipated blade model transitions, along with startups over the next several years, we're planning to run at an 80% annual utilization rate to produce about 15 gigawatt blades per year and achieve our long term target of $2 billion, an annual with revenue.
Digit adjusted EBITDA.
Well they are estimated.
Average of 75 Gigawatts.
And offshore wind installed each year through 2028, we expect to have about 20% local market share in the coming years.
Our pipeline remains strong with the potential to add onshore line as well as offshore lines, what's the offshore volumes reached levels to provide critical math for efficient outsourcing.
During 2019, we grew our global market share to approximately 18%.
They realize their operations globally, including our new plants that matter Morris, Mexico, and young Joe China.
Our new planted should <unk>, India began operations earlier this year and we fully expect that all the additional effort put into the startup planning and team building during 2019, well results had one of our best startups ever.
We're pleased to be serving fastest from each of these new TV guy locations and growing our business without.
We executed a joint development agreement with GE cooperatively develop at bats blade technology for future wind turbines.
We signed an agreement with Boardex to transition multiple lines and Turkey to longer blade and extended our contract with them through 2022.
We acquired the former euros team based in Berlin, that's focused on blame design tooling materials and process technology development strengthening our technical capabilities in support of our global operations and growth.
We executed our transitions very well with ramp times better than planned and overall cost less than budget.
Executed an agreement with workforce development produce a prototype chassis and cap structure.
Bill electric delivery vehicle and continued to gain ground, our target of $500 million of annual diversified markets revenue overtime.
We added key members to our senior leadership team.
At depth and breadth in both when and diversified markets as well as to spearhead as well our global service recycling initiatives and we continue to evolve our board of directors, adding global automotive experience independent and diversity. We plan to continue this process and 2020.
We continue to remain focused on building long term sustainable value by capitalizing on two major macros decarbonizing, the electric sector and electrifying vehicle weight trends, driven more and more by economics, what customers want to buy what investors want to invest in and the D.
The positively affect climate change.
Now I'll turn the call over to bill to provide a more detailed business at market update.
Thanks, Dave I'd like first give a brief update on the global in the U.S. when markets. Please turn to slide six we continue to be pleased with the growth wind energy as a cost effective and reliable source of clean electricity.
As a way in the industry continues to drive down Levelized cost of energy, while consumers and corporate customers increased the demand for renewable energy, we've seen a future up of electricity growth as a strong combination of cost effective been reliable wind solar storage and transmission.
The U.S. when market remains strong and we believe will continue through the decade Turner by consumer and industrial demand and de carbonization goals set by state cities that utilities. The additional your added to the PTC will also likely being that positive for the one market over the next four to five years.
I'd now like to update the comments I made at our Investor day regarding the Corona virus or cobot 19.
Although we cannot predict the full impact of cold at 19 on other businesses or local economy, we ever better picture today than we did three weeks ago of how this may impact our plans and our results at 2020.
Our plants in China have now already opened and we are in the process of ramping up production to normal speed as our associates return anchor play quarantine requirements, our supply chain, it's back to full production and logistics challenges get resolved clearly our Q1 results in China will be impacted negatively, but we do have plans in place to recover.
Most if not all the volume we expect to lose in Q1 from the temporary shutdowns.
Also can increase production out or non China facilities to fill some of the gap. Another example of where global footprint is such a differentiator. Our initial estimates of the impact based on what we know today is that the first quarter revenue will be down by approximately 45 million and adjusted EBITDA will be impacted by approximately 15 million.
For the full year, we expect to make most if not all the revenue and although the ultimate impact on adjusted EBITDA could be as much as.
We're working with our customers and suppliers to mitigate that's as much as possible. Therefore, we are not adjusting our 2020 guidance, Brian will share more details on the financial impact in a bad.
The overall when market demand and the impact of Cowen 19 on the global went market supply chain will continue to create some challenges for us during 2020. However, our global supply team continues to do an excellent job security critical raw materials through alternative suppliers and or locations and the execution of our strategy of rate.
You know localization and long term supply agreements to ensure a consistent supply the key raw materials with respect to the supply chain in China. Most of our key suppliers are backed up and producing and logistics challenges have begun to abate.
So as of today, we don't anticipate any material issues in China or other locations as a result of coke and maintain.
Moving on to Q4 performance, we completed the initial startup of lives in our facility in Yum, China in 2019, and we believe that we are well positioned entering 2020 to execute operationally drive improved profitability and fill out the rest of the facilities capacity with new line, we will have two lines and start up during the.
First half of the year to meet the increased demand from one of our customers and notwithstanding the impact of Cobot 19 based on what we know today. We believe was she will make up most if not all of the volume we lost during the first quarter, while our plants were temporarily shut down.
Also worked through our startup challenges, including a two week stride in Baltimore as Mexico. During 2019, we entered 2020 with a more stable labor situation and we recently finalized the 2020 wage negotiations with our Union five weeks early without any disruption to our operations or work stoppages although.
We will have a few transitions and this facility. During 2020, we believe we are well positioned to significantly improve the overall operating results for dislocation at 2020, while meeting or exceeding the blade demands of our customer.
Construction of our new facility near Chennai, India is nearly complete and is on time and under budget. The initial mold has a place where the startup phase as we speak we built a very strong management team and team of associates more than 25% of whom have previously manufacturing experience with the balance having strong automotive in India.
That's really experience we are confident that this will be one of our best executed startups and we're looking forward to adding additional buying so this facility. So.
The addition of our young show not a horse in China plants, we have added nearly 2.4 million square feet at nine Gigawatts and manufacturing capacity over the last 18 months.
Turning to slide seven we now have a total potential contract value of up to approximately $5.2 billion through 2023, and then minimum guaranteed volume under our supply agreements is 2.8 billion.
The potential and minimum contract values do not include the to live in China that will be operating under a short term contract and 2020.
Where does it include the impact from most of the anticipated new larger blade models that we will produce after the 2020 transitions.
Moving on to slide eight as our global capacity is nearing our targeted level of 18 Gigawatts. Our primary focus is now turn to operational excellence to drive safety quality throughput and cost reductions to accelerate margin expansion and free cash flow.
Operating imperatives include turning speed into a competitive advantage cutting transition times in half and significantly reducing startup times advancing our composite technology to enable operational improvement and overtime better recyclability at ways.
Ordering even more deeply with our customers on tooling blade design design for Manufacturability and service.
Reaching a better balance with our customers on transmission economics, which will provide the incentive to make transitions more efficient and cost effective for us and our customers.
Continuing to leverage our global and regional scale to drive down raw material costs expand material capacity and I turn maximize our opportunity for continuity of supply of critical raw materials.
Endearing to build develop and retain our team to enable world class execution, and finally, continuing to drive our TSG vision, because it's not only the right thing to do but it will drive business performance.
We're excited to be publishing our first yes. You report. This March then you will see for the first time that we are a long way down the FC Pat and I Bopper Operationalize most of what you will see some time ago, but just haven't reported and publicly until now.
We remain confident and committed to our overall business mob on strategy. The fundamentals of our business remained strong when markets around the globe continued to grow at an attractive pace. The trend of one blade outsourcing is continuing and our customers or potential customers are demanding increasing quantities of blades to serve many fast growing emerging markets and it varies.
Probably less marketing along with our customers. We will continue to invest in existing line transitions and new line startups are mature operations continued to perform at or above our expectations, which gives us confidence in our ability to generate the profit levels. We expect.
With that let me turn the call over to Brian.
Thanks, Bill please refer to slides 10 through 12.
Net sales for the three months ended December 31st 2019 increased by 132 million or 45.5%.
422.1 million compared to 290.1 million in the same period in 2018.
That's still a wind blaze increased by 54.3% to 397.8 million for the three months ended December 30, Onest 2019, as compared to 257.8 million in the same period in 2018.
Increase was primarily driven by 41% increase in a number of when blades produced year over year largely as a result of increased production at our new plant in Mexico, China, along with the increased production in Turkey.
The impact of the currency movement on the consolidated net sales for the quarter was a net decrease 0.8% as compared to 2018.
Gross profit for the quarter totaled 30.8 billion, an increase of 18.2 billion or the same period of 2018, and our gross profit margin increased 7.3%.
Our general and administrative expenses for the quarter were 12.1 billion or 2.9%.
But net sales as compared to 11.6 million in the same period of 2018 were 4% of net sales.
For share based compensation DNA as a percentage of net sales was 2.6% and 3.7% in Q4, 2019 and 2018, respectively.
Our provision for income taxes for the quarter was 8.4 billion as compared to a provision of 3.3 billion. The same period in 2018. The change was primarily due to guilty associated with the jurisdictional earnings mix in the quarter as compared to the same period in 2018.
The net loss for the quarter was point ninemillion as compared to net loss of 8.8 million in the same period in 2018.
This decrease was primarily due to the operating results discussed above diluted loss per share was two cents for the quarter compared to a loss per share a 26. It in the same period in 2018.
Adjusted EBITDA increased to 31.8 million compared to 9.8 million during the same period in 2018, our adjusted EBITDA margin for the quarter was 7.5 person up from 3.4 person in the fourth quarter of 2018.
The increase in margin percentage of 410 basis points was primarily driven by the decrease of startup and transition activities.
For the full year 2019, net sales for the year increased by 406.9 million or 39.5%.
1.44 billion compared to 1.03 billion in 2018.
Sales of went boys increased by 42.4% to 1.3 billion in 2000 19.9 billion in 2018. The increase was primarily driven by 31% more when blades produced in 2019 as compared to 2080 and an increase in average selling prices due to the mix windley models for.
News during 2019 compared to 28.
Gross profit for the year totaled 77.8 million up from 72.8 million in the same period 2018 in our gross profit margin decreased to 5.4 person from 7.1 person.
The decrease in the gross margin percentage was primarily driven by the extended challenges our Newton Iwould transportation facility significant under utilization labor and not a Morris Mexico due to the strike, partially offset by a decrease in startup and transition costs.
General and administrative expenses for 2019 totaled 39.9 million were 2.8% of net sales compared to 43.5 million or 4.2% net sales for 2018.
The decrease as a percentage of net sales was primarily driven by lower incentive compensation and a reduction in the performance assumptions related to certain or shared based compensation.
Our prayers provision for income taxes was 23.1 million for the year ended December 31st in 2019 as compared to a benefit of 3 million the same period in 2018.
The increase in taxes was primarily due to changes in valuation allowances and to a lesser extent the impact of guilty based on the earnings mix by jurisdiction in the year ended December 30, Onest 2019, as compared to the same period in 2018.
Net loss for the year was 15.7 million as compared to net income of 5.3 billion in the same period in 2018.
The above decrease was primarily due to the reason set forth up on.
The net loss per share was 45 cents for 2019 compared to diluted income per share of 15 cents for 2018.
Adjusted EBITDA increased to 81.9 million, we're a margin of 5.7% in 2019 from 68.2 billion in a margin of 6.6 person in 28.
The decrease in 90 basis points was primarily driven by 13 million increase in investment and transportation business in 2019 cents compared to 2018, and the under utilization and not a more specs.
Noted above.
Moving to slide 12, we ended the year was 70.3 million of cash and cash equivalents total debt outstanding of 142.1 million and net debt of 71.8 million compared to net debt of 51.3 million has a tender thirtyth 2019.
For the quarter, we had a net use of cash from operating activities, a 5.7 million, while spending 15.3 billion on capex, resulting in negative free cash flow through the quarter.
21 million.
For the year negative free cash flow of 17.3 million after spending 74.4 billion on Capex.
Our balance sheet remains strong and we continue to demonstrate the ability to fund our growth primarily with cash generated from our operations and the availability we have under our line of credit facility.
The announcement that we have exercised the accordion feature on our revolver gives us the optionality for working capital and future Capex.
Please turn to slide 14, as Bill noted earlier, we continue to monitor the impact of covert 19, our operations based on what we know today covert 19 will negatively impact Q1 revenue by approximately 45 million in adjusted EBITDA by approximately 15 million.
For the year, we expect to recover approximately 95% of the revenue and adjusted EBITDA could be impacted by up to 10 million.
Through the impact of the cold at 19, we believe Q1, adjusted EBITDA will be slightly negative.
For the full year 2020, we are maintaining our previously provided guidance.
We expect 2020 net sales of between 1.55 billion and 1.65 billion.
Adjusted EBITDA of between 100 million and a 125.
Utilization of between 80% to 85%.
When blades set capacity of 40 380.
Average sales price burbling between 140000 145000.
Nonbelievers sales of between 75 million in 100 million capital expenditures to be between 80 million 90 billion.
Approximately 50% of the Capex purchases will be incurred in Q1.
Start up costs between 17 million and 20 million.
Due to the impact of the Kobin 19, and the cash outflow associated with Capex, we expect negative free cash flow of 30 million in Q1 for the year, we still expect to be free cash flow positive.
With that I will turn it back over to steep drop off and then we will take your questions Steve.
Thanks, Brian our overall mission remains unchanged, establishing 18 Gigawatts global wimbley capacity over the next few years to drive $2 billion of annual when revenue along with $500 million, an annual transportation revenue and achieved double digit adjusted EBITDA levels with an estimated.
75, gigawatt global combined onshore and offshore wind market, we expect to have approximately 20% mobile market share.
We plan to continue to drive for more speed during transition leverage our global scale for operating and buying efficiencies to continue to drive down costs, all while maintaining a strong and conservative balance sheet.
I want to thank all of our dedicated TPS associates for their commitment to our mission to Decarbonize and electrified we remain very competent and our multiyear gave plant and we'll stay that course. Thank you again for your time today and with that operator, please open the lines for questions.
Thank you we will now be conducting a question and answer session. If he would like to asked a question. Please press star one on your telephone keypad. They confirmation total indicate your line is another question Q.
My first start to if he would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from Eric Stine with Craig Hallum. Please go ahead.
Hi, Rob.
Eric Eric Hey, just a it just wondering if you can talk a little bit about the confidence you have been making up.
Does the revenue and EBITDA that you've called out tough for Cobot 19, Yeah I'm just curious it sounds like in part it's because your operations are are slowly getting back up and running but but curious how it kinda breaks down between that.
And your confidence in other locations being able to make up for those are lost volumes.
Yeah. Eric This is no then I'll turn it over to Brian So.
He answered your question is our plants are are all open again werent process of wrapping them up for a little ahead of schedule, which is good obviously taken.
Most care our of our associates to make sure that they're protected and we're following the proper health recommended how procedures or what have you been with all that said.
Supply chain is opening backed up as well most of them if not all our Bakken production like Gaspare wrapping up through last we're finding employees back from their home pounce on getting them during the current team.
So yeah, and what we're ramping back up and weren't work not only confident and on the balance of the year I'll, let Brian comment on the on the revenue EBITDA, but we do have the opportunity as I mentioned.
With our other plants to Ah.
Oh overdrive embedded up capacity there to make up any shortfall, we may ultimately yet right. If you want to comment does it change as we work closely with the teams that we feel good as they work with the customers to utilize all brother of plants and the current platform that we have on the revenue sides. We feel confident we'll make that up and then on the net income an adjusted EBIT.
The side, we see basically we're able to utilize a buying upside as other sites or other areas as we talked about before with our cost of initiatives. Another direction. So that's what we're able to keep our guidance to say okay.
Okay.
And maybe just a good segue I know you know thinking back to early 2019 in Mexico, you know when the disruption there and hoping to make that up and and yeah. There was sort of certain raw materials. The gotten the way that maybe just talk a little bit about some of the initiatives and success you're having.
In the bill of materials localizing supply.
And those sorts of things.
Yeah, So where we're continuing to work not only on the localization, but just on making sure I remember why are we are better coordinated with our customers on what their needs and demands are for the full year, and then going out and carry that capacity. So.
There's a number a different initiatives on the supply chain that we've taken our supply chain team has done a great job security the the volume of capacity, we need for 2020.
As well as working with our customers I'm not collaboration.
So there are still some challenges you know core remains to be a bit of a challenge from a supply standpoint.
But we feel confident that we've got our what we made for 2020.
I don't really see any other major issues again. It is you know just just to be clear on the call, but 19 stuff I mean, we're very confident in where we are at today, given what we know and China and at our plants around the globe I'm asked as the virus potentially spreads you know the impact that may have on ship.
Thing or orders being closed and other locations, we can't predict what that may or may not do.
But again right are pretty confident in the supply chain and what we've got in place for 2020 and beyond.
Yep, Okay, maybe just last thing for me just to clarify did you say.
Q1, do expect negative adjusted EBITDA.
Yes, that's correct slide you know that yes, okay. Thanks a lot.
Thanks, Eric picture.
Our next question comes from Paul Coster with JP Morgan. Please go ahead.
Yeah. Thanks for taking my question, Steve I feel of M.C.. So a you tube sprouts supply in your own workforce or can you talk a little bit about your Jones Youre Oh, yeah.
And how it wasn't like should the dialogue is with them. It's what extent you think they go had built around a tribute Boeing thing because obviously you know that would that would be a.
Facts around sort of your control memorial Suky or beyond.
Yeah, Paul it's Dave Thanks.
Paul we can't really combat odd specifics around our customers I think in general what you know is theres a lot of demand in calendar 2020, getting on the North American market and in other markets.
So there's going to be a lot of scrabbling industry wide.
Serve as much of that demand as we all can beyond that in terms of their specifics, we're not really in a position to just speak for them, but as Bill said, we're comfortable with what we control and our pieces of business and that's what we've got effect.
Okay, and then in terms of the catch up but presumably happens almost immediately on second quarter can you just talk us through what but actually means Oh, you gonna be sort of working 24.7 for the Rudolph.
Hi, how are you going through.
Good morning, everybody the books Kraft foods.
Yeah, Oh, we were 24 seven all the time, so Brian I'm not quite as simple as that but with that said Ah. Yes. It's different schedules are scheduled holidays. Those change. So when we work on production plan to try to meet the needs of our customers. So all else and saw the quite frankly as in conjunction with.
Customers, we might push out some of this changes that we were anticipating later in the air push them into 2021. So we can maximize the volume for them and 2020. So it's a combination of different things that Fortunately it won't happen just in Q2, just because of the nature of our manufacturing process. It will happen throughout the year.
But we do but we do see the opportunity to it'll make up most if not all of the volume that we're talking about and at some of our sites will go beyond what our original expectations worse. So.
That's why we're confident makeup and Paul just to add real quick if I could you know you've seen us continue to drive cycle times down even though blades are getting larger we're continuing to do that so whenever we do that we create additional capacity kind of quarter by quarter as we go through the year. So as bill use the word overdrive and that's.
Part of a way for you all think about it that we're creating more capacity and we're we're probably going to be using more of that capacity through reductions in cycle time to help with a the make up throughout the year.
Okay and my last question right. It's a movie so expect to close here I imagine that everyone's going to want to play catch up really fast and.
That makes more trucks right most storage area for a period can you just comment upon those variables. Some remote seem you guys you can find Suzanne.
Yeah, I think you know from a from our supplier standpoint, you know there well do some expediting costs again, we.
Do you guys know, we have share share cost agreements with our customers. So from that passed on others might maybe not as much but as far as from our customers standpoint, I think that's more of a discussion for them as it relates to transportation up the blades et cetera from our plants to their location.
Okay. Thank you.
Thanks, Paul well.
Our next question comes from Pavel Molchanov with Raymond James. Please go ahead.
[noise] got things, where they thanks for taking the question just one more on the Q1 guidance.
A year ago, we had theme.
Sandy on N.B. Mytomorrows disruption now what's the virus do you expect revenue to be up or down compared to Q1 of 19.
Yeah. This is Brian Yeah, we still expect revenue to be up from Q1 up 19.
Based on the other plants a matter Morrison young Joe all performing better this year.
So that's.
And I understood. Okay and is the can you tell me what the mix of blade versus non blade wise in Q4 and weather.
Any of that 2020 guidance is still going to be the same in terms of the mix from what you talked about at the analyst day.
As far as the split we don't disclose that on a quarterly basis, you will have the revenue split on our financial when we released our K it'll be available on Monday as far as the change in guidance on revenue of and basically blade and non blade revenue that has not changed since we provided guidance.
Okay. Thank you very much.
Thanks Bill.
Once again, if you would like to ask your question. Please press star one on your telephone keypad.
Our next question comes from Jeff Osborne with Cowen and company. Please go ahead.
Yeah. Good afternoon, guys a couple of questions on my end.
Thank you mentioned that the pipeline was strong but I didn't hear the figure of number lines in the pipeline is it something you could share with us.
Yeah exactly as we've talked about last year work, we're transitioning from a number of lines that gigawatt.
The capacity of what's the pipeline and so the pipeline remains strong.
It hasn't it hasn't changed significantly as far as numbers from from what we've talked about in the past.
But where you know we're moving away from the line discussion I'm talking more about gigawatts of capacity gigawatts under contract and utilization, so, but but it does remain strong that we're still actively working a number of pretty interesting opportunity and Jeff. It's Steve just just to add to it.
You think about big picture here and I know Weve repeated these numbers a few times, but we are basically finishing out should I will have 18 gigawatts of floor space under roof.
We have four more lines in China for more lives in India, yet to sell in order to turn that into 18 Gigawatts under contract call. It so 15 under contract.
18 under roof top if you will aid more lines there to fill and then as we've said we do expect over the next couple of years to slow the topline growth on a percentage basis. So really it's time to harvest right and turned that into free cash flow, but there's more than adequate pipeline to bill's point.
To fill out the eight lines and then just be really smart about how where and when those additions get made so you can see with tear ups a in China from last year and now with Cobot 19, you can imagine there's a bit of a delay around exactly how quickly some of the life conversions in China might might be made.
And as we've said before there are both onshore and offshore lives in the pipeline.
So moving to the gigawatt utilization is a big picture move it doesn't change just as Bill said it doesn't change the overall demand profile for us to accomplish what we told you.
That's helpful and maybe just a follow up in the offshore discussion I was always on the under the impression that you would maybe elect to put the offshore in matter Morris, but it sounds like is that facility fully occupied or is there any potential.
I'm sure there relative to China, where you have the four lines yeah. The correct Tom into Morris facility is is fully occupied or you could imagine and I think we've shared before that for us to think about the best sites for offshore blade production are likely to be locations, where we already exist or nearby.
Where we've got immediate water access where we can ship blades all over the world. So low cost hubs could be Mexico could be India, certainly could be gaucho China.
We have existing space on the water John show, we would have to build space in the other locations in order to be world class and cost competitive and as we said in our prepared remarks, the real issue on offshore there's a lot of interest in offshore Theres a lot of growth opportunity. There's a lot in the press, but getting back market tool.
Point, where it's big enough to really pull out of dedicated bottle like ours. That's what we're still working on we've got to get get the critical mass volumes up a little bit and then to your point operate off one of our world class Fobs, one or more of our world class hubs to serve that market.
Got it does have I just said two other quick lines of questioning so on the.
Corona virus you mentioned the 45 in the 15 of EBITDA I heard you right you thought you could get 95% of the revenue back but.
Potentially only five of the EBITDA you said you could still lose 10, just trying to understand the decremental margins or the lack of the shared pain gain.
Approach with that process or maybe I misheard that the statistics you were trying to give.
Oh, you heard aggressively we gave the guidance the impact on Q1 would be 15 million adjusted EBITDA and then for the year up to 10 million again, we're working closely with our customers. Some of that has to do with additional costs that we've incurred in Q1 to keep the labor force going and then some other costs for PPD and other things as you move throughout the year just.
Because of the safety of our associates at these facilities.
Got it that's helpful. Brian and then the Oh, that's my how does this is there I know it's early but any you highlight both at the analyst day and is in today's deck, but you want to use speed tier advantage is there any early indications are there through the sandy on R&D team or other initiatives that you know increased cycle time is actually playing out in your you're able to drive down that that cost.
Yeah. So we've got some transitions going on right now in the first quarter and you know adds Adrian and Ramesh laid out at the Investor day with a different phases of a transition.
Where were already you know we're already tracking well ahead of what the what our baseline the bat. So I think we're well on the way to the goal of 50% reduction this year, if not better. So the answer as early indications are that the planning we put in place and the new kind of approach to the transitions is going to bear fruit.
It's good to hear Bill. Thank you, Matt Thanks Jacek.
Again, if he would like you asked a question. Please press star one on your telephone keypad. Our next question comes from Ethan Ellison with Morgan Stanley. Please go ahead.
Hey, guys.
Two quick ones from me.
If I'm not mistaken I think there nine manufacturing lines with GE with contracts that are expiring in 2020.
Could you just talk or walk through the process of extending these contracts are are back filling them somehow.
Yeah, you can think said Steve.
We do need to extend those contracts and that's obviously an important objective for this year as you know I pick out about I wouldn't Mexico. Those lines are serving primarily be U.S. market, Mexico serves perhaps 10% of the buying goes to Mexico vast majority comes to the U.S.
The U.S. market a strong the competitiveness of particularly in Mexico served in the U.S. market is extremely strong so we're quite confident and being able to get that Don but you're right. It's an important objective for us in this timeframe.
Okay perfect.
And then maybe just a follow up on the transition activity and the the ramp times that were trending better than you had expected are planned for in the past you've talked about this taking about six months. So just to clarify for if we're saying 50% improvement are we expecting to see trends.
Missions take about three months by the end of the year.
Yeah. So.
By the end of the or maybe again. This is this is a process.
And like I said early results are looking very good.
But yeah it depends on the nature of it depends on the nature of the transitioning them. So it can be.
It can be three months it can be six months, but I would expect both of those the.
I live in the high end to come back you know come back down a bit from that so.
The answer is yes, we expect to see good results by the end of the year end throughout the year.
Great.
Thanks all.
Thank you actually Ben.
Thank you I would now like that where the floor over to management for closing comments.
Yeah. So thanks, all for joining our call today and for your continued interest in TV I see we look forward to continuing to update you as we make progress. Thanks, so much.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.