Q3 2020 Broadwind Inc Earnings Call
[music].
This time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr., Jason <unk> Chief Financial Officer for Broadway. Thank you you may begin.
Good morning, and welcome to the broad when third quarter 2020 results conference call.
During the call today is our CEO, Eric Blatchford, and I'm, Jason bond for the company's CFO.
Issued a press release before the market opened today.
Detailing our third quarter results.
I would like to remind you that managements commentary and responses to questions on todays conference call May include forward looking statements.
By their nature are uncertain and outside of the company's control.
Although these forward looking statements are based on management's current expectations and beliefs actual results may differ materially.
For a discussion of some of the factors that could cause actual results to differ.
Please refer to the risk factor section of our latest annual and quarterly filings with the FCC.
Additionally, please note that you can find reconciliations to historical non-GAAP financial measures discussed during our call and in the press release issued today.
At the conclusion of our prepared remarks, we will open the line for questions.
With that I will turn the call over to Eric.
Thanks, Jason.
And welcome to those joining us today.
During a period of pandemic related market disruption.
Continue to advance our long term strategy through targeted end market diversification.
Operational execution cost discipline.
Pursuit of new organic growth opportunities that leverage our precision mark manufacturing expertise.
Our third quarter performance was mixed as our core when markets outperformed our more cyclical non wind end markets in the period.
Demick related disruptions to our supply chain and workforce had a material impact on margin realization during the quarter, resulting in lower operating efficiency. Despite a year over year growth in revenue.
Importantly, despite these headwinds we continue to ship product to our customers on time, well, taking all necessary and appropriate actions to ensure business continuity.
Speaking on slides four and five.
Revenue increased 18% on a year over year basis, driven mainly by increased demand for wind towers.
Market revenue increased by more than 35% versus a third quarter 2019, but a tower section volumes sold up approximately 30% year over year.
We are in active discussions with their tower customers regarding 2021 capacity and have begun to accept orders for 2021.
Currently approximately 35% of 2021 caught tower capacity is booked.
Our total backlog declined 12% sequentially, while total orders were up.
Flat sequentially with the exception of our steel market.
Which experienced both sequential and year over year growth in orders all other non wind market segments posted year over year decline in orders.
Well manufacturing activity has increased at a at a modest pace in recent months following shelter in place orders issued earlier this year non when customer activity remains well below prior year levels.
In multiple cases customers have indicated their intention to postpone orders initially planned for this year.
Into early 2021.
Implying a gradual recovery in non when market demand heading into 2021.
Turning to a discussion of our segment level performance.
Have you fabrications revenue increased 28% year over year.
Supported by an acceleration in wind tower demand and increased diversification.
Gearing revenue declined by 11% year over year due to a general pause a new customer orders and continued softness in oil and gas markets.
Revenue from industrial customers doubled on a year over year basis, offsetting some of the softness in our oil and gas mining and steel markets.
We're continuing with our actions to align our gear segment cost structure with current with the current demand environment, including workforce reductions and a hold on capex as we pursue sales opportunities and our diverse markets.
We anticipate a recovery for this segment during the first half of 2021.
Industrial solutions revenue was down 7% sequentially and down 5% in the third quarter.
When compared to the prior year period impacted by some modest slippage of shipments due to supply chain disruptions.
Segment backlog grew by 38% supported by consistent order activity.
As I indicated at the outset at the call. The pandemic had a more significant impact on our supply chain and operations during the third quarter than in previous quarters.
That said our business remains on a stable footing.
Supported by continued strength with within our core wind tower business together with expectations for improved customer demand as we look ahead into 2021.
In the meantime, we continue to focus on expense expanding it to new diverse end markets.
Well working closely with our suppliers and customers to capitalize on business opportunities as they arise.
With that I'll hand, the call over to Jason for a financial overview of our third quarter results.
Thanks, Eric.
Third quarter consolidated sales were $54.6 million up from $46.1 million in the prior year quarter, Despite pandemic related operational challenges.
These challenges are manifest both in significant supply chain disruptions, where multiple suppliers for either behind schedule or could not me quality specifications.
Together with labor availability as the as the pandemic impacted both employees and their families in the states where we operate.
Despite these challenges we continue to meet our customer commitments.
The quarter over quarter increase in revenue was driven by improved plant utilization or heavy fabrication segment, which benefited from increased power demand.
Well they produce for three wind turbine Oems in the quarter.
Our TTM consolidated sales.
It was $207.4 million exiting the third quarter, which now includes approximately $63 million of non when revenue.
Since launching I revenue <unk> revenue diversification initiative, we've made significant progress into non wind markets.
And continued to focus building that book of business.
Compared to the prior year quarter gross margins declined 190 basis points to 6.8% in the third quarter.
The supply chain, and <unk> and staffing disruptions, which drives labor inefficiencies because we are working out of optimal process impacted gross profit by approximately 600 to $700000.
Several customer project delays into future periods, which we announced in early August also weighed on margins during the quarter.
The year over year change in gearing performance drove a 270 basis point decline in gross margin.
Operating expenses as a percent of sales was approximately 8% and below our long term target of 10%.
Primarily due due to improved plant utilization effective cost management and higher material content on the product mix sold.
We are prudently managing operating expenses as evidenced by flat expenses year over year on an 18% revenue increase.
Within Opex increase self insured medical expenses were offset by lower incentive compensation expenses.
Interest expense declined to $500000 from $600000 in the prior year quarter due to lower debt levels.
Notwithstanding the pandemic headwinds, we generated $1.3 million of adjusted EBITDA in the third quarter, a decrease of $600000 versus the prior year period.
On a TTM basis, we've generated $9.5 million of EBITDA.
A $5.8 million improvement when compared with the performance and the previous 12 month period.
Over that period of time, adjusted EBITDA margins improved 220 basis points to 4.6%.
Moving onto our heavy fabrication segment.
Third quarter sales were $43.4 million, a 28% increase on a year over year basis.
Primarily due to increased demand as the industry ramped up activity levels to support higher expected U.S. wind turbine installations.
Third quarter orders were $31.4 million compared to $65.6 million in the prior year quarter.
As a reminder, prior year order levels were abnormally high as turbine Oems were securing capacity well in advance of historical lead times due to expectations of surging wind tower installations in 2020.
Our backlog provides visibility to our remaining 2020 production.
And we're in discussions with our customers regarding 2021 production.
Subsequent to quarter end we.
We have booked $13 million or tower orders for multiple Oems for 2021 production.
And as of this call we have approximately 35% of our 2021 optimal tower production capacity sold.
We sold 312 sections in the quarter, our fourth consecutive quarter in which we have sold more than 300 sections.
To support this level of demand a tower plants operated near peak utilization during the third quarter compared to approximately 75% in the prior year quarter.
Average selling prices per unit were higher in the quarter, primarily driven by a stronger commercial environment. When the orders were placed in the prior year.
Together with the benefit of <unk> associated with the production of larger more complex tower designs.
Segment, adjusted EBITDA increased 63% year over year to $3 million.
Given the increased plant utilization and higher Asps.
Although we met our revenue target and customer commitments during the quarter adjusted EBITDA margins declined sequentially by 280 basis points.
The complexity of multiple design changeovers supply chain and labor disruptions weighed on margins throughout the quarter.
And they also continue into the fourth quarter.
Notwithstanding the aforementioned challenges segment performance was dramatically improved on a TTM basis.
With adjusted EBITDA, increasing from $3 million to $14 million this year.
Shifting to our gearing segment.
Gearing segment orders declined from $5.9 million in the prior quarter to $3.2 million.
Order activity remains below prior year levels.
It's constrained by lower capital spending by our customers since the onset of the pandemic.
Together with lower oil and gas activity as reflected by a sharp year over year over year decline in the North American rig count.
Importantly were beginning to see some green shoots in the oil and gas market.
With the North American rig count now having increased for eight consecutive weeks. Despite this optimism for a future oil and gas market recovery.
We remain focused on executing our strategy of diversifying your customers and products.
We're beginning to see increased levels of quoting in many of our end markets.
And we'll continue to focus our commercial efforts in other markets, even when oil and gas markets recover.
Our backlog was $15 million as of 930.
Flat on a year over year basis.
Third quarter segment sales declined to $7.1 million from $8 million in the prior year due to lower demand from oil and gas and mining customers.
As a result of the operating leverage profile the business reduction sales resulted in the $500000 EBITDA loss during the quarter.
We have then we'll continue to take actions to preserve margins and cash include.
Including Rightsizing labor and deferring capital purchases.
While we are early in this challenging environment.
Industrial solutions.
Solutions.
<unk> $4.9 million of new orders in Q3 down slightly compared to the prior year period.
TTM segment orders are approximately $19.5 million.
Up roughly 21% over the prior year period due to our customer regaining share.
Higher aftermarket activities.
And our progress expanding share within our primary customer.
Segment backlog has grown 38% year over year ending at $10.3 million.
Offering solid visibility to revenue over the next several quarters.
Third quarter segment sales decreased to $4.1 million from $4.3 million in the prior year, mostly driven by supply chain delays on just in time deliveries and customer driven project delays to Q4.
Segment, adjusted EBITDA was $200000.
The operating leverage associated with increased volume.
Active cost management has resulted in TTM EBITDA of $1 million since.
A significant increase over the comparable TTM period.
At September Thirtyth, 2020, operating working capital was $13.5 million or 6.2% of sales and nearly $7 million sequential improvement.
<unk>, primarily due to increases in inventory turns to eight times and timing of receipts.
Do you still continues to trend favorable at 40 days.
We're continuing to manage air aggressively and new credit responsibly.
And as a result, we have not experienced significant write offs falling the onset of the downturn.
Deposits, an APC were modestly lower resulting in a cash conversion cycle of roughly 23 days.
Total cash and availability under our credit facility remains above historical levels.
With nearly $22 million of liquidity at quarter end.
We had approximately $8 million drawn under our credit facility and had $2.5 million of cash on our balance sheet.
We generated $7 million or free cash flow during the quarter.
Positioning us to reduce debt.
Approximately $5 million.
With low ongoing capex requirements, our capital allocation strategy continues to focus on repayment of debt.
Which should position us well to make future investments as our non wind end markets recover.
Subsequent to quarter end, we executed an amendment to our loan and security agreement.
This amendment extended our line of credit maturity date to July of 2023, and more importantly, lowered our borrowing cost to up.
By approximately 300 basis points.
Reduction in borrowing cost reflects the strength and credit profile, a result of our improved operating performance over the last 18 months.
As we highlighted on previous calls this year, we received approximately $9 million of proceeds under the Paycheck protection program.
We believe we met all the requirements set forth by the treasury to apply for loans and did so in good faith.
And ultimately ensuring continued employment for our employees during the period of widespread economic uncertainty, which we which continues today.
For reference these loans can be forgiven by the small business administration, if borrowers can demonstrate that they that they use the funds on eligible expenses such as payroll rent mortgage interest and utility obligations over a 24 week period.
We utilized 100% of the loan proceeds on knees eligible expenses.
And we are planning to submit our forgiveness application to our lender and the SB eight in Q4.
The U.S. Treasury previously announced that all borrowers that receive PPP loans in excess of $2 million will be audited.
Or the timeline for that audit is unclear at this time.
To the extent the P.P.P. loans are not forgiven. The company is required to repay the loans over a two year period at a 1% interest rate.
Our net leverage declined to the lowest level seen in several years ending the quarter at 0.9 times trailing 12 month EBITDA after netting out the P.P.P. loans.
I believe we are positioned well to manage through the COVID-19 challenges given our low leverage profile and strong liquidity position.
We received proceeds of $300000 during the quarter under our now expired ATM program.
This $10 million ATM was largely unused during the three year period and at this point, we do not have plans to reintroduce this program in the future.
As we look at Q4.
We're continuing to see similar challenges like we did in Q3 and our production facilities starting from the spread of Colgate in the communities. We operate in an ongoing supply chain disruptions both.
Both of which will weigh on margins in the quarter.
Spreads, we expect revenue to be approximately $43 million to $46 million and EBITDA to be approximately half a million dollars to $1 million.
And lastly, we anticipate providing full year 2021 guidance on our Q4 conference call.
That concludes my remarks, I will turn the call back over to Eric for an overview of conditions within our end markets in.
In addition to some concluding remarks.
Thanks, Jason.
Country, it's been hit with a series of historic challenges this year.
During this period of widespread volatility our leadership team remains focused on positioning the business for profitable growth.
And application this means continuing to grow market share in both the legacy onshore wind and I when markets.
While continuing to explore potential entrants into the offshore wind space.
That's for our response to the COVID-19 pandemic.
We're continually monitoring the potential impact of the virus on our operations customers and supply chain we've.
We've implemented all necessary and appropriate protocols as recommended by the U.S.C.C. to ensure the continued well being of our team.
Our businesses are considered essential and critical infrastructure as defined by the U.S. Department of Homeland Security and we remain open and operational throughout.
Throughout this pandemic, we've continued to produce and ship products to meet our customers needs.
Our order rates have declined since the COVID-19 outbreak as our customers are dealing with the overall economic uncertainty. We're all facing however, our quoting activity has increased in recent weeks pointing to a first half of 2021 recovery in orders.
The full impact of the virus on our business and end markets remains difficult to quantify.
We anticipate the current availability under our credit line and P. proceeds will provide adequate liquidity to support our business. During this period of uncertainty.
Moving onto an update of markets served and our continuing diversification initiative.
On a TTM basis, our non when revenue represents about 30% of total revenue.
We continue to pursue opportunities outside of the wind sector to offset the lumpy timing of wind orders.
We are seeing continued growth in our industrial markets, which include material handling and infrastructure projects, but.
<unk> power generation in mining <unk> remaining relatively stable.
These markets are partially offsetting the softness in oil and gas we continue to see.
On a TTM basis, the rebound in our win based revenue has caused non wind revenue to represent about 30% of total <unk>.
We continue to invest business development resources toward markets with the biggest opportunities for growth as we continue to press for market diversification.
Turning to our demand outlook by end market, beginning with the wind sector, which represents about 70% of TTM revenue.
The outlook for this sector continues to be positive.
Driven by various economic forces such as the PTC, including a one year extension announced late last year.
Competitive to win power versus other sources and the nations desire for clean energy.
You know there are currently more than 60000 turbines operating across some 41 states and the U.S., but individual state renewable portfolio standards supporting further growth.
13 states of more than one gigawatt of wind projects either under.
Construction or advanced development, with Texas, Colorado, and Kansas, leading the way.
Well underlying demand conditions continue to support strength for this sector over a multiyear period, our customers acknowledged that some projects scheduled for this year and early next could be delayed due to the pandemic.
The 2021 Mckenzie projects more than 16 Gigawatts of wind power will be installed in the U.S.
Followed by 13, Gigawatts next year, both significant achievements.
And as a reminder, the federal government has given an extra year to bring projects slated for 2020 online without jeopardizing important tax credits.
Looking ahead and.
In addition to that strength expected for entre installation through 2021.
Wood Mackenzie forecast, increasing demand in the out years as offshore turbines gain traction in the U.S.
Adding to a stable onshore demand.
This long term projection for U.S. wind now has improved to include nearly 25 gigawatts of offshore installations for wouldn't kenzie.
Although some projects have moved from 2023 to 2024 and 25 the.
The industry still expects 2023 to be a strong initial year for offshore wind development.
We generated about 8% of our TTM revenue from the industrial sector, which has an outlook of positive to neutral.
Much of our revenue in this sector comes from customers in material handling, but the ultimate end users in defense and similar vital applications, which are less cyclical and some of the other markets we serve.
Our deepwater port in Wisconsin, combined with our heavy lifting capacity unique fabrication capabilities and huge paint those continue to draw strong customer interest.
8% of TTM revenue came from the power generation sector.
We see a positive demand outlook, our primary customer in this market is gaining share and we continue to expand our customer base and the new gas turbine space.
The mining sector drove about 9% of TTM revenue and our customers report a neutral outlook.
Orders from this sector, which was strong in Q1 have softened since.
The oil and gas sector, which comprised 4% of TTM revenue has seen a significant decline in demand.
Hydraulic fracturing economics are less attractive, but the recent pullback in crude oil prices, causing customers to defer.
Their capital expenditures.
Customer activity levels have improved in recent weeks as rig counts have increased.
Construction drove about 1% of TTM revenue.
And we see the outlook for this segment as neutral to negative in the near term and.
An infrastructure Bill if introduced.
Certainly benefit us as this would create demand for new equipment purchases to support ROE building bridge construction and waterway projects at this juncture expectations are for a successor to the fast Act somehow.
Sometime during 2021.
Our key initiatives rivaling remain consistent.
Our near term and medium term strategy for the business remains unchanged in spite of the challenge is a coke in 19.
On the heavy fabrication segment, we're in discussions with our expanded base of <unk> power customers to sell our 2021 capacity.
We will continue to improve processes and system capabilities to maximize throughput and profitability.
We continue to see progress around the offshore, particularly given the recent announcement of multiyear projects on the east coast, reflecting the growing demand for offshore wind in that region.
We will leverage the investments made in our in our engineering and supply chain teams to better support.
Evolving tower market as well as other opportunities.
And lastly, we will continue to our built in quality continuous improvement actions.
To ensure a smooth process flows and good throughput in our plants.
And the gearing segment, we remain focused on accelerating our efforts towards end market diversification by leveraging our experienced engineering and sales teams.
We will grow our custom gearbox business and leverage our service and repair.
Facilities in Illinois, Pennsylvania, and North Carolina to better serve customers in the Midwest northeast and southeast regions.
Lastly, we will continue to size our business in accordance with market demand.
In our industrial solutions segment, we continue to focus on expanding our core product line of new gas turbine aftermarket components as they push into adjacent markets.
Our rebranding initiative continues but the rollout of our new website and support materials.
We are following that with an increased digital marketing campaign designed to reach customers, where they are in a time, where trade shows and customer visits are significantly limited.
Looking ahead, we remain excited about our growth potential and wind renewables and clean tech, but also see opportunities to grow in the other markets, we serve such as material handling power generation and other industrial applications working.
Were continuing a multiyear diversification plan to leverage our core process capabilities and other markets.
And have achieved TTM revenues in excess of $60 million outside of wind, even as we grow arpus, even as we grow our position in wind.
The extension of the PTC for a 60 year, which is a real benefit for wind market.
And the recent favorable trade case findings provide a catalyst for growth in our heavy fabrication segment.
Thank you for your interest and we look forward to providing updates throughout the coming year as our business navigates through this period of uncertainty with that said I'll turn the call over to the moderator for the Q and a session.
Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one.
A confirmation Tom will indicate your line is in the question queue.
You mean, our Q.
Remove your question.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star <unk>.
First question comes from the line of.
Eric Stine with Craig Hallum Capital Group.
Proceed with your question.
Hi, Jason.
Hi, good morning.
Hey, good morning, So I'm wondering if we're going to start with wind you know I know that that you've been looking at this for a bit of time in terms of off.
Offshore you know and I'm, just curious I mean, obviously, whether it's a whether it's the political backdrop.
Any number of other you know factors that go into it and what are kind of the next thing that we should look for in terms of your actions here, you know and potentially the timing if that's something that you could share.
Well, what I will share is that we have been able to site, taking a look at evaluating different site.
On the East coast to do a greenfield to do a greenfield plant you've heard me mention.
The demands walk operation has the capabilities to do to do offer wins and that would be the quickest.
<unk> entrance into the market, but that might be a long putt because of the cost of transport from or Manitowoc plant city to to the east coast. So we are evaluating they said well locations on the on the East coast.
As far as the next steps again, but we're in discussions with with our OEM customers in there and discussions with there, but their developers and as they as they mature and get closer than we will.
Come to conclusion, together as you know whether whether or not this makes sense commercially to actually do a build on the east coast.
As far as timing, Eric if were to hit the first tranche.
Offshore installations, which which is occurring in 2023, assuming it doesn't move more to the right because of permitting or whatnot or that we would likely need to have a decision sometime in Q1, or Q2, 2021, which will give us enough time to build a factory brick and get it up to speed in order to hit those in it.
Actual oh installations at 2023.
Yep got it no that's helpful and maybe just sticking with when you mentioned that for 2021, you've got 35% of your.
You know effective or.
You know <unk>, the effective capacity that you'd like to run that can you just give us a sense I mean at this time and it maybe maybe it's a tough comparison to make because last year was so heavy as as people tried to get in front of you know long lead times and the PTC here in 2020.
I mean, how do you feel about this number in a in a more typical year. Its 35%. A typical number are you ahead or or I guess potentially behind where you were you know that that you would have in yeah.
Yeah. That's a good question. We are this is a typical year and we're right frankly, where we normally are in a in a normal year.
So as this as this quarter.
Continues in.
Towards the end of this year and into next year, well have a lot more visibility, but yeah. This this is common.
Last year was an anomaly because of the because the body order ahead, if you will right because strong yeah. So I'm 20 twond.
Right right.
Yeah, and we're in discussions with multiple Oems for or that that production as well so that is encouraging to us as well yep. Okay.
Got it thanks for that and then maybe last one for me just.
On the fourth quarter commentary <unk>, you gave a lot of detail in terms of trends in the various end markets wind but.
But also non wind as part of that diversification, but maybe from a high level just kind of some puts and takes you know that would get you to the low end versus the high end of that for Q outlook.
We have we have this that this this range on the revenue side is that that is in our backlog today and now it's about executing.
So we think.
We expect the wind demand to come down for towers in Q4 based on the announcement that we had in early August will offset that with some increases in our industrial solutions segment industry.
Industrial Fab and then and then gearing there there will be a little bit of an increase as well, but overall, it's going to be a down quarter from from the top line, primarily because of the volume reduction will probably be operating at close to 75%.
Utilization in towers and then.
Additionally, there was about a $5 million reduction because our customer is supplying materials and that's just that's just a pass through not just that'll just be a change in the margin profile.
Got it okay. Thanks a lot.
Hi, Sarah.
Thank you our next.
Question comes in line with.
Capital Partners. Please proceed with your question.
Hi, guys. Thanks for taking the question.
Hi, Justin.
Hi, So I guess first off for Q3, just wondering did a supply chain and staffing constraints resulted in any delays and your ability to meet orders like was there an impact to revenue or or did you just see the impact on the cost side and.
And then looking forward.
I guess a similar question do you expect any impact to order or your ability to meet orders or margins in Q4, how do you see that trending.
I'll start with the impact on Q3, so we met our we met our commitments to our customers in Q3, certainly it was a challenge on the execution side to do that based on those disruptions that we talked about and that as we had in our prepared remarks that was approximately six to $700000 of of a version.
In our gross profit during the quarter. So it had a pretty immature had an immaterial impact.
On our business as we look into Q4, you know we feel like were they the supply chain is starting to recover and we feel like we're in a position to have all of our supply chain covered for Q4 shipments, but there still is some risk absorb work.
We're mindful and being cautious on that side.
Yeah, Justin <unk>, what how it really impacts us is what I would call out a process work.
And as the as the materials come in where we're able to.
Complete them on time, but sometimes we've got a we've got a set of project aside and then go back to it I think completed on time and that that's what I mean by out of process work its extra handling it's not really rework, but its out a process, where justin that can be expensive manufacturing operation.
Okay got it.
And then shifting to it. He is you indicated that our his team in Q3 moved higher or is that something you expect to continue in Q4 and into 2021.
Can you talk about you know.
A little bit more about why the Sps are moving higher is it more complex.
Powers and then.
How does that impact the margin like are you able to capture a higher margin with that higher S.P. or or is oh.
Martin or margins likely to still be a kind of in the same level.
Well I'll start just then I'll then I'll ask.
Jason had some color the towers are getting bigger.
Which affects the individual average selling prices.
And whereas a couple of years ago. The average harvest resections, we're producing three four or five and sometimes six section tower. So that drives the average selling price just naturally up as far as the margin profile those would be basically consistent.
Jason.
Yeah, Q3, small small increase about 8000 per section a burst sequentially I'm. We're looking at our order book for Q4 that comes down by about 20% and a lot of that is because a a chunk of these jobs are these these orders are.
The materials are are basically provided by our customers.
As we look into a as we look to next year I think it's a little early to to to look at the what the Asps I think they'll be relatively consistent on a year over year basis, and we've had a lot of fluctuation this year based on different designs.
Different amount of materials provided by our customers for these different projects I think as you model it and as we're thinking about next year it'll be fairly consistent.
Okay.
Helpful and.
And then turning to your customers you know in Q3, you produce for three of the top four Oems in the U.S.. What do you see going forward do you do you anticipate a continuing <unk> relationships with each of those three customers could you add another customer and then if you could speak to you know are you.
Being a more consistent order flow from from GE are you able to grow that relationship.
Well, we're certainly talking with those three of the four and reminder, the fourth one which we can produce for they produce their own tower. So we'd love to produce for all four but but that port one doesn't doesn't really need a need for capacity at this time.
Oh, so what we are we are in communications with those what those remaining three and I do expect to build to build at least for two of those three in <unk> in 2021, possibly three of the three depending on where they might have their projects on which projects they wind Justin.
Okay, Great I will pass it on thanks.
Thank you.
Thank you.
He comes from the line of meat.
With HC Wainwright. Please proceed with your question.
Thank you Hey, good morning, Eric Hi, Justin <unk> <unk> has been discussed just starting to touch on sort of the non wind contribution expectations within the Oh, you know to.
Oh, you're being a little bit of a ceiling in terms of you know how much are the non wind sites can you know bring in.
Given sort of the macro environment right now.
<unk>.
We've we've seen you know since the since the pandemic, we had a really strong Q1 in the gearing markets that we're in it was a very healthy quarter and the same and I would say the same for the industrial fabrications, which are in those other.
Cyclical markets like mining material handling construction.
Since since Q1. It has we did the order book certainly has come down in the quoting activities. You know we think have bottomed in Q3 were starting to see some recovery, but you know certainly.
We are we are starting to feel the impacts in our revenue in Q3 from reduced orders in Q2.
We're expecting some growth in Q4 and in those markets that I just talked about and I think we're we're encouraged as we look into 2021 that the quoting activities and our funnels and pipelines are starting to improve that would that would indicate that that the volumes should be higher next year and those.
Not when markets.
Understood.
Maybe you know just a sort of a high level regulatory type question.
Given where we are with sort of the election results, but they you know.
<unk> do you can you share your view on.
You know the regulatory set up.
That would sort of drive or create challenges you know for the next Oh 13 months.
Yeah. That's a great question [laughter], we're all kind of wondering that same that same thing right, but well regarding our mark because we're so we're so diverse which is which is our intention.
There's some markets are stronger submarkets might become weaker and whatnot, but the gradual step down on the PTC.
Yeah.
We're anticipating that we don't know if there will be a a PTC extension, but but even without a PTC extension, we're confident and when you know there's bipartisan support for wind in Congress.
We're confident that the Bible competitive source of power generation for years to come that's the win piece the.
The other piece, there's been discussion of an extension of the fast Act <unk> or perhaps and 2021 also the infrastructure Bill that Congress has been kicking around I think once the election I gets passed US I think both parties, you're talking about an infrastructure bill and I think that that certainly lift a lot of the markets that we that we serve mining construction.
Yeah.
Material handling et cetera.
<unk>.
Yeah, I think that's all I had for now my other questions offline. Thank you so much.
Thank you.
Thank you our next question comes online.
Johnson Rice. Please proceed with your question.
Good morning.
Morning.
On the the recent.
Anti dumping and countervailing duty petition that was filed at the end of September I think India, Malaysia, Spain.
Yeah for wind towers can you can you maybe give us an update there and what percent of the market are those.
Three countries responsible for the U.S. market.
Yeah, what's interesting is the pursuit or the the suit against Korea, Canada, Indonesia, and Vietnam <unk> represented about a thousand towers out of the general market of about maybe 4000 towers.
You know that case that case was one and we found that that shift there was that that shift or the imports shifted from those countries to these countries, Malaysia, India and Spain, there was a bit of a surge of imports from those countries.
Up to an annualized pace of between six or 700 towers and climbing or about I guess, 1500% increase which is why which is why they became on our radar screen and we had to file. This problem that this case. So were the case is it's and it's in a preliminary preliminary investigations.
By the ITC and we expect their preliminary findings.
In in December.
Okay.
Thank you and then the other question I had [laughter].
[laughter] in terms of opportunities for you on the onshore wind side.
When older wind installations or were replaced with turbines with higher capacity.
Is there an opportunity for you on the on the replacement wind tower side are you seeing that out there yeah, absolutely excellent question that we refer to that as Repowering and there is a repowering initiative and we are we are selling into that market we've done repowering.
Jobs for for for a couple of Oems right now we're quoting on a third so.
That's definitely market were interested in were quoting to that market in two or three Oems right now.
Great. Thank you look at yeah as you look at the revenue attached to that it's a it's a much lower steel content or the adapters could be you know maybe a fifth of the of the of the revenue but certainly.
The volumes are are seem pretty healthy at least in the commercial environment right. Now. So we're optimistic that that can that can provide some lift in that business by virtue of just explaining it a little bit differently, Jason referred to as an adapter that adapter can either be top of the tower.
At the bottom of the tower or actually replacement section of one of those towers and the whole point is to try to make sure that that tower can can receive a new and more efficient.
Turbot or to sell on the top but perhaps larger blade.
So those adapters come in various forms we produced multiple different forms of those adapters.
So if a new wind towers, I'm, just going to make up an S.P.C.
400000 or something.
Something like that would on a replacement wind tower what would.
The scope b or average selling price for you all.
It does it would it would have been that depend on the size of the day after but maybe 10, 10% to 20%.
Okay.
Understood. Thank you.
I appreciate the question.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. <unk> for any final comments.
Well. Thank you everyone for joining the call. We appreciate the interest in our business stay safe out there Vishal end as we're all fighting through this this crazy time.
And just look forward to meeting with you in another three months. Thank you much.
Thank you. This concludes todays conference you may disconnect. Your lines at this time. Thank you for your participation.