Q1 2022 TPI Composites Inc Earnings Call
Good afternoon, and welcome to TPI Composites first quarter 2022 earnings conference call.
Today's call is being recorded.
Allocated one hour for prepared remarks and Q&A.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
At this time I'd like to turn the conference over to Christian Edin Investor Relations for TPI composites.
Thank you Sir you may begin.
Thank you operator, I would like to welcome everyone to TPI composites first quarter 2022 earnings call, we will be making forward looking statements. During this call. They are subject to risks and uncertainties, which could cause actual results to differ materially.
A detailed discussion of applicable risk is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website TPI composites Dot com. Today's presentation will include references to non-GAAP financial measures you should refer to the information contained in the slides accompanying today's presentation for definitions of information and.
The reconciliations of historical non-GAAP measures to the comparable GAAP financial measures with that let me turn the call over to Bill Silex, TPI composites, President and CEO . Thanks.
Thanks, Christian and good afternoon, everyone. Thank you for joining our call. In addition to Christian I'm joined today by John <unk>, Our interim CFO and Chief Accounting Officer.
I will briefly review our first quarter results cover our global operations, including our service and transportation businesses, then cover our supply chain and the wind energy market more broadly and Dan will then review our financial results in detail and then we'll open the call for Q&A.
Please turn to slide five we.
We delivered net sales of $384 $9 million during the quarter and adjusted EBITDA of $6 1 million.
Although adjusted EBITDA on a billings basis was a loss of $5 3 million. It was better than planned as a result of tight cost controls and cost reductions globally excellent execution, including on multiple transitions, which enabled us to deliver additional blade volume during the quarter, we signed a number of new development agreements in our transportation segment.
And we also published our 2021 ESG report during the quarter.
Please turn to slide six for highlights from the report we.
We made significant progress towards our 2030 goal of carbon neutrality by reducing our overall cotwo intensity by 9% and expanded onsite renewable energy generation, we achieved our waste reduction targets by meeting Tpi's process waste reduction goal of 5% during the year, we increase transparency throughout TPI.
This value chain by initiating scope three emissions reporting we've reduced our already best in class recordable incident rate by 38% and lost time incident rate by 32%.
Driven by our behavior based safety program, we improve our overall diversity equity and inclusion survey score by 6% and I signed the CEO pledge for action as part of <unk> commitment to Eni going forward, we will refer to our initiative as idea inclusion diversity equity and awareness diverse.
City without inclusion is not our goal the goal first and foremost is to create an inclusive culture and finally, we obtained third party assurance from DNV for scope, one and two emissions as well as select <unk> and SaaS be topics.
Turning to slide seven we've reiterated our long term ESG goals to promote a zero harm culture focused on eliminating unsafe behaviors to achieve 33% female and 33% ratio and ethnically diverse persons on our board of directors by 2023.
To achieve 25% female representation on our global leadership team by 2025.
25% ratio and ethnically diverse persons on our U S leadership team by 2025 and become carbon neutral by 2030 with 100% of our energy being procured from renewable sources.
Turning to slide nine I'll now give you a quick update of our global operations supply chain as well as the wind market.
The first quarter, we did not experience any significant production issues from COVID-19, including any material production stoppages, although there have been no production impacts to us so far from the senseless invasion of Ukraine by Russia, We will continue to monitor the impact of the war on our supply chain and take proactive measures to minimize potential risks.
In China, Covid cases have increased significantly and as a result, Shanghai entered phase Lockdowns in late March domestic logistics have been impacted but thanks to the efforts of our local and global supply chain teams. We met our Q1 production targets and continue to deliver blades on time from young Joe as well as export the raw materials that we saw.
Still source in China on a timely basis.
We will continue to monitor the situation closely and execute our contingency plans to minimize the impact on our local production and raw material supply pipeline.
We are continuing to diversify and derisk, our supply chain by qualifying sources in the regions in which we manufacture products other than our production in China, which primarily relies on Chinese suppliers, we have reduced our exposure in China for TPI controlled spend to just 6% down from over 20% in 2019.
During the quarter, we made excellent progress on the speed of our startups and transitions that we have in four locations during 2022.
China, Turkey, Mexico, and India, We've completed five lines two each in China in India, and one in Turkey, and they were all completed ahead of schedule and as a result, we will enable us to deliver additional volume to our customers during 2022.
From a service perspective, we had another solid quarter of growth or expansion in Europe is going as planned including the opening of a new training center in Spain, the establishment of a new entity in the UK and the signing of several new significant agreements, we expect to grow the service business by approximately 40% to 50% and <unk>.
'twenty two.
On the transportation front, we had another good quarter, we are pleased with our operational execution on the passenger EV parts and our customer extended the initial pilot production program for another quarter now it goes through quarter. Three we successfully launched a new program with the same customer and we plan to exceed the original estimate of four.
<unk> hundred 50000 units, we discussed during our fourth quarter call. We also kicked off development programs with multiple leading Oems for a class eight cap structures and last mile delivery vehicles. Our pipeline continues to strengthen in the commercial vehicle segment and for unique components on passenger Evs, we now expect our transportation.
Revenue on a billings basis to grow by over 70% in 2022. This is up from the 40% to 50% growth we discussed on our Q4 call.
Moving on to supply chain the situation continues to be challenging with higher energy prices as well as the Covid Lockdowns in China. During 2021, there were both significant price increases and supply constraints with respect to our policy of resin and carbon fiber as well as increases in inbound logistics costs, we expect carbon fiber and relate.
Product supply to remain constrained as demand for carbon continues to outpace capacity additions production of carbon products is also very energy intensive and continued rising energy costs is adversely impacting the cost of carbon materials. After already seen price increases of up to 50% for certain feedstocks during 2012.
One.
Apart few resin prices continue to see pressure with constrained feedstocks and high energy costs and higher resin prices in Europe , and North America continue to be supported by bullish demand from industries like automotive infrastructure and construction, while competitive resin suppliers aren't available in Asia, the current unreliable logistics environment and associate.
Cost often offset any potential savings on price.
As of today, we believe we have secured adequate raw materials for all planned production in 2022, including the raw material that is controlled by our customers.
Though we expect that the price of carbon fiber and resin will remain at elevated levels in 2022, approximately 60% of the resin and resin systems and approximately 90% of carbon fiber. We use is purchased under contracts either controlled are borne by our customers and therefore, these customers receive or bear 100% of any <unk>.
Kris or decrease in price notwithstanding the challenging cost environment, we now expect to be able to hold the average bill of material costs for customers for which we control the supply chain to a less than 5% increase compared to 2021 levels.
As I noted earlier, we remain focused on localizing and regionalized, our supply chain to reduce the impact of higher logistics costs provide security of supply and build long term strategic partners with key suppliers to ensure the best pricing and availability in the short medium and long term.
Since our last earnings call. The warrant Ukraine has brought to the forefront the need for energy security and independents, not only in Europe , but across the globe to accelerate the eu's fit for 55 energy transition plan. The Repower EU program has been proposed it is intended to cut Europe's reliance on imported energy speed up there.
Permitting process throughout Europe , and should help accelerate the growth in wind installations. We are pleased to see Europe , increasing its commitments. As this is an important market for TPI with over 30% of our blades going into the region. In addition, Germany has announced plans to increase its 2030 clean energy target by 15.
Sent to 80% this means that Germany would have to install more than 10 10 gigawatts of wind every year, starting in 2025 or five times what was installed during 2021.
In the U S discussions regarding extending the PTC as part of a more comprehensive energy transition strategy has gained some traction in recent weeks with that said uncertainty around the timing and magnitude of any legislation along with increased cost is still putting a damper on U S demand in the near term.
We believe that notwithstanding current challenges faced by the wind industry demand for wind energy will strengthen over the long term given the focus on energy security and independence globally, and the necessity to decarbonize and electrify it to meet the aggressive goals set to combat climate change.
We believe that we are uniquely positioned with our global footprint in key strategic geographies, along with collaborative relationships with our suppliers to grow our market share with industry, leading turbine Oems as the demand for wind begins to accelerate again, while execution remains our primary focus we are moving forward with multiple strategic initiatives.
1921.
This increase in net loss was primarily due to prefab, David at stock dividend, an accretion a decrease in the number of wind blades produce.
Cause challenges in our Nordics tomorrow's facility restructuring costs, and approximately $7.1 million and non restructuring related operating costs that were associated with certain manufacturing facilities, where production has stopped.
Adjusted EBITDA for Q1 was $6.1 million or one sixth of sales.
Compared to $13.1 million or $3 two of self in the same period in 2021.
Moving to slide 12.
We ended the quarter with $131 million and restricted cash and cash equivalents and no net debt.
The net changing cash for the quarter of approximately $111 million was in line with our forecasts.
Net cash used an operating activities was approximately 81 million primarily due to an increase of accounts receivable of 31 million the majority of which was to one customer.
A decrease in our accounts payable of 19 million and an increase in contract assets.
Which was the result of increased procurement of customer specific materials to minimize the risk of potential production disruptions.
May all kind of given the recent COVID-19 impacts in China.
And your political uncertainties, including the ongoing war in Ukraine, We expect a small cash bond and Q2 before we begin generating free cash flow in Q3, and Q4 back to your bill. Thanks. It on turning to slide 13, as we look forward to the rest of the year, we expect Q2 sales and.
Just stood EBITDA on one billings basis to be much higher than Q1 of 2022 and expect adjusted EBITDA in a billings basis to be flat compared to Q2 of 2021. We are also reiterating our full year buildings targets for sales and adjusted EBITDA to be flat compared to 2021 or.
Formal guidance for 2022 has not changed and once again, we will not provide gap revenue or adjusted EBITDA guidance, given current market volatility potential impacts under ASC 606 related to future contract modifications are extensions and corresponding changes to our long term volume which cannot.
The forecast with certainty at this time.
Please turn to slide 15 to close we remain focused on managing our business through near term challenges in the industry and our efforts to position TPI as the preferred global solution provider to our customers and their customers to enable profitable execution and growth in the future.
I Wanna, Thank all of our TPI associates once again for their commitment dedication and loyalty to TPI and our mission to Decarbonized and electrify I'll I'll turn it back to the operator to open the call for questions.
Thank you Sir at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation <unk> indicate that you're lying as in the queue. You May press start some if you would like to remove your question from the queue.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing any star keys.
In the interest of time, we ask that you limit yourself to one question and a follow up thank you.
One moment, please while we pull for any questions.
[noise]. Our first question comes from the line of Laura Sanchez with Morgan Stanley . Please proceed with your question.
Hi, Hi, <unk>. Thank you so much for your claim here can you just talk a little bit about the seasonality on EBITDA can you talk a little bit more on the revenue side I'm wondering about.
Kind of a transfer you ever seen the Lockdowns in China authentication to start up for the rest of the year et cetera, how should we think about the <unk> for the next <unk>.
Yeah, Hey, Laura good to talk to you.
Take the way we've got the cadence now and we talked a little bit about in the fourth quarter is Q too will clearly be better revenue quarter. Then Q1 Q3, I think is probably at or a little bit above Q2, Q4 comes down a little bit as we normally see towards the end of the year.
Are you being you mentioned no impacts from the Lockdowns in China in the first quarter.
Any anytime Thursday, and in the second quarter or is that Holly.
David.
I would like to say, it's fully mitigated obviously, they're still lockdowns happening so.
That will still remain a challenge I think into the through the second quarter I will tell you that even though the lockdowns in Shanghai didn't happen until late March.
We were experiencing them through the quarter in various parts of China already and so we've kind of been dealing with that through the whole quarter, but again I think we're in pretty good shape today our team.
His work the situation pretty pretty effectively so I still don't anticipate any issues. We have taken some additional inventory on in the event that we do have some minor delays. So that we don't stop production, but right now we're in pretty good shape.
Got it can sit here and the last one on my end on the a S. P. S. It seems like you are well ahead of the diet that you gave for the ear is there some timing issue, that's making first Q, particularly strong or should we use this level 1100 remained out there.
Yeah, it's a little bit of a timing issue because we had with some start ups with transitions. We had early blades at a higher price as we ramp up the production Laura.
Got it got it and that reminds me on the first question was there anything on the revenue side that we should.
Taken taken to account for compensation can sign up for the rest of the year.
So we are largely through the transitions at this point, we have we have.
We have two lines still being transitioned in Mexico, and we have a couple in China, yet but.
No I don't I don't think anything of any <unk> any material difference from from what we saw in the first quarter.
Perfect. Thank you so much.
Yep. Thanks, Laura.
Our next question comes from the line of Joseph Osha with Guggenheim Partners. Please proceed with your questions.
Hello, This is actually <unk>.
I just wanted to touch on the cancer patient that a business a ladder.
Leaving part Sarah and I know you highlighted the 70 per cent growth.
Kind of Windows update of thoughts on how we should be thinking about that over the next couple of years and when he might see that generating I'm more meaningful and AD revenue.
Yeah, Hey, Hillary good to good to speak with you again.
We've made some really nice attraction over the last several quarters, including the first quarter I think the quality of our partners in the development agreements.
Should should result in some some meaningful movement over the next couple of years for sure clearly the program, we have working with the EV passenger.
<unk> is gonna drive significantly more volume next year than we have in the plan for this year as well, but I think the conversion of a number of those development projects that we've entered into into actual production Ah contracts.
Start to see that towards the end of this year or early next year. So we should start to see that impact in in 2023 and beyond.
Mmk and lastly from you just on the cockpit initiative, if you could kind of give us an update on how that progressing I'm against targets for for the issue around getting thank you.
I'm sorry Hillary.
I couldn't understand what you asked.
<unk> did you say.
Yeah, just that they're very caught that initiatives that you've been <unk>.
Okay.
Yeah, yeah, going going really well.
We talked about taking a significant amount out last year the year before we have some pretty ambitious goals for this year. We were ahead of our cost out plan for the first quarter.
So they're going very well.
Just just very diligent on every dollar we spend as well as taking costs out of the process as well so.
We're ahead of schedule and we plan to stay ahead of schedule.
Okay. Thank you.
Yep. Thank you.
Our next question comes from the line of Justin clear with Roth Capital Partners. Please proceed with your question.
Hey, thanks for taking our questions.
You bet he just.
So first off considering the cost inflation that we've seen since March wondering if you've seen any impact on order volume or customer demand.
It sounds like you're maintaining a revenue expectations. So maybe there hasn't been a meaningful impact here, but just wanted to to see any impact customer demand at this point.
At this point no we've we've.
<unk>.
We've been very successful in our transitions, we've got the ability to provide some additional volume this year.
There is some interest in that uncertainty geography so.
I would say we haven't seen a decrease.
Could see a little bit of a pickup.
Just just because of our the speed of our transitions in demand uncertain of the region's but at this point just and we haven't seen any decline in demand from a from a cost standpoint.
Got it okay.
And then Q.
Q1.
<unk> more than you had planned and I know a part of that is the transitions, but is there anything else in Q1.
Or some plants performing ahead of expectations or anything else that enabled you to exceed expectations there.
Yeah, I'm actually from an operational standpoint, all of our plants are operating.
Really nicely this year no major operational hiccups or issues, we did produce more than expected out of Mexico.
That was planned from our standpoint.
Based on what our customers needs, where they accelerated a little bit.
So other than that just.
Very good execution with a little bit of build ahead in Mexico.
Okay great.
One more if I if I made you said he's secured all the raw materials for your plan production in 2022 can you sure. When you were able to do that was this you know potentially ahead of the most recent increase in costs and.
What what is typical.
Proactive action that you have taken given.
Spectation tier for inflation.
Yeah, it really varies by commodity.
Lead times vary.
But in this.
This environment, we were proactive as we have been through the whole of Covid you, probably remember I was talking about building inventory levels and the COVID-19 timeframe as well so.
Here was making sure that where we are reliant on our customer.
Two two contracts for the material that we worked proactively more proactively LSA this year than in the past with our customer supplier as well to make sure that we had the proper allocation and volumes at the right time. So I think it was pearl activity on the part of our supply chain as well as better collaboration with our customers that.
Control their supply chains, so it's a combination of things.
Okay, great. Thank you.
Yep Thanks, Justin.
Our next question comes from the line of Eric Stein with Craig Hallum. Please proceed with your question.
Yeah, Hi, good afternoon Balon for Eric Thanks for taking the questions.
Yeah.
Maybe first on the service business you know good to see the U expansion and kind of the growth targets that you laid out just kind of give a little more color on on kind of the growth profile. The margin profile, there and how you think about that business over the next couple of years.
Yeah, So will grow it we grew at 50 per cent last year will grow at another 40% to 50%. This year, that's assuming it's all organic.
Margins are better this year.
Better utilization of our of our personnel better allocation of talent around the globe.
As well as some some better pricing on some of the the deals that we've cut with our customers.
It's a combination of just very robust robust market and the service business a need for very high quality blade technicians, which we have a bunch of them around the globe. Obviously, we build them, we should be able to repair them and service them.
And just focusing on higher dollar and higher volume and higher margin work comp.
A combination of all of those.
Alright, and then just maybe on off shore, you know kind of scene folks talking about a re prioritization. There could you just kind of talk about how they might impact you in just how you are thinking about the opportunity offshore here in the near term.
Yeah. So we're continuing to work a number of different opportunities in the offshore space.
It's a complicated space.
There's a lot of risk involved.
Saw you might have seen.
That's just talked a little bit about it.
Their earnings release earlier this week.
So we're proceeding very cautiously and carefully and making sure we dot is and cross teas, but we do see it as a nice opportunity going forward.
And we're continuing to pursue it was bigger.
Alright sounds good thanks for taking the questions about.
You bet. Thank you.
And our next question comes from the line of Julian Marian Smith with Bank of America. Please proceed with your question.
Alright, Thanks, guys, it's Alex Burghul on for Julian Thanks for taking our questions here what are the attic, specifically a little bit more on the on the raw materials side of things I know you guys mentioned carbon fiber as well as a policy rather than earlier in the call, but I'm wondering if you can expand a little bit more.
On some of the other inputs here, whether you know balsa wood pets, I mean, particularly as we go into this rather inflationary backdrop on oil and whatnot. What are you seeing there and kind of what's your outlook I guess throughout 22 into 2023. Thanks.
Yeah, you bet. So are you know, obviously carbon and <unk>, we've talked about our other big inputs are glass.
Fiberglass and core which would include balsa and P E T as as you mentioned.
Alas.
Market trend is up a bit are actual trend is pretty flat from 2021 again, that's just relationships volumes et cetera. So we've been able to keep that relatively flat, but the market trend has been up a bit and 22 from 21.
From a core perspective.
Balsa us actually flatter trending down there is a lot more demand for P. E T capacity hasn't come online as quickly as.
Most would like so we do see in the market a bit of a.
Price increase from the <unk> standpoint, but from a TPI standpoint, we've again been able to.
Secure volumes at prices that are flat to last year tour down.
And then other than that you've got coatings, which are the kind of paint that we use on the blade again market price is up a bit, but we're flat year over year or down on that as well so.
We are tending to trend a little bit better than market at least the spot prices in the market.
But we do see a challenging 2000 remained 2022 from a commodity standpoint.
Got it I appreciate that and then just a quick follow I'm I'm wondering if you guys can characterize sort of the cadence you'd expect on utilization throughout the year versus you know where you are in Q1 to your full your 22 guide, which obviously you're maintaining thanks.
You bet so.
Four Q1, we are right around that 65% level.
Expect to be in the mid eighties and Q2.
Mid to low nineties, and Q3 and Q4 both so utilization picks up pretty nicely as we get through transitions.
Got it thanks guys.
Yeah. Thank you.
And our next question comes from the lineup Alec Scheibel offer with Stifel. Please proceed with your questionnaire.
Alright, good afternoon, everyone. Thank you for taking my question here.
You bet is there to talk to you yeah.
Likewise, so just looking at the strong increase you've had an average selling price per grade I was wondering if you could give some color and what's the driving that maybe somehow with just looking forward and how we should be thinking about that.
Yeah, I think that's and as we mentioned a little bit earlier part of that as as we go through a transition early blades produced once we start production are generally priced at a higher higher ISP.
Till we get to a certain number and then I kind of level off levels off to a normal price. So that's part of it part of it is just blade mix.
The mixer blades produced into in Q1, we do expect that to kind of level level out and come back down to kind of where our guide range was as we get further into the year. Some of the transition blades that were R. R.
Doing, especially in China are smaller blades, so ASB on those as a little bit lower so as those come on full steam will start to see that ASB come back down into the range that we.
Originally guided too.
Excellent. Thank you favorite color.
You bet.
Our next question comes from the line of Kashi Harrison with Piper Sandwich. Please proceed with your question.
Hi, This is luke filling in for Cassie Thanks for taking my questions.
You bet.
Talk about the cash flow statement, a little bit obviously, you guys call about that there was a little bit of a headwind with accounts receivable and timing of payments, but I'm. Just wondering if you can give some color on the cadence of working capital over the course of the year of your level of comfort with the where where cash is that right now.
Thank you yeah. So yeah, I think as we mentioned we expected a pretty big burn in Q1 for a number of reasons as we were getting through some of the costs challenges in Mexico. Some buildup of AP at the end of the year, some capex carryover and what have you. So.
We're right on target with with where we thought we would be at the end of the quarter for the balance of the year.
As we mentioned will have a bit of a burn in Q2 before we turn to free cash flow positive in Q3 Q for.
Ending the ending the year is pretty good what we think is very good shape, we've got $107 million of availability under under borrowings that are that are not outstanding today.
So we feel very good from a liquidity standpoint through the balance of 2022 for sure.
Alright, and the rest of our questions were answered thank you.
You bet. Thank you.
[noise] and our next question comes from the line of Tom current with Seaport Research Partners. Please proceed with your question.
Good afternoon.
Good afternoon, I got for us.
[laughter] just to.
Repeatedly emphasized that your your primary focus for 2022 is execution and it sounds as if the company's off to a promising start with that priority when it comes to transitions.
Could you elaborate on their transactions that occurred in China, and India, one too where these transitions between customers or inter customer transitions between bulbs and what are some of the tactics that proved successful waterboard lessons learned you should be able to apply to future transitions wherever they might be.
No great question, So in India same customer just going to a larger blade.
And in India that was in.
India and China.
Same customer too new to new blades.
So multiple blade transitions in China, plus a blade transition.
To a larger blade, both in India and in Mexico for the same customer.
Just just as an example, now this is this one is a little bit unique because it's a blade we built in another factory in China.
But from startup production.
Until we got to our desired cycle time of 24 hours was five weeks that is blazing speed to anybody in the blade industry.
So and the reason why part of it was we had prior experience on the blade.
But the main reason is as we've we've known about these transitions for a long enough period of time.
We were able to better collaborate and plan with our customer.
And hold our customer accountable for the portion of the transition that they need to participate in whether it's approvals of molds being installed or cut up blades.
Various things so it was really.
The lessons learned are just enough time to do truly detailed planning and do that planning with the participation of our customer and our suppliers for equipment and what have you and then execute that plan and hold all parties accountable and I think that's that's the biggest lesson learned for us.
Yeah. That's the other thing I will mentioned as we did.
We haven't dedicated team now that that is responsible for the transitions. So we have a dedicated team of unbelievable.
Talent talented people that travel the globe and assist our local sites with the transitions and having them involved early often on the ground when we need them that's been a big help as well.
And how long have you had that thing.
You know.
We we've had.
We haven't had well it really just since last year.
When we formed it.
And and we were able to carve out resources from our teams around the globe and just put this as one cohesive team and we don't pull from that team for other projects. They are fully dedicated to transitions in startups and so just having a dedicated team that that is their focus and we've had teams that have.
<unk> transitions in the past, but not to the extent, we do know where they're at 100% dedicated to a transition to the startups.
There are there are a cohesive unit.
Cause I like to call him the go team.
They pick up their by their bags are packed and they go and when we have a transition and they camp out in the in the plant until we're until we have it right. So.
But that's just been about over the last year is when we really started.
Utilizing a fully dedicated team.
Interesting and and then in Mexico, you highlighted that production came in.
Sounds like a bit sooner than expected 412.
Could you clarify <unk> not tomorrow's perform respectively, and then <unk> tomorrow is where you're at with getting ignored ex facility up to where you you want it to be.
Yeah. So war is performed very well, that's where we had the.
The build ahead.
So for both both blades that we're building for our customer they're operationally one very well as you might recall, we had some challenges last year with the multi piece blade.
What are we started that out but we've iron those kinks out we worked very collaboratively with our customer and we are on track to to deliver the volumes they need this year.
And Madam Morris.
Our plan for versus their operated continues to operate very well and.
And with respect to Nord X Matamoros operationally, we're in very good shape today.
We have we produced the volumes we.
We needed to produce in Q1.
After hitting our production in queue for as well we are in the middle of a transition there so and that is going as planned.
So I would say from a pure operational standpoint.
We've turned the corner there the plant itself is now getting to a place that.
To become a world class blade plant, which is what we like to operate so we're very close to that we still have some cost challenges there that we're working on some of that is qualifying new material locally sourced versus from China to avoid the logistics costs. So we're working through those for the balance of the year, but operationally.
From a production standpoint, we're in very good shape.
Great extra feeling my question.
You bet. Thank you.
And our next question comes from the line of <unk> <unk> with Raymond James. Please proceed with your question.
Thanks for taking my question I dialed in a little late so tardy covered this already.
Since the.
Started the war I'm sure yes, yes.
Typically from the European onshore.
Sure market.
<unk> you've encountered or your.
Customers specifically have encountered.
Any.
Increased incoming.
Appetite from developers in other words Nash.
Natural gas $20 and then yeah.
Tremendous focused on Disentangling from Russian supply, obviously, you're well positioned with your facility in Turkey.
Is there anything like that that you can point to.
Think there's certainly a lot of talk <unk> about increasing install.
Installs over you know over.
Over the foreseeable future have we seen an increase in demand for the balance of 22, specifically related to that I would say no now it's possible that blades that we are producing are now being diverted to Europe that might've had been earmarked somewhere else don't don't know that too.
Today, I will tell you that about 37% of our blades in Q1 went to Europe compared to 30% last year. So whether that was already planned or that there's there's some correlation is probably too early to tell.
We do expect obviously for the longer term for there to be really strong demand in the European market, but whether we are seeing it today just yet I think it is still a bit early for them.
Okay.
I'm, a non blade sales $30 million this quarter.
Pretty solid ground.
<unk> and I think.
Second highest.
Quarterly number ever in that category that bill all from pro Carol.
No.
No. We've got pro Tara clearly is still in the mix and then R E B customer.
That we're building parts for.
That's clearly a big part of that as well.
Okay.
Any sense of when you might be able to disclose.
Some additional detail on who that is.
My guess is we won't be able to disclose it would love to be able to but at this point that's not there does their policy is to not disclose their suppliers.
Understood well good to see the the growth anyway.
I appreciate it.
We're pretty excited about it.
Our next question is a follow up from Julianna Marian Smith with Bank of America. Please proceed with your question.
Hey, good afternoon. Thanks for your time and patience appreciate it I I just wanted to follow up here and talk about the Bill I wanted to call them and talk with a bigger picture here and step back and and certainly considering some of the comments from Nextera out there about sort of the fund's ability between solar and wind what are you seeing out there in terms of.
The early days on the back of a B C V D. Any effective pivots out there I mean again I I I get that there's a lot of other dynamics here, but would love to hear how this might be fomenting potential demand when that might materialize and how much you know the triple b, yeah, or nay might might be holding customers back at the same time.
Yeah, I I think I think the uncertainty around long term policy is probably over over writing.
Impact of the.
Circumvention stuff and maybe some I know nextera talked about a pivot or a shift from from solar to more when this year.
We haven't seen a meaningful uptick as a result of of the challenges in the solar market yet but.
But again, it's still it's still a bit early to see that demand shift it's theirs.
Not easy to just turn on and turn off these deals. So I will tell you that it is certainly possible that we start to see some of that manifest itself in the back end of the year, but at this point I would say, we haven't seen anything material.
Got it and then when you think about the timeline there for for seeing some of that I would take I mean is it as you say like by the end of the year, we get taxed et cetera is or what have you I mean that'd be that's pencils down hopefully if you see something of an uptick in U S. Origination just wait that quote unquote certainty at that point.
Either way Julian Yeah, I think if if something happens sooner rather than later and we get certainty then.
Clearly that helps the market when when we see that manifest in a pickup in demand I think is still a little bit hard to tell.
There are some that are are saying, if we get something here.
Before.
Before the mid terms, which most don't think that's likely at this point.
We still probably don't see any any real impact until best case back half of 2023.
From a from a major swing so again I think it's a little hard to pin it down I wish I could but what the uncertainty there as well as just the continued challenges from a supply chain and a cost standpoint, I think that's that's impacting some of the decision, making and the wait and see as well so.
My Best guess would be best case.
Back have a twenty-three, but more likely into 2004.
Got it yeah, I I I Gotcha, Alright, I I appreciate that.
Good luck will speak soon.
Alright, Thanks to you and take care.
Okay.
Thank you everyone for your questions. At this time you have reached the end of the question and answer session and I. When I was trying to call back over to management for any closing remarks.
Thank you and just like to thank all of you again for your interest in T. P. I and your attention today and look forward to our next discussion. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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