Q4 2023 TPI Composites Inc Earnings Call

Operator: Good afternoon, and welcome to the TPI Composites fourth quarter and full year 2023 earnings conference call. All participants will be in listen-only mode.

Good afternoon, and welcome to the T. P I composites fourth quarter and full year 2000 twenty-three earnings conference call all participants will be in listen only mode.

Operator: And should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.

So do you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to.

Operator: To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jason Wegman, Investor Relations for TPI Composites. Thank you.

To withdraw your question. Please press Star then too.

Please note this event is being recorded.

I would now like to turn the conference over to Jason Wakeman Investor Relations for T. P. I composites. Thank you you may begin.

Jason Wegman: Thank you, operator. I would like to welcome everyone to TPI Composites' fourth quarter 2023 earnings call. We will be making four forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.com.

Jason Wakeman: Andrew Operator, I would like to welcome everyone to CBI composites fourth quarter of 2023 earned.

Jason Wakeman: These calls.

Speaker Change: Won't be making forward looking statements. During this call that are subject to risks and uncertainties.

Speaker Change: Cause actual results to differ materially.

Andrew Operator: A detailed discussion of it was like a whore risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website <unk> dot com.

Jason Wegman: 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 definitional information and reconciliations of historical non-GAAP measures to comparable GAAP financial measures. With that, let me turn the call over to Bill Siwek, TPI Composites President and CEO. Thanks, Jason.

Andrew Operator: 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 definitional information and reconciliation of historical non-GAAP measures to be comparable GAAP financial measures.

Andrew Operator: With that let me turn the call over to Bill's Highway <unk>, President and C E O.

William E. Siwek: Good afternoon, everyone, and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. I'll discuss our results and highlights from the fourth quarter and full year, our global operations, and the wind energy market more broadly. Ryan will then review our financial results, and then we'll open the call for Q&A. Please turn to slide five.

William E. Siwek: Good afternoon, everyone and thank you for joining a call in the definitely the Jason I'm here with Ryan Miller are CFO I'll discuss our results and highlights from the fourth quarter and full year in our global operations in the wind energy market more broadly Ryan will then review our financial results and then we'll go from the cough or Q&A. Please turn to slide five.

William E. Siwek: As we indicated on our third quarter earnings call, we expected our fourth quarter sales and adjusted EBITDA to be down as we started line transitions across our plants and lowered inventory levels to optimize cash. Our strategy to preserve cash in the fourth quarter was successful, as we ended the year with $161 million of cash, which was flat with where we ended the third quarter. I'm very happy with how our team executed our cash flow initiatives to prioritize liquidity through the quarter, given some of the headwinds we were facing. As Ryan has been discussing for the last few quarters, we believe we had opportunities to harvest cash out of our balance sheet, and that's exactly what we did. During the quarter, our sales were negatively impacted at one of our plants due to out-of-spec material received from a supplier that resulted in a significant production slowdown over a 10-week period, including a shutdown for four weeks, while we resolved the issue with both the supplier and our customers. This reduced our fourth-quarter sales by approximately $23 million and adjusted EBITDA by $80 million.

William E. Siwek: As we indicated on our third quarter earnings call, we expect that our fourth quarter sales and adjusted EBITDA it'd be down as we started life transitions across our plans and lowered inventory levels to optimize cash or strategies to preserve cashed in the fourth quarter was successful as we ended the year with $161 million of cash which was.

William E. Siwek: Black with where we ended the third quarter.

William E. Siwek: I'm very happy with our team executed our cash flow initiatives to prioritize liquidity through the quarter given stomach headwinds we were face it.

William E. Siwek: As Ryan hasn't been discussing the last few quarters, we believe we had opportunities to harvest cash out of our balance sheet and that's exactly what we did.

William E. Siwek: During the corner our sales were negatively impacted at one of our plans to lab suspect material received from a supplier that resulted in a significant production slowdown over a 10 week period, including a shut down for four weeks, while we resolve the issue with both the supplier and our customer destroyed.

William E. Siwek: This reduced our fourth quarter sales by approximately $23 million and adjusted EBITDA by 8 million, but we do expect to recover the misplay volume revenue and adjusted EBITDA, along with liquidated damages from the supplier in 2024.

William E. Siwek: But we do expect to recover the missed delay volume, revenue, and adjusted EBITDA, along with liquidated damages from the supplier, in 2024. I was pleased with how our team reacted to this issue, shut down production, and engaged with our customer quickly to ensure we didn't have a quality issue. As we announced in mid-December, we refinanced our Series A preferred shares by converting the $350 million of Series A, along with $86 million of accrued paid-in-kind dividends, through a cashless exchange for $393 million of senior secured term loans and the issuance of 3.9 million shares of common stock. This refinancing improved our liquidity by about $190 million over the term of the loan, and we permanently reduced our obligations to Oak Tree by about $90 million.

William E. Siwek: I was pleased with how our team reacted to this issue shut down production and engaged with our customer quickly to ensure we didn't have a quality ish.

William E. Siwek: As we announced in mid December we refinanced our series a preferred shares by converting the $350 million obscurity day, along with $86 million a bit crude painted kind of dividends through a cashless exchange for $393 million of senior secured term and the issuance of 3.9 million shares of common.

William E. Siwek: Stock this.

William E. Siwek: This refinancing of food that liquidity pay about $190 million over the term it alone.

William E. Siwek: Permanent to reduce our obligations to oak tree by about $90 million. We can now take up to 100% of interest payments through December 31, 2025, and that's at 50 per cent of interest payments from January 120th 26.

William E. Siwek: We can now pick up to 100% of interest payments through December 31, 2025, and up to 50% of interest payments from January 1, 2026 through maturity on March 31, 2027. This agreement provides us with significantly greater financial flexibility and, along with the $132.5 million convertible green bond we issued earlier in 2023, provides us with the liquidity we expect to need to fill our existing capacity, manage through the current market conditions, and ultimately grow to serve our customers' needs. From a customer perspective, we finalized several contract extensions and expansions to provide significantly enhanced visibility into our sales volumes in 2025 and beyond. We signed a new supply agreement with GE in Mexico to provide their workhorse turbine, which will facilitate GE's ability to competitively serve the U.S. market while building on a long and productive relationship. We will start with four lines of the new blade this year, and production will ramp up in the second quarter to be on full serial production over the second half of the year. With the addition of this blade, we now support GE's three primary turbine models for the U.S. market.

William E. Siwek: The maturity on March 31, 2020 stuff.

William E. Siwek: This agreement provides us with significantly greater financial flexibility and along with the 132.5 million dollar convertible Green bond. We issued earlier 20 twenty-three provided us with a liquidity, we expect to need to fill our existing capacity manage through the current market conditions and ultimately grocery serve on <unk>.

William E. Siwek: Customers capacity.

William E. Siwek: From the customer perspective, we finalized several contract extension has been expansions to provide significantly enhance visibility into our sales volumes in 2025 N beyond we.

William E. Siwek: We signed a new supply agreement with Judy in Mexico to provide their workforce turbine, which will facilitate G E. The ability to competitively serve the U S market, while building on a long and productive relationship. We will start up four lines of the new blades. This year production will ramp up in the second quarter to be in full cereal production over the second half.

William E. Siwek: The year was.

William E. Siwek: With the addition of this place we now support G E. Three primary care of and models for the U S market.

William E. Siwek: To expand its reach in the European wind energy market, we established two new production lines in Turkey for NORDEX, increasing our total capacity for them in Turkey to eight lines or approximately 3.2 gigawatts. This expansion secures production for up to three years through 2026. We also extended our supply agreements with Vestas through 2024 in Mexico and India and will continue to work with Vestas to align our footprint with their long-term goals. Please turn to the slides. Before I jump into our operating results, I would like to formally welcome Chuck Strode, our COO of Wynn. Chuck comes to us having spent 24 years in the aerospace industry.

William E. Siwek: To expand its reach in the European wind energy market, we established two new production lines in Turkey for Nord X increase your hair at total capacity for them and.

William E. Siwek: In Turkey to hate lines are approximately 3.2 Gigawatts. This expansion security production for up to three years through 2020 cents.

William E. Siwek: We also extended our supply agreements with best is through 2024 in Mexico, and India and continue to work the best is to align our footprint what their long term needs. Please turn to slide six.

Speaker Change: Before I jump into our operating results I would like to formally welcome Chuck Stroud R. C O.

Mark Strouse: Chuck comes to US having spent 24 years.

Mark Strouse: In the aerospace industry, most recently as vice President of operations for power and controls within Collins Aerospace a multibillion dollar business with a track record of leaving large complex organisations Chuck brings deep operational expertise and leverage his passion for Lee and principles to drive operational excellence and consistently deliver results.

William E. Siwek: Most recently, I'm Vice President of Operations for Power and Controls within Collins Aerospace, a multi-billion dollar business. With a track record of leading large, complex organizations, Chuck brings deep operational expertise and leverages his passion for lean principles to drive operational excellence and consistently deliver results. We are thrilled to have Chuck join the TPI team and look forward to his contributions to our ultimate success.

Speaker Change: We are thrilled to have Chuck joined the T V I T and I look forward to his contributions to our ultimate success.

William E. Siwek: Also joining us this past year as our Chief Quality Officer was Neal Jones. Neal brings over 25 years of experience in quality and engineering positions in the wind and automotive industry. He has spent more than 13 years with Baptist in a variety of quality leadership roles, with the last five as Senior Vice President of Quality, Health, Safety, and Environment.

Speaker Change: Also joining up this past year as our chief quality Officer was Neil Jones.

Speaker Change: Brings over 25 years of experience and quality and engineering positions in the wind and automotive industry. Neither spent more than 13 years with Baptist in a variety of quality leadership roles with the last five and senior Vice President quality health safety and environmental.

William E. Siwek: Before joining Vestas, Neal spent over 20 years in the automotive industry, including engineering and quality leadership roles with PRW and a senior quality leadership role with Eaton Automotive. I'm excited about the transformative strength of our new and improved executive team, as each member brings exceptional talent, diverse perspectives, and a proven record of success, making them well-equipped to guide our company through the next exciting chapter. Now moving on to the business. Our blade facilities in India and Turkey continue to excel operationally, driving our global utilization rate to 87% while delivering 602 sets or 2.6 gigawatts during the quarter.

Speaker Change: Before joining baskets Neil spent over 20 years in the automotive industry, including engineering and quality leadership roles with TRW and his senior quality leadership role with eaten automotive.

Speaker Change: I'm excited with the transformative strength of our new and improved executive team as each member brings exceptional talent diverse perspectives and a proven record of success, making them well equipped to guide our company to the next exciting chapter.

Speaker Change: Now moving on to the businesses are late facilities to India, and Turkey continued to excel operationally driving our global utilization rate the 87% while does.

Speaker Change: <unk> 602 cents or 2.6 gigawatts during the quarter.

William E. Siwek: As expected, revenue from our global service business declined year over year due to fewer technicians deployed on revenue-generating projects due to the warranty campaign we announced in the second quarter. But that will turn around in 2024. While the automotive business has made significant progress with the order pipeline and operational execution initiatives, 2023 revenue was down year-over-year due primarily to Proterra's bankruptcy. As you know, we have made meaningful investments to expand the Automotive business over the last several years. While we believe there is increasing demand for composite products for electric vehicles, and we have made significant progress with the automotive business, we intend to prioritize capital for growth in the wind business in the near term, which is why we have been exploring strategic alternatives to ensure our automotive business is sufficiently funded to execute on its growth strategy. Our intent is to complete this process no later than June 30th of this year. Our supply chain costs have improved significantly compared to the past two years.

Speaker Change: As expected revenue from our global service business declined year over year did a viewer technicians deployed and revenue generating projects due to the warranty campaign, we announced in the second quarter that will turn around in 2000 2004.

Speaker Change: While the automotive business has made significant progress with the order pipeline and operational execution initiatives 2023 revenue was down year over year due primarily to <unk> pro terrorists bankruptcy.

Speaker Change: As you know we have made meaningful investments to expand the automotive business. During the last several years, while we believe there is increasing demand for composite products for electric vehicles, and we have made significant progress with your automotive business, we intend to prioritize capital for growth in the wind business in the near term, which is why we have been exploring strategic alter.

Speaker Change: And it is to ensure our automotive business is sufficiently funded to execute on its growth strategies are intended to complete this process. No later than June 30th of this year.

Speaker Change: Our supply chain costs have improved significantly compared to the past two years raw material costs continue to decline from 2023 levels and we anticipate that excess capacity of key inputs and reduced Chinese demand should create further cost savings in 2024, while logistics costs had returned to pre pandemic.

William E. Siwek: Raw material costs continue to decline from 2023 levels, and we anticipate that excess capacity of key inputs and reduced Chinese demand should create further cost savings in 2024. While logistics costs have returned to pre-pandemic norms, we have seen a spike in rates due to the ongoing Red Sea situation. While the situation remains fluid, we've mitigated delivery impacts through alternative suppliers and multi-modal logistics solutions and will continue to closely monitor events for potential effects on our cost and availability of critical raw materials. Now, with respect to the wind market, globally, we have seen a surge in government support for renewables in recent years, exemplified by the U.S. Inflation Reduction Act and the EU's policy push for streamlined regulations, faster permitting, and cross-border cooperation.

Speaker Change: Arms, we have seen a spike in rates due to the ongoing red sea situations.

Speaker Change: The situation remains fluid, we've mitigated delivery impacts or alternative suppliers and multimodal logistics solutions and will continue to closely monitored events for potential effects on our cost and availability of critical raw materials.

Speaker Change: Now with respect to the wind market globally, we have seen the surge in government support for renewables in recent years exemplified by the U S inflation reduction act and the easiest policy push for streamlined regulations faster permitting and cross border cooperation these initiatives fuel our optimism the longterm wind industry grow.

William E. Siwek: These initiatives fuel our optimism for the long-term wind industry. This momentum was further bolstered at COP28, when parties made history by agreeing to a transition away from fossil fuels in the global stock market. The Renewable Energy Directive, a key part of the European Green Energy Deal, was amended in early 2023 and adopted by all EU countries in November, raising its 2030 Renewable Energy Target to 42.5%.

Speaker Change: This momentum was further bolstered at 28 when parties made history by agreeing to a transitional fossil fuels and the global stock take the renewable energy direct is a key part of the European Green Energy deal was amended in early 2023 and adopted by all you you countries that November raising his 20th.

Speaker Change: 30, renewable energy target 42.5%.

William E. Siwek: In addition, the wind power package was launched aiming to double wind capacity by 2030 and to strengthen Europe's competitiveness in wind energy manufacturing. While favorable long-term policies like the IRA and Net Zero Industry Act provide optimism, we still don't anticipate increased wind industry installations to fully materialize until 2025, as the wind industry awaits some critical details on implementing key components of the Inflation Reduction Act and the execution of the more robust European policy. Additionally, permitting hurdles, transmission bottlenecks, elevated interest rates, inflation, and the cost and availability of capital all contribute to delaying a full-fledged market recovery.

Speaker Change: In addition, the wind power package was launched aiming to double wind capacity by 2030th strengthening Europe's competitiveness in wind energy manufacturing, while a favorable longterm policies like the I R. A and net zero industry Act provide optimism, we still don't anticipate increase wind industry installations to fully mature.

Speaker Change: Realized until 2025 as the wind industry of late so critical details on implementing key components of the inflation reduction act and the execution of the more robust European policies. Additionally, fermenting hurdles transmission bottlenecks elevated interest rates and inflation and the cost and availability of capital all contribute.

Speaker Change: To the ladies are both Glurge Margaret February.

William E. Siwek: We expect 2024 to be a year of transition with sales declining slightly from 2023, but with a significant EBITDA. Currently, we are operating 37 lines, including the 4 for Norex and Matamoros that will transition back to them in mid-2024, as well as 6 new lines starting up and 4 lines transitioning out all in 2024. This will impact utilization and output in the first half of the year, with the second half projected to improve markedly as the lines in startup and transition achieve serial production levels. So, notwithstanding slightly lower utilization in 2024 compared to 23, we expect a significant improvement in EBITDA and EBITDA margin as many of the operational and quality challenges we experienced in 2023 are now behind us. We expect our 2024 EBITDA margin to be in the range of 1-3% for the full year, but on a trajectory to get back to EBITDA levels north of $100 million in 2025 and to our target EBITDA margin at the highest inclusion. With that, I'll turn the call over to Bryan to review our financials. Thanks, Bill. Please turn to slide eight.

Speaker Change: We expect 2024 to be a year of transition with sales declining slightly from 2023, but with a significant EBITDA.

Speaker Change: Currently we are operating 37 lines, including the for for Noah accident, Matamoros that will transition back to them in mid 2024, as well as new lines starting up in four lines transitioning of 2024, this will impact utilization and I'll put it in the first half of the year with the second half projected to improve markedly as the lines.

Speaker Change: And startup in transition to cheap cereal production levels, so notwithstanding slightly lower utilization in 24 compared to 23, we expect a significant improvement in EBITDA and EBITDA margin as many of the operational quality challenges we experienced in 2023 right now behind US we expect that 2024 March.

Speaker Change: To be in the range of 1% to 3% for the full year, but on a trajectory to get back to EBITDA levels north of $100 million in 2025 into our target EBITDA margin and the highest single digits.

Speaker Change: That I'll turn the call over to Brian review, our financial results.

Brian: Thanks, Bill Please turn to slide eight in the fourth quarter of 2023 net sales for $297 million compared to 402.3 million for the same period in 2023, a decrease of 26.2%.

Bryan Robert Schumaker: In the fourth quarter of 2023, net sales were $297 million compared to $402.3 million for the same period in 2022, a decrease of 26.2%. Net sales of wind blades, tooling, and other wind-related sales, which hereafter I'll just refer to as wind sales, decreased by 96.9 million in the fourth quarter of 2023, or 25.6 percent, compared to the same period in 2022. Sales were negatively impacted at one of our plants by a production slowdown over a ten-week period, including a shutdown for four weeks due to out-of-spec material we received from a supplier, and we ran down five lines of preparations for transitions that will occur in early 2024. Sales were also impacted by a reduction in wind blade inventory included in contract assets driven by working capital initiatives.

Brian: Net sales are wind blades to lean other wind related sales what's your after I'll just refer to as Wednesday old decreased by $96 $9 million in the fourth quarter of 2023 or 25.6% compared to the same period in 2022 sales were negatively impacted and one of our plants by a production slowdown over a 10 week period, including a shutdown for four weeks.

Brian: It's like material, we received from a supplier and we ran down five lines of preparations for transitioning to occur in early 2024.

Brian: Sales were also impacted by the production of wind blade inventory included in the contract that that's driven by working capital initiatives.

Brian: Inventory reduction impacted net sales of wind for the court ended December 31, 2023, as lower blade inventory cost directly correlates to <unk> revenue under the cost the cost revenue recognition method for Blake contracts.

Brian: Decreases were partially offset by higher average selling prices.

Brian: He'll services sales decreased by $1.1 million in the fourth quarter compared to the same period of 2022.

Brian: While we were able to deploy many of our field services technician factory revenue generating services in the quarter. Our field services sales continued to be negatively impacted by the war to campaign, we disclose in the second quarter of 2023.

Bryan Robert Schumaker: The inventory reduction impacted net sales of wind to the corridor ended December 31, 2023, as lower blade inventory costs directly correlate to lower revenue under the cost-to-cost revenue recognition method for our blade contracts. However, these decreases were partially offset by higher average selling prices. Field services sales decreased by 1.1 million in the fourth quarter compared to the same period in 2022. While we were able to deploy many of our field services technicians back to revenue-generating services in the quarter, our field services sales continued to be negatively impacted by the warranty campaign we disclosed in the second quarter of 2023. Automotive sales decreased $7.3 million in the fourth quarter compared to the same period in 2022.

Brian: Automotive sales decreased $7.3 million in the fourth quarter compared to the same period of 2022.

Brian: Was primarily due to a reduction in both body delivery date of birth terrorists bankruptcy.

Brian: Net income attributable to kind of stockholders me continuing operations with 11.6 million in the fourth quarter of 2023 compared to a net loss of $41.9 million. The same period of 2022.

Brian: Europe over here improvement was primarily driven by the refinancing of our series date preferred stock into a senior securitas lowered whereby the recorded and $82.6 million gain on extinguishment.

Brian: Adjusted EBITDA for the fourth quarter of 2023, with a loss of $28.1 million compared to adjusted EBITDA $21.2 million during the same period of 2022.

Brian: The decrease in just EBITDA for the three months ended December 31, 2023 as compared to the same period of 2022 was primarily driven by lower sales as I. Just described increased cross relate to quality initiatives and higher startup in transition costs. In addition note. The fourth quarter of 2023 includes $20 million of losses from her nor X amount of more slant.

Bryan Robert Schumaker: This decrease was primarily due to a reduction in buff body deliveries due to Proterra's bankruptcy. Net income attributable to common stockholders in continued operations was $11.6 million in the fourth quarter of 2023, compared to a net loss of $41.9 million in the same period in 2022. The year-over-year improvement was primarily driven by the refinancing of our Series A preferred stock into a senior secured term loan, whereby we recorded an $82.6 million gain on extinguishment. Adjusted EBITDA for the fourth quarter of 2023 was a loss of $28.1 million, compared to adjusted EBITDA of $21.2 million during the same period in 2022. The decrease in adjusted EBITDA for the three months ended December 31, 2023, as compared to the same period in 2022, was primarily driven by lower sales, as I just described, increased profits related to quality initiatives, and higher startup and transition costs.

Brian: Should be the last quarter, we see anywhere near that level of loss of this plan as we had better price in 2024 and plan to transition that factory back to the <unk> in the middle of the year.

Brian: Moving on to slide nine we ended the quarter with $161 million of unrestricted cash and cash equivalents and $485 million debt, which includes the senior secured turn loan with oak tree.

Brian: 132.5 million Green convertible notes issued in March of last year, the credit facilities, we utilize the Turkey, India two minutes working capital a small number of equipment finance leases.

Brian: We had negative cash flow of $15.4 million in the fourth quarter of 2023 compared to positive free Cashflow 15.5 million in the same period of 2022.

Brian: <unk> the cash in the fourth quarter of 2023 was primarily need or even at a loss and capital expenditures, partially offset by working capital improvements, which were primarily aimed at lower inventory levels their contract asset that one.

Brian: Nope that we were able to reduce our contract asked that balance by $72 million in the fourth quarter almost 40 per cent.

Brian: We continue to places significant focus on every cash and training officially play a working capital to make sure. We can comfortably execute T initiatives as we move forward and restart our idle capacity.

Bryan Robert Schumaker: In addition, note that the fourth quarter of 2023 includes $20 million of losses from our Nordex Matamoros plant. This should be the last quarter we see anywhere near that level of loss for this plant, as we have better pricing in 2024 and plan to transition that factory back to Nordex in the middle of the year. Moving on to slide 9, we entered the quarter with $151 million of unrestricted cash and cash equivalents and $485 million of debt, which includes the Senior Secured Term Loan with Oaktree, the $132.5 million green convertible notes we issued in March of last year, the credit facilities we utilized in Turkey and India to manage working capital, and a small number of equipment, finance, and lease. We had negative free cash flow of $15.4 million in the The net use of cash in the fourth quarter of 2023 was primarily due to our EBITDA loss and capital expenditures, partially offset by working capital improvements, which were primarily aimed at lower inventory levels in our contract asset balance. Note that we were able to reduce our contract asset balance by $72 million in the fourth quarter, or almost 40%.

Brian: Now a summary of our financial guidance for 2024 can be found on site.

Brian: We anticipate sales from continuing operations in the range of 1.3 billion to $1.4 billion, representing a slightly client period of 2023.

Brian: Is primarily driven by lower Plainfield theater production line transitions and temporary domain softness partially offset by rising nasp's.

Brian: Digitally automotive revenue will likely decline due to the <unk> bankruptcy, while field service sales are expected to improve with increased technicians deployed and revenue generating projects.

Brian: We previously Highland Air expectation for a significant improvement in 2024, adjusted EBITDA and EBITDA margin. This is driven by several factors the absence of a large warranty charge completion of the Nordics Matamoros contract. The absence of the bank is charged I don't care field service organization returning to revenue generating word. However, these positive factors woogie parts.

Brian: Upset by Udall is the utilization declined from 82% to arrange a 75 to 80 per cent. If you do plan to start up some transitions higher startup in transition costs and continuing inflation challenges, particularly in Turkey, and Mexico. These factors contributing to expect an email margin range of one to three per cent.

Speaker Change: I wanted to give you some directional perspective on our plans for 2024.

Speaker Change: We believe 2024 will be a tale of two halves in the first half will be ramped up 10 lines that are either in startup were transition. We expect the first task volumes to be a fair amount lower than that could happen in the first quarter will be lower than the second quarter as.

Speaker Change: As we work through these transition to start up early in the year, we are expected to generate modest losses and consume cash in the first half of the year I'm expecting our adjusted EBITDA margin to be a mid single digit loss and the volumes ramp our adjusted EBITDA margin improves to mid single digits in the second half.

Bryan Robert Schumaker: We continue to place a significant focus on preserving cash, ensuring we efficiently deploy our working capital to make sure we can comfortably execute key initiatives as we move forward and restart our idle capacity. A summary of our financial guidance for 2024 can be found in slide 10. We anticipate sales from continued operations in the range of $1.3 billion to $1.4 billion, representing a slight decline compared to 2023. This decline is primarily driven by lower blade sales due to production line transitions and temporary demand buffers, partially offset by rising ASP. Additionally, automotive revenue will likely decline due to the Pratera bankruptcy, while fuel service sales are expected to improve with increased technicians deployed on revenue-generating projects. We previously highlighted our expectation for a significant improvement in 2024 adjusted EBITDA and EBITDA on margin. This is driven by several factors.

Speaker Change: We currently expect that sometime in the second quarter will likely hit are low watermark for cash on hand, and then there's the Penguins brand cereal production, we expect to be generating positive cash flow in the second half of the year.

Speaker Change: In 2024, we anticipate capital expenditures of $25 million to $30 million. These investments are driven by our continued focus on achieving our longterm growth targets than restarting our idol line.

Speaker Change: We continue to be confident in our liquidity position, which has improved significantly since we refinance the oak tree preferred chairs that you would turn loan our balance sheet, along with the improvement or liquidity not for the adults when they look to navigate another transition year. It will also allow us to invest to achieve our mid to long term growth profitability and capital targets.

Speaker Change: With that I'll turn the call back over to Bill.

Bill: Thanks, Brian Please turn to slide 12 will remain bullish on the long term energy transition and believe we will continue to play a vital role in the pace and ultimate success of the transition we remain focused on managing our business through the short term market challenges and remain excited about how well positioned we are with our significantly improve liquidity and strong balance sheet to cap.

Bryan Robert Schumaker: The absence of a large warranty charge, completion of the Nordics Matamoros contract, the absence of the Patera Bankage Charge, and on-field service organization returning to revenue-generating work. However, these positive factors will be partially offset by utilization decline from 82% to a range of 75% to 80% due to planned startup and transitions, higher startup and transition costs, and continued inflation challenges, particularly in Turkey and Mexico. These factors contribute to an expected EBITDA margin range of 1% to 3%.

Bill: What lies on the significant growth the industry would expect in the coming years and in turn attain our growth and financial goals I want to thank all of our Tpa associates once again for the commitment dedication and loyalty to Cvs.

Speaker Change: I will now turn it back to the operator to open the call for questions.

Speaker Change: We will now begin the question and answer session.

Bill: To ask a question you May press Star then one on your telephone keypad if.

Bill: If you're using a speaker phone please pick up your handset before pressing the keys.

Bill: To withdraw your question. Please press Star then too at this time, we will pause momentarily to assemble our roster.

Bill: The first question today is from Mark Strauss with J P. Morgan. Please go ahead.

Bryan Robert Schumaker: I wanted to give you some directional perspective on our plans for 2024. We believe 2024 will be a tale of two halves. In the first half, we will be ramping up 10 lines that are either in startup or transition. We expect the first half's volume to be a fair amount lower than the second half, and the first quarter will be lower than the second quarter.

Mark Strouse: Yeah. It's good evening. Thank you very much for taking our questions. So I wanted to go back to the comment about the.

Mark Strouse: You know somebody to your customer well I guess, it kind of the the ramp and order activity waiting for some of the guidelines of the Iowa ready to come out I just want to make sure I'm I'm thinking about this right. It is that more a comment of you know kind of the pipeline opportunities and new lines that might come with that I'm in <unk> I think the follow on question.

Bryan Robert Schumaker: As we work through these transitions and startups early in the year, we are expecting to generate modest losses and consume cash. In the first half of the year, I'm expecting our adjusted EBITDA margin to be a mid-single-digit loss. As these volumes ramp, our adjusted EBITDA margin improves to mid-single-digits in the second half. We currently expect that sometime in the second quarter, we will likely hit our low water mark for cash on hand. And then, as the 10 lines ramp to cereal production, we expect to be generating positive cash flow in the second half of the year. In 2024, we anticipate capital expenditures of $25 to $30 million. These investments are driven by our continued focus on achieving our long-term growth targets and restarting our idle line. We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oaktree Preferred Shares into a term loan.

Mark Strouse: Just kind of the the visibility into the second half ramp is that.

Mark Strouse: Largely set in stone or is there anything that that ramp is waiting on as far as the I R a or or otherwise.

Speaker Change: Yeah, Hey, Mark Thanks for the question for I mean.

Speaker Change: The second half that's that's pretty much baked in right now right I mean, we've got there's nothing dependent on the I R. A for that I think from a longer term perspective, we see you know an inflection point in 2025, you've seen a number of our customers and out some pretty good orders towards the end of last year beginning of this year.

Bryan Robert Schumaker: Our balance sheet, along with the improvements in our liquidity and operating results, will enable us to navigate another transition year and will also allow us to invest to achieve our mid- to long-term growth, profitability, and capital targets. With that, I'll turn the call back over to Bill. Thanks, Ryan.

Speaker Change: Many are those are 425 and 26 and beyond.

Speaker Change: So again I think there there is some clarification on I R. A there's there's I think we're starting to see a lot of interest and activity around repowering as well and I just think there's still some clarification domestic content and a few other things that will will kind of open up the spec. It if you will.

William E. Siwek: We remain bullish on the long-term energy transition and believe we will continue to play a vital role in the pace and ultimate success of the transition. We remain focused on managing our business through the short-term market challenges and remain excited about how well positioned we are with our significantly improved liquidity and strong balance sheet to capitalize on the significant growth the industry expects in the coming years and, in turn, attain our growth and financial goals. I want to thank all of our TPI associates once again for their commitment, dedication, and loyalty to TPI.

Mark Strouse: Whether it's repowering or further orders in 225 and 26.

Speaker Change: Okay. Thanks, Bill and then the the comment about the you know getting up north of 100 million, an annualized EBITDA in 20th or beginning in 2025.

Speaker Change: Kind of <unk>.

Speaker Change: Making sure I'm thinking about that right are you are you, saying kind of a full year 2025 number you're expecting that to be over $100 million or is that at some point.

Operator: I'll now turn it back to the operator to open the call for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: 2025, the annualized run rate will be north of 100 billion.

Speaker Change: No that would be for the year 2025 over over $100 million.

Mark Strouse: To draw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today is from Mark Strouse with J.P. Morgan, please go ahead. Yes, good evening.

Speaker Change: Excellent okay.

Speaker Change: What do you think about the.

Speaker Change: Okay. Thanks, Thanks, <unk> no no no sorry, Bill I didn't mean to interrupt go ahead.

Speaker Change: Now you'll get you'll get.

Speaker Change: Alright, thank you.

Speaker Change: The next question is from Eric Stein with Craig Hallum. Please go ahead.

Eric Stine: Hi, Bill <unk>.

Eric Stine: Eric how are Ya.

Eric Stine: I'm doing well and you.

William E. Siwek: Thank you very much for taking our questions. So, I wanted to go back to the comment about some of your customers, well, I guess, you know, it kind of the rampant order activity, kind of waiting for some of the guidelines of the IRA to come out. I just want to make sure I'm thinking about this right.

Eric Stine: So maybe we can just talk a little bit about the the more color on the materials. If you have that caused the slow down and then the also the shutdown.

Eric Stine: I mean.

Eric Stein: Is this something that that is common in your business, but this just happened to be.

Eric Stein: Very large so it had an outsize impact and you need to call call. It I order or just maybe some thoughts and does.

Eric Stein: Was it something that we can think about that it is behind you.

William E. Siwek: Is that more a comment on, you know, kind of the pipeline opportunities and new lines that might come with that? And I think the follow-on question is just kind of the visibility into the second half ramp.

Speaker Change: Yeah, it's behind US, it's not common and it was a material impact to us which is why we called it out. So this was a customer directed supplier with a quality issue. We identified it quickly early on quite frankly and stopped production.

William E. Siwek: You know, largely set in stone, or is there anything that that ramp is waiting on as far as the IRA or otherwise? Hey, Mark, thanks for the question. I mean, as far as the second half is concerned, that's pretty much baked in right now, right? I mean, we've got, there's nothing dependent on the IRA for that. I think from a longer-term perspective, we see an inflection point in 2025. You've seen a number of our customers announce some pretty good orders towards the end of last year and the beginning of this year. Many of those are 425 and 26 and beyond.

Speaker Change: As a result, because we didn't want to have any quality escape. So it's not something that is normal in the in the industry, but it happens from time to time.

Speaker Change: And.

Speaker Change: It it is behind us and it did it did create a significant slowdown for us in at least in one plant in the fourth quarter, which is why we call it out separately.

Speaker Change: Got it.

Speaker Change: Something that I.

William E. Siwek: So again, I think there is some clarification on IRA. There is, I think we're starting to see a lot of interest in activity around repowering as well. And I just think there's still some clarification, domestic content, and a few other things that will kind of open up the spigot, if you will, on whether it's repowering or further orders into 25 and 26. Okay, thanks, Bill. And then the comment about getting north of 100 million in annualized EBITDA in 2020 or beginning in 2025. Just kind of making sure I'm thinking about that right.

Speaker Change: Just to confirm so you do expect.

Speaker Change: I mean this is not lost volume. These are volumes that you will you will see in 24, you expect to see in 24 and is there any way to think about kind of the magnitude of the the make up so that you might get from that supplier or is it a vanilla would assume it's a a meaningful amount.

Speaker Change: Yeah. It's I mean, we've obviously we have returned the material.

Speaker Change: But it was I think we that's a 20 million dollar sales impact and an 8 million dollar 8 million dollar EBITDA impact in the fourth quarter. So you would expect that the flow through into 2024.

William E. Siwek: Are you saying kind of the full year 2025 number; you're expecting that to be over 100 million? Or is it that at some point in 2025, the annualized run rate will be north of 100 million? No, that would be for the year 2025 over 100. If you think about it.

Speaker Change: Okay.

Speaker Change: And then maybe the second one for me just on the warranty issues. Good news that some of your technicians are starting to transition back to more revenue producing activities 70 on one hand, you're sounding much more optimistic about it but yeah. It still sounds like it's something that you expect you to have an <unk>.

William E. Siwek: Okay. Thanks. Thanks, Mark. No, no, no. Sorry, Bill.

William E. Siwek: I didn't mean to interrupt. Go ahead. No, you're good.

Speaker Change: Packed going forward. So is this just a case of <unk>.

William E. Siwek: You're good. Thank you. The next question is from Eric Stine with Craig Hallam. Please go ahead. Hi, Bill. Hi, Ryan. Eric, how are you?

Speaker Change: These things winding down and do you feel like you've got a handle on the entirety of the issue is this something that you think you're getting very close to it being done.

Eric Stine: Good. I'm doing well. You?

William E. Siwek: So maybe we could just talk a little bit about the more color on the materials issue you have that caused the slowdown and then also the shutdown. I mean. Is this something that is common in your business, but this just happened to be very large, so it had an outsized impact, and you need to call it out? Or maybe some thoughts, and is it something that we can think about now that it is behind you? Yeah, it's behind us. It's not common.

Speaker Change: Yeah, we we definitely feel we have a handle on how many issues quite frankly, we have for quite some time, but these warranty campaigns you know take a little bit of time to work through so we'll <unk>, we'll be continuing to work through the balance of those campaigns, even though you know the cost is already sitting in the <unk>.

Speaker Change: But we will still have some technicians as we as we finish up those campaign. So the vast majority of our technicians are already on on third party worker on billable work already so yeah 2024 should be a much better much better year from the field service standpoint.

William E. Siwek: And it had a material impact on us, which is why we called it out. So this was a customer-directed supplier with a quality issue. We identified it quickly, early on, quite frankly, and stopped production as a result because we didn't want to have any quality escape.

Speaker Change: Okay, that's great. Thanks.

Speaker Change: Yep. Thank you.

William E. Siwek: So it's not something that is normal in the industry, but it happens from time to time. And it is behind us, and it did create a significant slowdown for us, at least in one plant, in the fourth quarter, which is why we called it out separately.

Just Sinclair: The next question is from just Sinclair with Roth M. K M. Please go ahead.

Just Sinclair: Yep [noise].

Just Sinclair: Hi, Thanks for taking my questions here.

Sinclair: So I guess first I was wondering if you can just update us on how many lines you expect to have operating at the end of 2024 I May go ahead <unk> commentary earlier about it so it sounds like maybe 39, but I wanted to be sure and then how many of those line that you expect at the end of the year.

William E. Siwek: And it's something that, I mean, just to confirm, so you do expect, I mean, this is not lost volume; these are volumes that you will, you will see in 24, you expect to see in 24. And is there any way to think about the kind of the magnitude of the makeup that you might get from that supplier? Or is I mean, I would assume it's a way to pull them out. Yeah, it's I mean, we've obviously returned the material.

Just Sinclair: Are under contract versus how many are under negotiations bill.

Speaker Change: It just it I'll I'll start off you know we ended this year with 37 lines and and you know we're turning four by four lines back over to Nord expert Matamoros, Briding four lines and for G E down in <unk>. So it was kind of off that and then there's six other lines that we're starting up through started to transition.

William E. Siwek: But it was I think we had a $20 million sales impact and an $8 million, $8 million EBITDA impact in the fourth quarter. So you would expect that to flow through into 2024. Okay, um, and then maybe the second one for me just on the warranty issues.

William E. Siwek: Good news that some of your technicians are starting to transition back to more revenue-producing activities. I mean, on the one hand, you're sounding much more optimistic about it. But yet, it still sounds like it's something that you expect to have an impact going forward. So is this just a case of these things winding down? And do you feel like you've got a handle on the entirety of the issue?

Speaker Change: This year and then there'll be seven lines that go away because and one factory just due to space. So we're going from three lines down too. So will end the year with 36 lines installed.

Speaker Change: Got it okay is there.

William E. Siwek: Is this something that you think you're getting very close to it being done? Yeah, we definitely feel we have a handle on the issues, quite frankly, we have for quite some time. But these warranty campaigns, you know, take a little bit of time to work through.

Speaker Change: The discussions with your customers to potentially add more lines by the end of 2024 than than where you are right now or if not in that timeframe given the strong order flow and the potential ramp in 2025, and what's the possibility that you could look at expanding at.

William E. Siwek: So we'll be continuing to work through the balance of those campaigns, even though the cost is already sitting in the P&L. But we will still have some technicians as we finish up those campaigns. So the vast majority of our technicians are already doing third-party work or on billable work already. So yeah, 2024 should be a much better year from the field service standpoint. Okay, that's great. Thanks.

Speaker Change: In that time period.

Speaker Change: Yeah, we there's certainly we do have some available capacity that we could fill relatively quickly in 2024 and as you as you rightly point out there has been a lot of order activity. You know recently end of last year and and carry it into this year.

Speaker Change: We do see volumes picking up fairly significantly in 2025, So you might imagine we're having discussions with all of our customers about capacity additional capacity an additional lines.

William E. Siwek: Yep, thank you. The next question is from Justin Clare on the Roth MKM. Please go ahead.

Justin Clare: Yep. Hi, thanks for taking our questions here. So I guess first off, I was wondering if you could just update us on how many lines you expect to have operating at the end of 2024? I know you had some commentary earlier about it. So it sounds like maybe 39, but I wanted to be sure.

Speaker Change: Alright, Okay, and then just one one other one just curious on the trend in Opex in 2024 versus what we saw in 23, and then that'd be it further into the 20th 25 any meaningful change that we should be thinking about.

Speaker Change: Yeah, I'm, assuming you say opex or a capital expenditure guidance guide at the $25 million to $30 million about half of that is related to startups in transition.

Bryan Robert Schumaker: And then how many of those lines that you expect at the end of the year are under contract versus how many are under negotiation? Justin, I'll start off. You know, we ended this year with 37 lines, and you know, we're turning four lines back over to Nordex from Adam Morris. We're adding four lines in for GE down in Juarez, so those kind of offset each other. And then there are six other lines that we're starting up, as we start some transitions this year, and then there will be seven lines that go away because in one factory, just due to space, so we're going from three lines down to two. So we'll end the year with 36 lines installed. I got it.

Speaker Change: Okay are you you're free to operating expense or Capex, Justin operating expense.

Speaker Change: Operating expense.

Speaker Change: Yeah, I mean, we we have we have taken significant amount of operating costs out of our out of our structure over the last several years and we will continue to do that.

Speaker Change: Our new C. O. L is has a has a very deep history and experience on with lane and that is a mindset that we're employing throughout our organization. So we expect to continue to to take down a structural cost and and we'll continue to focus on that as we move forward. So I have a.

William E. Siwek: Okay. Is there any discussions with your customers to potentially add more lines by the end of 2024 than where you are right now? Or, if not in that timeframe, given the strong order flow and the potential ramp-up in 2025, what's the possibility that you could look at expanding in that timeframe? Yeah, we do have some available capacity that we could fill relatively quickly in 2024. And as you rightly point out, there has been a lot of order activity recently, the end of last year and carried into this year. We do see volumes picking up fairly significantly in 2025. So you might imagine we're having discussions with all of our customers about capacity, additional capacity, and additional lines. Got it, okay.

Speaker Change: The trend of reducing our our operating costs as a percentage will continue.

Speaker Change: Okay, great. Thank you.

Speaker Change: Yep Thanks, Justin.

Speaker Change: The next question is from typical side with Bank of America. Please go ahead.

Typical Side: Hi, good evening. Thank you so much for taking our question today I have two questions. Please 20th.

Typical Side: Given that you've realised higher pricing <unk> can you give us an idea of.

Speaker Change: What how they can think about you know the cadence of margins 220, 24, uhm given various different uhm dynamics at play that's the first question and also on the pricing side in the backlog.

William E. Siwek: And then just one other one, just curious about the trend in OPEX in 2024 versus what we saw in 23, and then as we move further into 2025, any meaningful change that we should be thinking about? Yeah, I'm assuming you say OPEX, our capital expenditure guidance, you know, we've got it at 25 to 30 million, and about half of that is related to startups and transitions. Okay, are you referring to operating expense or capital expenditure, Justin? Operating expense Operating expense

Speaker Change: You see any evidence of customers that are basically looking to renegotiating pricing for some of these projects in the background.

Speaker Change: I'll I'll take the second one first and then I'll, let Ryan take you through the margins, but no I I mean, obviously, we we we have we've reprice essentially every quarter based on market pricing of raw materials, and what have you, but as far as renegotiating price based on specific projects.

William E. Siwek: Yeah, I mean, we have taken a significant amount of operating costs out of our structure over the last several years, and we will continue to do that. Our new COO has a very deep history and experience with lean, and that is a mindset that we're employing throughout our organization. So we expect to continue to take down structural costs, and we'll continue to focus on that as we move forward. So I would guess the trend of reducing our operating costs as a percentage will continue. Okay, great. Thank you. Yep, thanks, Justin. The next question is from Dimple Gosai with Bank of America. Please go ahead. Hi, good evening.

Speaker Change: That's not something <unk> I mean, it's we have contractual arrangements with our customers that have formulaic pricing. So we're not seeing anybody come back on specific projects for repricing and on the margins right. Yeah, I I think on the on the pricing <unk> with this year are mixer blades was a little bit more towards the longer blades we.

Speaker Change: She had that that makes more than outweighed that we had material costs coming down as you know a lot of our material Costello to our customers. So that partially offset that as we look to 24 on the pricing side. We do expect R. R. S. P needs to go up that will be alert.

Bill Siwek: That will be largely due to just the link the blades and some of the ramp up with those from a margin perspective.

Dimple Gosai: Thank you so much for taking our questions today. I have two questions, please. One is, given that you've realized higher pricing in this latest set of results, can you give us an idea of what we can think about, you know, the cadence of margins through 2024, given various different dynamics at play? That's the first question, and also on the pricing side in the backlog, do you see any evidence of customers that are basically looking to renegotiating pricing for some of these projects in the backlog? I'll take But no, I mean, obviously, we reprice essentially every quarter based on market pricing of raw materials and what have you. But as far as renegotiating prices based on specific projects, that's not something we're seeing. I mean, we have contractual arrangements with our customers that have formulaic pricing. So we're not seeing anybody come back on specific projects for repricing. And on the margins, Ryan?

Speaker Change: The big hitters as you look from 23 to 24 is we had almost $50 million of warranty charges that they go away. We also had about.

Dimple Gosai: About $45 million of losses from the Nordics Matamoros plan that effectively go down to close to zero and then we had a 22 and a half million dollar charged for <unk> bankruptcy says it goes away and so as as those go away. We have a number of different margin improvement plans that we have in place.

Dimple Gosai: One of those being that field services will be obviously, a lot more than a third party revenue generating activities and and last time on warranty work and then we have about $30 million of total cost reductions baked in the plan that are offsetting a lot of the inflation headwinds that we have currently out there today as as you. When you go into a 10-K, we talk.

Speaker Change: A lot about something in place that I wouldn't be having Turkey, Mexico and so our teams have worked to go out and take a lot of cost out of our system to make sure that we can all set those things.

Ryan: So firstly as we talk to you guys, we talked about though that's a tale of two halves right. So first half we're talking about mid single digits lost.

William E. Siwek: Yeah, I think on the pricing side, you know, so this year, our mix of blades was a little bit more towards the longer blades. We actually had that mix more than outweighed the fact that we had material costs coming down. As you know, a lot of our material costs flow to our customers, so that partially offset that.

Speaker Change: Back half of the year second half of your mid single digit profit. So that's that's kind of the cadence.

Speaker Change: Perfect. Thank you so much.

Bryan Robert Schumaker: As we look to 24, on the pricing side, we do expect our ASTs to go up. That will be large. That will be largely due to just the length of blades and some of the ramp-up of those from a margin perspective.

Speaker Change: Yep.

Andrew Operator: The next question is from Andrew per Coca with Morgan Stanley. Please go ahead.

Andrew: Alright. Thanks, so much for taking the question most of amount of an answer but I just want to follow up quickly on on the margin kaden.

Bryan Robert Schumaker: The big hitters, as you look from 23 to 24, are we had almost $50 million of warranty charges that go away. We also had about $45 million of losses from a Nordic Smetamoros plant that effectively went down to close to zero. And then we had a $22.5 million charge for the Patera bankruptcy that goes away. And so as those go away, we have a number of different margin improvement plans that we have in place. One of those being that field services will obviously be a lot more third-party revenue-generating activities and less time on warranty work. And then we have about $30 million of total cost reductions baked into the plan that are offsetting a lot of the inflation headwinds that we have currently out there today. When you go into our 10K, we talk a lot about some of the inflation headwinds we have in Turkey and Mexico. And so our teams have worked to take a lot of costs out of our system to make sure that we can offset those costs.

Bryan Robert Schumaker: Can you maybe just give us a sense for what speak 10 for the Red Sea dynamic I think it was mentioned that is having an impact on on <unk>, who can you just give us some sense for what your banking into your Martin guidance for elevated pray cough, and maybe just remind us what your contract structure. It looks like in terms of passing this cough through to customers.

Speaker Change: Yeah, So I can't I can't give you a precise percentage that we baked and again, we're not impacted significantly quite frankly, it's it's relatively few.

Andrew Operator: A few raw materials skews, if you will and we have.

Bryan Robert Schumaker: And we do have alternative suppliers to avoid that that route to some extent, so it's actually pretty minimal impact and however to the to the extent it does impact our our pricing is on total delivered cost to the extent we are price increases as a result of logistics that would get back.

Bryan Robert Schumaker: Into the into the blade price as well.

Speaker Change: Okay. That's helpful. And then maybe just to come back to working capital for a second can you just give us a sense for what that looks like in the first half of the year is the transition some of these lines and maybe just give us a sense for you don't Wanna look like liquidity front sounds like you're focusing on managing cash, but what are the some of the levers that that might work.

Bryan Robert Schumaker: So first, as we talked about, though, it's a tale of two halves, right? So, first half, we're talking about mid-single-digit losses, back half of the year, second half of the year, mid-single-digit profits. So that's kind of the cadence.

Bryan Robert Schumaker: Some additional capital to be brought up your balance sheet to manage through this transition.

Speaker Change: Yeah, we're we're not planning on bringing incremental capital onto the balance sheet. At this point in time I think they're still has a little room to work in our existing plants that have that we have mature blades on reproducing I think there's still some room out there that we can bring some of that working capital down, particularly around their inventory balances in contact assets, which is what we execute it on the fourth quarter.

Dimple Gosai: Perfect. Thank you so much. Yes. The next question is from Andrew Prococo with Morgan Stanley. Please go ahead.

Andrew Prococo: Great, thanks so much for taking the question. Most of it might have been answered, but I just want to follow up quickly on the margin cadence. Can you maybe just give us a sense for what's baked in for the Red Sea dynamic?

Andrew Prococo: You will see a modest increase in working capital because we have a lot of a lot of lines that are ramping up here in the first half of the year. So that consumption of cash that I talked about in the prepared remarks was really focused in on on some of those areas that we have we have production that'll be ramping up so that'll consume some of that working capital, but you know we're gonna continue to go after everything we can.

William E. Siwek: I think it was mentioned that it's having an impact on freight costs. So can you give us some sense for what you're baking into your margin guidance for elevated freight costs? And maybe just remind us what your contract structure looks like in terms of passing those costs through to customers? Yeah, so I can't give you a precise percentage that we've baked in. Again, we're not impacted that significantly, quite frankly. It's relatively few raw material SKUs, if you will, and we do have alternative suppliers to avoid that route to some extent. So it's actually a pretty minimal impact.

William E. Siwek: On the balance sheet as as far as getting as efficient and disciplined as we can.

Speaker Change: Great. Thanks, so much.

William E. Siwek: The next question is from Kashi Harrison from Piper Sandler. Please go ahead.

William E. Siwek: Oh.

Speaker Change: Oh, Thank you for good afternoon, everyone and thanks for taking the question.

William E. Siwek: Maybe a follow up to mark so how much of your revenue guidance is you know the risks by your current supply agreement.

William E. Siwek: And however, to the extent it does impact our pricing, our pricing is based on total delivered costs. So to the extent we have price increases as a result of logistics, that would get baked into the blade price as well. Okay, that's helpful.

Speaker Change: And then you know while we're on the discussion of revenue what is the level of revenue required in 2025 to get to $100 million would be better.

Bryan Robert Schumaker: And then maybe just to come back to working capital for a second, can you just give us a sense of what that looks like in the first half of the year as you transition some of these lines? And maybe just give us a sense for, you know, on the liquidity front. Sounds like you're focusing on managing cash, but what are some of the levers that might warrant some additional capital to be brought into the balance sheet to manage through this transition? You know, we're not planning on bringing incremental capital onto the balance sheet at this point in time. I think there is still a little room to work in our existing plants that we have mature blades on and are producing.

Bryan Robert Schumaker: Yeah. So the all of our revenues Derisked in 24, I mean, it's all under contract. So that's that's pretty straightforward.

Bryan Robert Schumaker: Uhm revenue in I mean, we're not gonna give you we're not going to give you guidance for for 25 at this point in time, clearly, but think about it has.

Bryan Robert Schumaker: Yeah, I would I would think he Cassie you know mid single digits is where do we plan to be at the second half of the year I think as we entered twenty-five will be on that pace and his volume start accelerating you know, that's where we start to get on that walk to get up to our high single digits that we expect to be on a pace to be there as we exit 25 and go into 26, so I'm still working.

Bryan Robert Schumaker: I think there's still some room out there that we can bring some of that working capital down, particularly around our inventory balances and contract assets, which is what we did in the fourth quarter. You will see a modest increase in working capital because we have a lot of lines that are ramping up here in the first half of the year. So that consumption of cash that I talked about in the prepared remarks was really focused on some of those areas that we have. We have production that will be ramping up, so that will consume some of that working capital. But, you know, we're going to continue to go after everything we can on the balance sheet as far as getting as efficient and disciplined as we can.

Bryan Robert Schumaker: Through the time, you know some of those started some transitions, but I would think about <unk> at at least the mid single digit EBITDA type business as we get into 25.

Speaker Change: Got it I appreciate the color of their and then that's not my follow up question.

Bryan Robert Schumaker: You know you you you guys have highlighted the I R. A clarity of the driver.

Bryan Robert Schumaker: Driver of project delays can can you remind us what exactly customers are are waiting on when do you expect to get that clarity and.

Bryan Robert Schumaker: And I'm Gonna go for maybe another question is why is it that.

Bryan Robert Schumaker: Solar development has moved forward regardless of I R. A clarification, then why windows taking longer.

Bryan Robert Schumaker: Have I been taking longer move forward post I alright.

Speaker Change: Yeah, So I'm I'm higher rate, there's there's still.

Bryan Robert Schumaker: Even though guidance has come out on domestic content, there's still a lot of clarification. That's needed obviously on the green hydrogen piece, which could drive a significant amount of wind in the longterm, there's still a lot of clarification around that the initial guidance was not that favorable those are just a couple of examples.

Andrew Prococo: Great, thanks so much. The next question is from Kashi Harrison on behalf of Piper Sandler. Please go ahead.

Kashi Harrison: Thank you for, good afternoon, everyone, and thanks for taking the questions. Maybe a follow-up to Mark. So, how much of your revenue guidance is, you know, de-risked by your current supply agreement? And then, you know, while we're on the discussion of revenue, what is the level of revenue required in 2025 to get to $100 million of EBITDA? Yeah, so all of our revenue is de-risked in 24. I mean, it's all under contract.

Kashi Harrison: <unk> on the solar side it it. It's a good question I think part of it is development up solar might be perceived as being a bit easier I think inflation has been has impacted so they're a little bit differently than it has been it has wind I think when does take longer to <unk>.

Kashi Harrison: Permit in some locations. So it's it's a it's a whole bunch, it's a whole combination of different factors.

William E. Siwek: So that's that's pretty straightforward revenue. And I mean, we're not going to give you guidance for for 25 at this point in time, clearly. But think of it as. Yeah, I would think, Cashi, you know, mid single digits is where we plan to be in the second half of the year. I think as we enter 25, we'll be on that pace.

William E. Siwek: <unk> you can't just point to one, but it's a number of different different factors.

Speaker Change: Got it thank you.

William E. Siwek: Yep.

William E. Siwek: The next question is from William Griffin with UBS. Please go ahead.

Speaker Change: Hi, Good evening. Thanks for the time My first question was just around the the strategic alternatives for the automotive business and if you can speak to just any you.

Bryan Robert Schumaker: And as volumes start accelerating, you know, that's where we start to get on that walk to get up to our high single digits that we expect to be on a pace to be there as we exit 25 and go into 26. So still working through the timing on some of those starts and transitions, but I would think about us being, you know, at least a mid single-digit EBITDA type business as we get into 25. I got it. I appreciate the color there.

William E. Siwek: You know put potential outcomes or maybe maybe range of outcomes here as you you move towards possibly completing it sounds like by Joan here.

Speaker Change: My range of outcomes, you mean structure or.

Speaker Change: <unk> I think we've talked about it before it could be you know, we we should be talking about joint venture partnership.

Speaker Change: Any combination of those things that would provide capital to that business to execute on a lot of the development.

Speaker Change: Programs, we have in the growth we expect.

William E. Siwek: And then just about my follow-up question. You know, you guys have highlighted the, you know, IRA clarity as a driver of project delays. Can you remind us what exactly customers are waiting on? When do you expect to get that clarity? And, you know, And then I guess maybe just another question is, you know, why is it that solar development has moved forward regardless of IRA clarification, while wind has taken longer? You know, has that been taking longer to move forward post-IRA? You know, so on IRA, there's still a lot of clarification that's needed. Obviously, on the green hydrogen piece, which could drive a significant amount of wind in the long term, there's still a lot of clarification around that. The initial guidance was not that favorable. Those are just a couple of examples.

Speaker Change: Got it perfect and then that answered yeah, Yeah <unk> you got it you got it yep and just taking a little longer term three plus years out here is the wind market hopefully continues to recover and Stabilise. You know how are you thinking about potentially adding lines you know be.

William E. Siwek: On the 37.

William E. Siwek:

William E. Siwek: At at that point, you are are you comfortable with kind of the the footprint you have in place or would you expand I'm more if if you think the the demand is there and sustainable.

Speaker Change: Yeah, Yeah, clearly if if if the demand if we see the demand there and it is sustainable and we have commitments from our our customers that in certain regions. We certainly will will look at the opportunities where we're looking at them. Today. These these you know if it's a greenfield it takes a long time to get there so looking at market.

William E. Siwek: On the solar side, it's a good question. I think part of it is that the development of solar might be perceived as being a bit easier. I think inflation has impacted solar a little bit differently than it has impacted wind. I think wind does take longer to permit in some locations, so it's a whole bunch, it's a whole combination of different factors.

William E. Siwek: And geographies, where demand we think demand will be for for quite some time, we're evaluating that today. So the answer's, yes, we will certainly consider that are we comfortable with our footprint today, absolutely I think we have a great footprint and we do have the capacity to fill so I think just by filling our capacity today, we get.

William E. Siwek: Cashi, I can't just point to one, but there are a number of different factors. Got it. Yeah. The next question is from William Grippen with UBS. Please go ahead. Hi, good evening, thanks for the time.

William Grippen: North of 2 billion of revenue filling our capacity and running that at a fairly modest utilization rate nineties mid nineties and gets us to those EBITDA numbers that we've talked about so I think we're we're in a good position today. So if the opportunity presents itself. We can certainly look at additional growth opportune.

William Grippen: My first question was just around the strategic alternatives for the automotive business. And if you can speak to just any, you know, potential outcomes, or maybe maybe a range of outcomes here, as you move towards possibly completing it sounds like by June here. By range of outcomes, do you mean structure or not?

William E. Siwek: I mean, I think we've talked about it before, it could be, you know, we could be talking about joint venture, partnership, any combination of those things that would provide capital to that business to execute on a lot of the development programs we have and the growth we expect. Got it. Perfect. And then that answer?

William E. Siwek: Beyond our existing footprint.

Speaker Change: I appreciate it thanks Phil.

Speaker Change: Yeah, you bet, thanks, well.

William E. Siwek: The next question is from Jeffrey Osborne with T. D. Cowan. Please go ahead.

William E. Siwek: Hey, Bill three quick ones on the easy side I think you had previously talked about urine, having some clarity on that I think the 10-K makes a reference to June.

William E. Siwek: Yeah, you got it. You've got it. Yeah. And just thinking a little longer term, you know, three plus years out here as the wind market hopefully continues to recover and stabilize, how are you thinking about potentially adding lines, you know, beyond the 37? Um, at that point, are you comfortable with the kind of footprint you have in place? Or would you expand more if you think the demand is there and sustainable?

William E. Siwek: Is the sort of anti <unk> marketplace delay matters or just a slower process than anticipated.

William E. Siwek: I would say, it's more of a but a little bit slower process than anticipated, but still you know where we're moving forward a lot of interest and we we do believe will have something done here shortly.

William E. Siwek: Yeah, clearly, if we see the demand there and it is sustainable, and we have commitments from our customers in certain regions, we certainly will look at the opportunities. We're looking at them today. If it's a green field, it takes a long time to get there.

William E. Siwek: Got it could you here and then on on the the the supplier issue that it looks like the detrimental margins where around 35 per cent you know just a divided by 23.

William E. Siwek: So looking at markets and geographies where we think demand will be for quite some time, we're evaluating that today. So the answer is yes, we will certainly consider that. But are we comfortable with our footprint today?

William E. Siwek: What what are the you know eight what why is that is it just you have to pay people to stand around from Labour perspective, I assume in Mexico for four weeks to do nothing or you can just walk us through that and then when you are going after damages is it for the full value of the product lost or the four last income or EBITDA to the company.

William E. Siwek: Absolutely. I think we have a great footprint, and we do have capacity to fill. So I think just by filling our capacity today, we could get north of $2 billion in revenue.

William E. Siwek: Yeah, so the the <unk>.

William E. Siwek: <unk> I mean, you're basically losing contribution margin right. So.

William E. Siwek: Filling our capacity and running that at a fairly modest utilization rate, the 90s, the mid 90s, gets us to those EBITDA numbers that we've talked about. So I think we're in a good position today. But if the opportunity presents itself, we can certainly look at additional growth opportunities beyond our existing footprint.

William E. Siwek: It is we do have people that are <unk> I wouldn't say they were doing nothing but they are not nearly as productive as they would be if they're building blades.

William E. Siwek: So yeah, you're you're basically stopped and you can't just send them home you've <unk>, you've gotta keep that workforce intact. So it's sad, it's additional cost to deal with.

William Grippen: I appreciate it. Thanks, Phil. Yep, you bet. Thanks, Will. The next question is from Jeffrey Osborne with T.D. Cowan.

Jeffrey Osborne: To deal with the speed up the end of the production once you once you do restart.

Jeffrey Osborne: Please go ahead. Hey, Bill, three quick ones. On the EV side, I think you had previously talked about year-end having some clarity on that. I think the 10k makes reference to June. Is the sort of anti-EV marketplace delaying that, or is there just a slower process than anticipated? I would say it's more of a little bit slower process than anticipated, but still, you know, we're moving forward. There was a lot of interest, and we do believe we'll have something done here shortly. Got it. Good to hear. And then on the supplier issue, it looks like the decrimental margins were around 35%, you know, just 8 divided by 23. What are the, you know, A, why is that?

Jeffrey Osborne: Damage is that I'm going to talk about that publicly but you know our our contracts provide for that and so will follow our contract.

Jeffrey Osborne: Good luck with that is is there any update on what the plan is for <unk> I assume that's not in 2024 guidance and you perhaps if it's like Repowering for G. That's something that could be started fairly quickly versus you know a newer blade model that maybe you haven't produced in the past.

Jeffrey Osborne: Yeah, Yeah, so you're you're right, it's not in 2024 guidance.

Jeffrey Osborne: And to your point you know to the extent, we were too that'd be asked to start with the existing blade that the plant as tools for we could start up fairly quickly. It would just be a matter of assembling the workforce. So that would be relatively quickly, but yeah. It is not in the 24 guidance at this point.

William E. Siwek: Is that just you had to pay people to stand around, from a labor perspective, I assume, in Mexico for four weeks to do nothing? Or can you just walk us through that? And then when you, you know, are going after damages, is it for the full value of the product loss or the full loss, income, or either a loss to the company?

William E. Siwek: Yeah, so you're basically losing contribution margin, right? So it is, we do have people that are, I wouldn't say they are doing nothing, but they are not nearly as productive as they would be if they were building blades. So yeah, you're basically stopped, and you can't just send them home.

William E. Siwek: The rationale there is that because they need clarity on I R. A or is there. Some other market driver why you don't have clarity on that facility.

William E. Siwek: Yeah that's.

William E. Siwek: It it's it's more clarity for four G E and what they want to use the plant for at this point.

William E. Siwek: You've got to keep that workforce intact. So it's that, it's an additional cost to deal with, to deal with the speeding up of the production once you, once you do restart. Damages, I don't want to talk about that publicly, but you know, our contracts provide for that.

Speaker Change: Got it. Thank you I'll go ahead.

Speaker Change: Thanks Yep.

William E. Siwek: This concludes our question and answer session I would like to turn the conference back over to Bill side work for any closing remarks.

Speaker Change: Thank you again for your time today and continued his interest and support and T. P. I will talk next quarter. Thank you.

William E. Siwek: And so we'll follow our contract. Got it. And the last question I had is, is there any update on what the plan is for Newton? I assume that it's not in 2024 guidance? And perhaps if it's like repowering for GE, is that something that could be started fairly quickly versus, you know, a newer blade model that maybe you haven't produced in the past?

William E. Siwek: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

William E. Siwek: [music].

William E. Siwek: Yeah, yeah, so you're right. It's not in the 2024 guidance. And to your point, you know, to the extent we were to be asked to start with the existing blade that the plant is tooled for, we could start up fairly quickly. It would just be a matter of, you know, assembling the workforce. So that would be relatively quick. But yeah, it is not in the 24 guidance at this point. And the rationale there, is it because they need clarity on IRA, or is there some other market driver why you don't have clarity on that facility?

William E. Siwek: Yeah, that's, um... It's more clarity for GE and what they want to use the plant for at this point. Got it. Thank you. Go ahead.

William E. Siwek: Thanks, Jeff. This concludes our question and answer session. I would like to turn the conference back over to Bill Siwek for any closing remarks. Thank you again for your time today and continued interest and support in TPI. We'll talk next quarter.

William E. Siwek: Mmm.

William E. Siwek: [music].

Operator: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.