Q1 2024 TPI Composites Inc Earnings Call
Operator: Good afternoon, and welcome to the TPI Composites first quarter 2024 earnings conference call. At this time, I'd like to turn the conference over to Jason Wegmann, Investor Relations, for TPI Composites. Thank you. You may begin.
Good afternoon, and welcome to the T. P. I composites first quarter 'twenty 'twenty four earnings conference call.
Jason Wegmann: At this time I'd like to turn the conference over to Jason Wagman Investor Relations for TPI composites. Thank you you may begin.
Jason Wegmann: Thank you operator, I would like to welcome everyone to TPI composites first quarter 2024 earnings call.
Jason Wegmann: Thank you, operator. I would like to welcome everyone to TPI Composites' first quarter 2024 earnings call. We will be making 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. Today's presentation will include references to non-GAAP financial measures.
Jason Wegmann: We won't be making forward looking statements. During this call that are subject to risks and uncertainties, which could cause actual results to differ materially.
Jason Wegmann: 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 dotcom.
Jason Wegmann: 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 the comparable GAAP financial measures.
Jason Wegmann: 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 the comparable GAAP financial measures. With that, I will turn the call over to Bill Siwek, TPI Composites, President and CEO.
William E. Siwek: With that let me turn the call over to Bill side I E. B I can positive president and CEO.
William E. Siwek: Thanks, Jason. Good afternoon, everyone, and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. Please turn to slide five.
William E. Siwek: Thanks, Jason and good afternoon, everyone and thank you for joining our call. In addition to Jason and I'm here with Ryan Miller, Our CFO. Please turn to slide five I'm pleased to announce the publication of our 2023 sustainability report in March. This year, we remain committed to our publicly stated goals of fostering a zero harm culture and achieving carbon neutrality.
William E. Siwek: I'm pleased to announce the publication of our 2023 Sustainability Report in March of this year. We remain committed to our publicly stated goals of fostering a zero-harm culture and achieving carbon neutrality by 2030 through 100% renewable energy procurement. Wind Blades produced by us in 2023 are estimated to prevent approximately 346 million metric tons of CO2 emissions over their 20 year lifespan.
William E. Siwek: By 2030 to a 100% renewable energy procurement.
William E. Siwek: Wind blades produced by us in 'twenty to 'twenty three are estimated to prevent approximately 346 million metric tons of cotwo emissions over their 20 year lifespan.
William E. Siwek: We're advancing towards our 2030 goal of carbon neutrality, achieving an 18% reduction in overall market-based scope one and two CO2 emissions, and Turkey. We invested in two wind turbines and additional solar panels. Further, to enhance on-site renewable energy use, we signed a power purchase agreement in India. Hence, we reduce total annual waste generated by 12%. Our behavior-based safety program continued to yield safety results outperforming industry standards and our internal goals, and we have fully embraced our IDEA program and were recognized with numerous awards for our commitments to inclusion and diversity around the globe. In the U.S., our LEAP for Women program was recognized with a GRID Award for Best Affinity Group.
William E. Siwek: We are advancing towards our 2030 goal of carbon neutrality, achieving an 18% reduction in overall market based scope, one and two C O two emissions and Turkey, we invested into wind turbines and additional solar panels further to enhance onsite renewable energy use we signed a power purchase agreement in India.
William E. Siwek: We reduced total annual waste generated by 12%.
William E. Siwek: Our behavior based safety program continued to yield safety results outperforming industry standards, and our internal goals and we have fully embraced our I V. A program and were recognized with numerous awards for our commitment to inclusion and diversity around the globe and the U S. Army for women program was recognized with it.
William E. Siwek: Grid Award for best affinity group.
William E. Siwek: In Mexico, we were recognized as a top employer. In India, we were recognized as one of the 100 Best Companies for Women. And in Turkey, we were awarded the Silver Stevie Great Employers Award for Achievement in Diversity and Inclusion.
William E. Siwek: In Mexico, we were recognized as a top employer in India. We were recognized as one of the 100 best companies for women and in Turkey. We were awarded the silver Stevie Great Employers award for achievement in diversity and inclusion Advair.
William E. Siwek: Advancing our sustainability goals remains a priority in 2024. We're actively negotiating the Purchase Power Agreement in Mexico to ensure 100% renewable energy for our facilities there. Additionally, we're working to expand on our recent PPA in India. These investments go beyond environmental benefits. They also make strong economic sense, contributing directly to the improvement of our financial performance. Please turn to slide seven.
William E. Siwek: Advancing our sustainability goals remains a priority in 2024, we're actively negotiating the purchase power agreement in Mexico to ensure 100% renewable energy for our facilities. There. Additionally, we're working to expand on our recent PPA in India.
William E. Siwek: Investments go beyond environmental benefits. They also it makes strong economic sense contributing directly to the improvement of our financial performance.
William E. Siwek: Please turn to slide seven <unk>.
William E. Siwek: Consistent with the guidance we provided during our 2023 fourth-quarter earnings call, sales and adjusted EBITDA in the first quarter of 2024 were lower than in the prior year due to the timing of production line startup and transitions across several of our facilities. However, they were slightly ahead of our plan, so we are still on track for the full year. Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year after we get through the process of ramping up the 10 lines that are in startup or transition in the first half of the year.
William E. Siwek: Consistent with the guidance, we provided during our 2023 fourth quarter earnings call sales and adjusted EBITDA in the first quarter of 'twenty 'twenty four were lower than in the prior year due to the timing of production line startups and transitions across several of our studies.
William E. Siwek: However, they were slightly ahead of our plan. So we are still on track for the full year let.
William E. Siwek: Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year. After we get through the process of ramping up the 10 lines that are in startup our transition in the first half of the year.
William E. Siwek: I'm confident in our ability to achieve mid-single-digit adjusted EBITDA margins in the second half of the year given the excellent operational execution we are seeing today in most of our plants. The $23 million adjusted EBITDA loss in the first quarter included $22 million related to startup and transition costs, $9 million of unanticipated losses from the Nordex Matamoros plant due to temperature and humidity issues, as well as decreased volume requirements, and we recorded an $8 million charge to account for the inflationary impact of completing pre-existing warranty claims.
William E. Siwek: I'm confident in our ability to achieve mid single digit adjusted EBITDA margins in the second half of the year given the excellent operational execution, we are seeing today and most of our plants the $23 million adjusted EBITDA loss in the first quarter included $22 million related to startup and transition costs $9 million of unanticipated losses.
William E. Siwek: From the Nordics Matamoros plant due to temperature and humidity issues as well as decreased volume requirements and we recorded an $8 million charge to account for the inflationary impact of completing pre existing warranty warranty claims without these items, our adjusted EBITDA margin would have been over 5% and that's at a 67% factor.
William E. Siwek: Without these items, our adjusted EBITDA margin would have been over 5%, and that's at a 67% factory utilization level. I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the third and fourth quarters when our utilization climbs well above 80%. Activities to transition the Matamor plant back to Nordex are in full swing, and we are on track to return the facility by June 30 as planned.
William E. Siwek: Utilization level I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the third and fourth quarters, when our utilization clients well above 80%.
William E. Siwek: Activities to transition the Matamoros plant back to know where they are in full swing and we are on track to return to the facility by June 30 as planned.
William E. Siwek: Our use of cash in the quarter was primarily to fund our startups and transitions, and was aligned with our expectations. We believe our quarter-end cash balance of $117 million, along with access to existing credit facilities and the significant impact of the strategic refinancing with Oaktree, provides us with ample liquidity to navigate current market conditions and ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year. Please turn to slide 8.
William E. Siwek: Our use of cash in the quarter was primarily to fund our startups and transitions. It was aligned with our expectations. We believe our quarter end cash balance of $117 million, along with access to existing credit facilities and the significant impact of this strategic refinancing with Oaktree provides us ample liquidity to navigate current market conditions.
William E. Siwek: And ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year.
William E. Siwek: Please turn to slide eight.
William E. Siwek: Turning to our wind business performance, our blade facilities in India and Turkey continued to be profitable, delivering 241 blade sets representing 1.4 gigawatts of capacity during the quarter. Additionally, most of our Mexico operations performed well, even while going through numerous transition startup and volume adjustments. Overall, our operating performance is benefiting from our renewed focus on lean. Embracing lean practices and ensuring they are part of our day-to-day culture will enable us to deliver greater value to our customers while optimizing our cost structure, maximizing productivity, and manufacturing the highest quality blades in the industry. Moving on to our field service business, as anticipated, our global service revenue declined year over year.
William E. Siwek: Turning to our wind business performance, our blade facilities in India, and Turkey continued to be profitable delivering 241 blades, that's representing one four gigawatts of capacity during the quarter most of our Mexico operations performed well, even while going through numerous transition startups and volume adjustments.
William E. Siwek: Overall, our operating performance is benefiting from a renewed focus on lean embracing lean practices and ensuring they are part of our day to day culture will enable us to deliver greater value to our customers, while optimizing our cost structure maximizing productivity and manufacturing the highest quality blades in the industry.
William E. Siwek: Moving on to our field services business as anticipated our global service revenue declines year over year. This reflects a temporary reduction in technicians assigned to revenue generating projects due to the warranty campaign announced last year, we expect our technicians to returned to normal levels of revenue generating work by mid year.
William E. Siwek: This reflects a temporary reduction in technicians assigned to revenue-generating projects due to the warranty campaign announced last year. We expect our technicians to return to normal levels of revenue-generating work by mid-year. We're prioritizing capital allocation towards the wind business. To ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives and expect to finalize a transaction by the end of the second quarter. Meanwhile, our supply chain execution and cost performance remain very stable.
William E. Siwek: Despite continued progress building the automotive segments order pipeline and operational execution and notwithstanding growth in Nonpro tower revenue Q1 revenue fell year over year due to the protests of bankruptcy the growth in non pro revenue was largely due to the launch of a new product line for our largest passenger you'd be customer while we.
William E. Siwek: Made significant investments in expanding our automotive business over the past years and continue to see strong growth potential for compounded products and electric vehicles, we're prioritizing capital allocation towards the wind business to ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives.
William E. Siwek: Expect to finalize the transaction by the end of the second quarter.
William E. Siwek: Raw material costs have decreased compared to this time in 2023, with further savings expected due to excess manufacturing capacity in China. Logistics around the Red Sea situation remain well managed with no operational or significant cost impacts today.
William E. Siwek: Our supply chain execution and cost performance remained very stable raw material costs have decreased compared to this time in 2023 with further savings expected due to excess manufacturing capacity in China.
William E. Siwek: It's around the Red Sea situation remained well managed with no operational or significant cost impacts today.
William E. Siwek: Now, with respect to the wind market, we are seeing the beginnings of an onshore wind rebound driven by ambitious government action, including the Inflation Reduction Act in the U.S. and the EU Green Deal and Repower EU policies, in response to the need for greater energy independence and security to address climate change and to meet the increasing global electricity demand fueled by factors like generative artificial intelligence and data centers, EVs, and the electrification of buildings. Excluding China, expectations are for global onshore installations to hold steady in 2024 with a growth inflection point in 2025, followed by continued expansion throughout the decade.
William E. Siwek: Now with respect to the wind market, we are seeing the beginnings of an onshore wind rebound driven by an ambitious government action, including the inflation reduction act in the U S and the EU Green deal and Repower EU policies and response to the need for greater energy independence, and security to address climate change and to meet the <unk>.
William E. Siwek: Kris and global electricity demand fueled by factors like generative artificial intelligence and data centers Evs and the electrification of buildings, excluding China expectations are for global onshore installations to hold steady in 2024 with a growth inflection point in 2025, followed by continued expansion throughout the deck.
William E. Siwek: And the U.S. BNEF is projecting onshore wind installations in 2024 of 8.4 gigawatts and to be nearly 20 gigawatts per year by the end of the decade. While favorable long-term policies like those in the U.S. and the EU provide optimism and have helped to accelerate orders for our customers, we still don't anticipate increased wind installations in our primary markets to fully materialize until 2025. The industry still awaits some critical details on implementing key components of the Inflation Reduction Act, such as the domestic content adder, prevailing wage and apprenticeship clarifications, 45Z, and the transition from PTC and ITC to the new tech-neutral version.
William E. Siwek: Good.
William E. Siwek: In the U S. B any after it's projecting onshore wind installations in 2024 of eight four gigawatts and to be nearly 20 gigawatts per year by the end of the decade.
William E. Siwek: While favorable long term policies like those in the U S and the EU provide optimism and have helped to accelerate orders for our customers. We still don't anticipate increased wind installations in our primary markets to fully materialize until 2025, the industry still await some critical details on implementing key components of the inflation.
William E. Siwek: A reduction of <unk>, such as the domestic content adder prevailing wage and apprenticeship clarifications 45, you see the transition from PTC and ITC through the new Tech neutral burst also elevated interest rates inflation.
William E. Siwek: Also, elevated interest rates, inflation, the cost and availability of capital, permitting hurdles, and transmission bottlenecks are also contributing to near-term delays. There are, however, encouraging signs that the U.S. and the E.U. are addressing permitting and transmission bottlenecks. FAWIN recently announced that permits for projects in Germany soared to a record high in the first quarter of 2024, nearly 40% higher than the same period last year.
William E. Siwek: Cost and availability of capital permitting hurdles and transmission bottlenecks are also contributing to near term delays.
William E. Siwek: There are however, encouraging signs that the U S and you are addressing permitting and transmission bottlenecks S. A win recently announced that permits for projects in Germany store to a record high in the first quarter of 2020 for nearly 40% higher than the same period last year.
William E. Siwek: Progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects overriding public interest status in the U S. The department of energy released the transmission interconnection roadmap I do X to tackle challenges and connecting renewable energy to the grid. This roadmap.
William E. Siwek: This progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects, overriding public interest status. In the U.S., the Department of Energy released a Transmission Interconnection Roadmap, I-2EB, and the Inflation Reduction Act to expedite federal agency permitting.
William E. Siwek: <unk> streamlined the process by 2030, focusing on faster approvals are more consistent costs, while maintaining good stability. Additionally, the white House Council on environmental quality and finalize the rule to reform simplify and modernize the federal Environmental review process under the National Environmental Policy Act the new rule.
William E. Siwek: We'll build on more than $1 billion from President Bidens inflation reduction at to expedite Federal agency permitting that.
Ryan D. Miller: Technical advances are also being made. Recent research shows re-conductoring existing transmission lines with advanced conductors can double capacity on existing rights-of-way in just 18 to 36 months. Now, before I turn it over to Ryan, our financial outlook hasn't changed over the past couple of quarters, as we still expect 2024 to be a year of transition. We're currently running 36 production lines, including those for Nordex and Matamoros, which are on track to transition back to them by the end of the second quarter.
William E. Siwek: Nickel advances are also being made recent research shows re conductor in existing transmission lines with advanced conductors can double capacity on existing rights of way and just 18 to 36 months.
Ryan D. Miller: Now before I turn it over to Ryan or financial outlook hasn't changed over the past couple of quarters as we still expect 2020 for it to be a year of transition. We're currently running 36 production lines, including those for Nordics in Matamoros, which are on track to transition back to them by the end of the second quarter, we are progressing nicely on the startups and transitions all.
Ryan D. Miller: We are progressing nicely on the start of some transitions, all of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half, as these lines achieve serial production. Despite lower utilization in 2024 compared to 2023, we still expect strong improvement and profitability, as we have addressed the operational challenge faced in 2023. As such, we are reconfirming our 2024 revenue guidance of $1.3 to $1.4 billion with an EBITDA margin between 1% and 3%.
Ryan D. Miller: Of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half as these lines achieved serial production.
Ryan D. Miller: Spite lower utilization in 2024 compared to 2023, we still expect strong improvement in profitability as we have addressed the operational challenge faced in 2023.
Ryan D. Miller: As such we are Reconfirming, our 2020 for revenue guidance of $1 three to one 4 billion with an EBITDA margin between 1% and 3% in 2025, we continue to expect a significant step up in profitability with EBITDA exceeding $100 million, putting us back on track to achieve our high single digit EBITDA margin target in 'twenty.
Ryan D. Miller: In 2025, we continue to expect a significant step up in profitability, with EBITDA exceeding $100 million, putting us back on track to achieve our high single-digit EBITDA margin target in 2026 and beyond. With that, I'll turn the call over to Ryan to review our financial results.
Ryan D. Miller: 26, and beyond with that I'll turn the call over to Ryan to review our financial results.
Ryan D. Miller: Thanks, Bill. Please turn to slide 10. In the first quarter of 2024, net sales were $299.1 million compared to $404.1 million for the same period in 2023, a decrease of 26%. Net sales of wind blades, tooling, and other wind-related sales, which hereafter I'll refer to as just wind sales, decreased by $98.7 million in the first quarter of 2024, or 25.5%, compared to the same period in 2023. Flight sales this quarter were negatively affected by startup and transition activities at our Mexico and Turkey facilities, expected volume declines based on market activity levels, and a decrease in average sales prices due to changes in the mix of wind blade models produced.
Ryan: Bill Please turn to slide 10 in the first quarter of 2024 net sales were $299 1 million compared to $404 1 million for the same period in 2023, a decrease of 26%.
Ryan D. Miller: Sales of wind blades to lean and other wind related sales, which hereafter referred to as just wind sales decreased by $98 $7 million in the first quarter of 2024 or 25, 5% compared to the same period in 2023.
Ryan D. Miller: Life sales this quarter were negatively affected by startup and transition activities at our Mexico, and Turkey facility expected volume declines based on market activity level and a decrease in average sales prices due to changes in the mix of wind blade models produced.
Ryan D. Miller: This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startup and transitions. However, field service revenue declined by $1.1 million in the first quarter of 2024, compared to the same period in 2023. Our first quarter is typically the low point for service revenue due to seasonal weather patterns and the nature of the work performed, and this year was also impacted by the warrants campaign announced last year. We expect a full transition back to revenue-generating activity by the second half of this year. Automotive sales decreased by $5.3 million in the first quarter of 2024 compared to the same period in 2023.
Ryan D. Miller: This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startups and transitions.
Ryan D. Miller: Service revenue declined by $1 $1 million in the first quarter of 'twenty 'twenty four compared to the same period in 2023, our first quarter is typically the low point for service revenue due to easily what the seasonal weather pattern and the nature of the work performed and this year was also impacted by the warranty campaign announced last year.
Ryan D. Miller: We expect a full transition back to revenue generating activity by the second half of this year.
Ryan D. Miller: Automotive sales decreased by $5 $3 million in the first quarter of 2024 compared to the same period. In 2023. This decrease was primarily due to a reduction in bus body delivery do you do for terrorists bankruptcy ours yet.
Ryan D. Miller: This decrease was primarily due to a reduction in bus body deliveries due to Proterra's bankruptcy, RTF set by an increase in sales of other automotive programs, and the launch of a new product line for our largest passenger EV customer. Adjusted EBITDA for the first quarter of 2024 was a loss of $23 million, compared to adjusted EBITDA of $8.4 million during the same period in 2023. The decrease in adjusted EBITDA for the first quarter of 2024 as compared to the same period in 2023 was primarily driven by lower sales, higher startup and transition costs, and changes in estimates for pre-existing warranty claims, partially offset by favorable foreign currency fluctuations. Moving to slide 11.
Ryan D. Miller: By an increase in sales of other automotive programs and the launch of a new product line for our largest passenger EV customer adjust.
Ryan D. Miller: Adjusted EBITDA for the first quarter 'twenty 'twenty, four with a loss of $23 million compared to adjusted EBITDA of $84 million during the same period in 2023.
Ryan D. Miller: We ended the quarter with $117 million of unrestricted cash and cash equivalents and $510 million in net debt. As planned, we had negative free cash flow of $47.3 million in the first quarter of 2024, compared to negative free cash flow of $87.1 million in the same period of 2023. The year-over-year improvement was primarily driven by the absence of payments tied to the closure of our operations in China and the growth of contract assets in the first quarter of last year. The net use of cash in the first quarter of 2024 was primarily due to our EBITDA loss, capital expenditures, and interest on tax payments.
Ryan D. Miller: As previously communicated, we expect the second quarter to be the low-water mark for cash. We've had much success improving the efficiency of our balance sheet over the past couple of quarters, and we will remain focused on preserving cash and optimizing working capital to ensure we have the resources to execute key initiatives and restart idle capacity moving forward. A summary of our financial guidance for 2024 can be found on slide 12. There are no changes to our original financial guidance provided earlier in the year, and I want to reiterate that the results from the first quarter for sales, adjusted EBITDA, and cash flow were in line with our plans. We continue to anticipate sales from continued operations in the range of $1.3 to $1.4 billion for the year. We also continue to believe 2024 will be a tale of two halves.
Ryan D. Miller: 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. As we work through these transitions and startup processes, we are generating modest losses and consuming cash. For the first half of the year, we are still expecting our adjusted EBITDA margin to be a mid-single-digit loss.
Ryan D. Miller: The first quarter was likely our low point for profitability this year, and we should improve somewhat in the second quarter as volumes ramp to serial production. Our adjusted EBITDA margin should improve to mid-single digits in the second half of the year, and we expect to be generating positive cash flow. For the full year, we anticipate capital expenditures of $25 to $30 million. These investments are driven by our continued focus on achieving our long-term growth target and restarting our idle line.
Ryan D. Miller: We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oaktree Preferred Shares into a term loan. We believe our balance sheet, along with the improvement 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- and long-term growth, profitability, and cash flow targets. With that, I'll turn the call back over to Bill.
William E. Siwek: Thanks, Ryan. Please turn to slide 14.
William E. Siwek: The numerous government policy initiatives aimed at expanding the use of renewable energy, the need for energy, independence, and security, and growing OEM backlogs give us competence in the wind industry for short and long-term growth. We are an integral part of the Entra Wind Growth Story, and we remain focused on managing our business with an acute focus on reinforcing lean principles to enhance our operational and financial performance. We are committed to partnering with our customers by aligning our factories to support them.
William E. Siwek: their next generation turbine models while also actively evaluating new geographies and sites to meet their expected needs in the future. The process of startup and transitions is progressing well, and we remain confident in our full-year financial expectations as we are planning a return to mid-single-digit adjusted EBITDA margins and positive free cash flow in the second half of 2024. Long-term prospects for TPI remain strong, and we are ready to get back to adjusted EBITDA north of $100 million in 2025.
William E. Siwek: Finally, I want to thank all of our TPI associates for their continued commitment, dedication, and loyalty to TPI. I'll now turn it back to the operator to open the call for questions. We will now begin the question.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Mark Strouse with J.P. Morgan. Please go ahead.
Mark Wesley Strouse: Yes, good afternoon. Thank you very much for taking our questions. Yeah, congrats on the progress. Sounds like we're getting closer and closer here.
William E. Siwek: I did want to ask something about the guidance outlook. I think before you said the utilization percentage was on 36 lines; now it's on 34. I'm sorry if I missed that, but what drove the difference between the two lines?
William E. Siwek: Yeah, we do have a market, and we're glad to hear from you. We have a couple lines that we're kind of working through the contract on that for the first quarter. And there are two lines in our India location where demand has come down, and they're no longer under contract. So we're still working through filling that up. But it's two lines on our India site that they came down. It didn't, it didn't impact our guidance or our sales or anything or all of our sales volume, and everything still remains the same for 20.
Mark Wesley Strouse: Okay, got it. And then, just following up on the last call, you mentioned some damages that you were seeking from the bad supply that you got. Is there any update on that timing or magnitude?
William E. Siwek: Yeah, Mark, again, not going to give you the magnitude, but that claim has been filed, and it's in the process right now. I would expect that we would have it resolved before the end of the second quarter, and it'll be positive.
Mark Wesley Strouse: And then lastly for me, the GE Juarez ramp. I believe you said that that's still on track. My understanding is that it ramps in 2Q. Is that still the case?
William E. Siwek: Yeah, so we were Yes, so the Mexico 2 facility is ramping as we speak, so that'll be ramping through Q2.
Mark Wesley Strouse: Okay, I'll take a look. Mark, just to clarify, we got two lines up and running today, and then the other two lines; there are two more lines that will come in in Q2. They will be in sale production in the second half of the year on that plan.
Operator: Okay. Thanks, everyone.
Pavel S. Molchanov: The next question is from Pavel Molchanov. I'm sorry, Raymond James. Please go ahead.
Pavel S. Molchanov: Thanks for taking the question. Let me start with kind of a housekeeping question. Interest expense in Q1, $21 million, seemed rather high. Is that going to be the run rate going forward?
Ryan D. Miller: Yeah, Pavel, so because we took the fair value of the debt that we had with Oak Tree in the fourth quarter last year and refinanced that, if you recall, we had a $118 million discount. And so there's really two components of interest and why it's at that elevated level. One is just the interest that we're picking.
Ryan D. Miller: And so for this year, that will probably be in the neighborhood of $46-ish million or so for the full year. And then the discount amortization will be around $31 million. And so you will see an elevated level of interest because we need to increase that discount. So for the full year, I'd expect that our interest expense on Oak Tree, including that discount, is going to be in the neighborhood of $77 million.
Pavel S. Molchanov: Okay, okay, that's very helpful. On the EV business, you mentioned you're still, you know, kind of contemplating its future. Anything changed from the last time we spoke three months ago in that regard?
William E. Siwek: No, not really. We're in advanced discussions, and our plan is to have a transaction completed by the end of the second quarter.
Pavel S. Molchanov: Oh, okay, oh wow. We will look forward to that. And last question, you know, we've seen a lot of input costs subsidizing across the clean tech value chain, certainly including steel and other carbon fiber that are relevant from your perspective. What kind of role is that playing in the margin uplift that you're envisioning for the second half?
William E. Siwek: Yeah, I mean, we're seeing, you know, we have seen decreases in overall raw material costs year over year, from last year to this year, for sure. Clearly, a portion of that we benefit from, so that's a small portion, I would say, of the uplift. The bigger portion is just getting the lines out of transition and startup into serial production and driving our utilization up north that's, you know, 80-85%.
William E. Siwek: That's the biggest driver, but there is some uplift from the commodity cost decline, for sure. If you'll remember, Pavel, we share a bunch of that with our customers. So we get a piece of it, our customers get a piece of it, but it is helpful for sure.
Pavel S. Molchanov: understood. All right. Thanks very much. Thank you.
Operator: Again, if you have a question, please press star then 1. The next question is from Eric Stine with Craig Hallam. Please go ahead.
Eric Andrew Stine: Hey, doing well, thanks. So maybe just starting on the startup and transitions, given your commentary, obviously going to be heavy again in the second quarter, is it a kind of a similar number in terms of startup and transition costs in Q2? And then, I would think that, as part of your guidance, that meaningfully subsides in the second half. That's correct. Okay, so the 22.2 million, I mean, I think you did it? I think it was either four or six. So it's, I mean, again, that's a representative number to think about.
Ryan D. Miller: Yeah, so we had six lines that we started up by the end of the quarter, and yet the 22 million relates to those. We have four more lines yet to start up. I think the first quarter, from our internal forecast, will probably be the heaviest quarter for start-up and transition costs. So I don't expect it to be above that number that you saw in the first quarter in the second quarter.
Eric Andrew Stine: That is helpful. And then just on Nordex, good to hear that that's on track for the handover at the end of June.
William E. Siwek: You called out, I believe, $9 million in kind of one-time expenses. And I know that's a big part of your confidence in what the second half looks like. Can you just remind us, though? I mean... What are the expenses above and beyond what maybe you would call one time that hit you in the first quarter?
Eric Andrew Stine: I'm not sure I would characterize them as one time only. What they really were was underutilization of the plant as a result of us having to halt production for a period of time due to temperature and humidity issues in the facility, as well as their, you know, reduced demand, and reduced volume needs from the customer. And as a result, you know, this is a pretty fixed cost business. So that's what created the challenge in the first quarter. We see that, you know...
William E. Siwek: Go ahead. Sorry. Yeah, I was just gonna say, so it's not, it's nine, it's not 9 million plus, you know, a number, it's more. That's just kind of a good number to use that will not be there when you get into the second half. That's correct. That's correct. Okay. All right, and then last one for me just on the EV business. So strategic alternatives, and you're talking about targeting a transaction.
William E. Siwek: I mean, that implies, at least to me, that that might no longer be part of your business going forward, or is that trend saying transaction a kind of a catch-all that could mean an investment, or could mean partnership that includes an investment.
Eric Andrew Stine: Yeah, it could be any one of those, Eric. Okay. Yeah, you'll know by the end of...
Operator: The next question is from Jeffrey Osborne with T.D. Cowan. Please go ahead.
Jeffrey David Osborne: Good afternoon, Bill. Just a couple questions on my end. For the Iowa facility, as part of the CAPEX guidance, can you just remind us what you'll be producing for GE there? Is that a repowering product or one of their newer blades?
William E. Siwek: What would be the timing of when that revenue would start?
Jeffrey David Osborne: Yeah, so I'm not sure yet, Jeff. That's still to be determined. And timing is, I would say, most likely as early 2025 would be my best guess at this point in time. But we don't have a final blade type nor a final start date yet. That's still in discussion. Okay.
William E. Siwek: But it's in the CAPEX guidance, just to be clear.
Jeffrey David Osborne: Nope, that's not in the CAPEX guidance. Quite frankly, Jeff, it'll depend on the blade, right? If it's the same blade we've been building the CAPEX for, it's pretty light. If it's a new blade, depending on the size of the blade, then that'll be a different CAPEX number. So until we understand what blade type, it's hard.
William E. Siwek: No that's not in the Capex guidance it quite frankly, Jeff it'll depend on the blade right. If it's if it's the same blade. We then build into Capex, it's pretty light if it's a new blade depending on the size of the blade then that'll be a different capex number so until we understand what blade type it's hard to predict that.
William E. Siwek: So, is there a way to... You know, Box put bookends on that, like what the upside number to CapEx would be, just given the strain balance sheet with the low water point here. We'll give that an extra $10 million. Yeah, it's probably no more than 10 million, my guess. Again, it'll depend on the blade type, ultimately. And that's how many lines click. Got it? The building is what, suitable for, is it five, six lines?
Jeffrey David Osborne: So is there a way to.
William E. Siwek: Box put bookends on that like what the upside number to Capex would be just given the strained balance sheet with the low water point here.
William E. Siwek: Because that extra $10 million.
William E. Siwek: Yeah, it's probably no more than $10 million would be my guess.
William E. Siwek: Again, it'll depend on the blade type ultimately.
William E. Siwek: How many lives.
Speaker Change: Got it.
William E. Siwek: <unk>.
William E. Siwek: Suitable for as it declines.
Jeffrey David Osborne: Right now, it's got us. The last blade we built was a 62 meter blade, and we had six lines.
William E. Siwek: Right now it's it's Scott we the last blade, we built was a 62 meter blade and we had six lines in there.
Speaker Change: Got it.
William E. Siwek: And then, I'm. You spoke super fast when you had the three items around the EBITDA translation. So $9 million was the Nordex that we talked about just before. I think $8 million was the inflation on the pre-existing warranty claims. What was the $22 million for? No, that was the stu-
Jeffrey David Osborne: And then.
Speaker Change: You spoke superfast when you add the three items around the EBITDA trends translations of 9 million was the Nordics that we talked about just before I think 8 million was the equation on the preexisting warranty claims what was the $22 million for.
Jeffrey David Osborne: So those were the startup and transition costs that we incurred in the quarter. Perfect. That's all I have. All right, cool. Thanks, Jeff.
William E. Siwek: So that was the startup and transition costs that we incurred in the quarter.
Speaker Change: Got it alright.
Speaker Change: Alright, perfect. That's all I have.
Speaker Change: Alright cool thanks, Jeff.
Operator: The next question is from Tom Curran with Seaport Research Partners. Please go ahead.
Jeffrey David Osborne: The next question is from Tom Curran with Seaport Research partners. Please go ahead.
Thomas Patrick Curran: Hi, guys.
Thomas Patrick Curran: You know, casting my view out a bit longer term here and allowing us to dream a bit, are you seeing any green shoots of potential interest that could lead you to reactivating the two idle lines in Turkey? And if you are, when might be the earliest we could see you do that?
Thomas Patrick Curran: Hey, Tom.
Thomas Patrick Curran: Casting my view out a bit.
Thomas Patrick Curran: A bit longer term here and allowing us to dream a bit are you seeing any any green shoots of.
Thomas Patrick Curran: Potential interest.
Thomas Patrick Curran: Could lead you to reactivating the two idle lines in Turkey.
Thomas Patrick Curran: And you know if.
Thomas Patrick Curran: If you are what what might be the earliest.
Thomas Patrick Curran: We could see you do that.
William E. Siwek: We really don't have idle lines in Turkey right now; we have two idle lines in India. And the answer is, yeah, I mean, we're starting to see order books fill or the backlog, you know, build. A lot of that backlog, as you probably know, is for, you know, 25 and 26 and beyond. But I think as things begin to open up a little bit more in Europe, as well as the U.S., you could see those lines fill.
Speaker Change: We really don't have idle lines in Turkey, right now we have two other lines in Mexico and India.
William E. Siwek: And the answer is yeah, I mean, we're starting to see order order books fill or backlog build a lot of that backlog as you probably know is for the 25 and 26 and beyond.
William E. Siwek: But I think as things begin to open up a little bit more in Europe.
William E. Siwek: As well as the U S you could see.
William E. Siwek: Now, there is a lot of activity around those lines, Tom. We are actively working on or in discussions with multiple parties along those lines. So it's not that there's not activity. So we are optimistic that we can fill not only those two lines that got idled, but there are two more lines there as well that we can activate. So we've got a total of four potentially to activate in India as we move forward through the year.
William E. Siwek: You could see those lines. So now there is a lot of activity around those lines Tom.
William E. Siwek: We are actively working are in discussions with multiple parties for those lines. So its not that theres not activity.
William E. Siwek: So we are optimistic that we saw not only those two lines that got idled, but theres two more lines there as well that we can we can activate so we've got a total of four Patel.
William E. Siwek: Potentially to activate in India.
William E. Siwek: As we move forward through the year.
Thomas Patrick Curran: Those are all on tonight, Bill.
William E. Siwek: And those are all in Chennai Phil.
William E. Siwek: Yeah, and Chennai. Correct. Yep.
Bill: Yeah in Chennai correct Yep.
Thomas Patrick Curran: And, sorry, I misspoke when I said Turkey. I did mean India. Could, could we, If all went well, would we expect to see the CapEx and production contribution from those, most likely in 2025?
Thomas Patrick Curran: Could could we.
Thomas Patrick Curran: If all went well would we expect to see the Capex and production contribution from those most likely in 'twenty five.
William E. Siwek: Given where we are in the year, probably, it's probably most likely that it would be 25, you start to see the revenue in 25 as well as contribution. CapEx, again, depending on blade size, number of blades, etc., the CapEx will vary there. I mean, that's already an eight-line facility where we've built it out pretty nicely, so there shouldn't be a ton of CapEx as we activate those four lines
Thomas Patrick Curran: Given given where we're at in the year, probably it's most likely that it would be 2025.
William E. Siwek: Hard to see the revenue and 25 as well as contribution.
William E. Siwek: Capex again, depending on blade size number of blades et cetera. The capex will vary there I mean, that's that's already on a fine facility.
William E. Siwek: Where we built it out pretty nicely. So theres there shouldn't be a ton of capex as we activate those four lines.
Thomas Patrick Curran: Maybe, like, in the two to four million range
William E. Siwek: Maybe like.
Thomas Patrick Curran: $2 million to $4 million range.
William E. Siwek: Again, it'll depend on blade size, quite frankly. I hate to keep saying that, but that's pretty important. So, I mean, we sized it for 80 plus meter blades for eight lines, depending on who the customer is. Some of them take more room than others, depending on how the blade is constructed, but it should be a relatively minor amount of capex if we fill all eight.
Thomas Patrick Curran: Again, it'll depend on blade size quite frankly, I hate I hate to keep saying that but that is that's pretty important as the bite size. So I mean, we sized it for you know 80 80 plus meter blades for eight lines.
William E. Siwek: Depending on who the customer is.
William E. Siwek: Some of them take more room than others, depending on how the blade is constructed.
William E. Siwek: But it should be relatively minor amount of capex, if we fill all those lines.
Thomas Patrick Curran: And then, you know, sticking with blade size and how important it is, you know, shifting back to Newton, Iowa, and how seriously GE seems to be deliberating whether to stick with the 127 versus shifting to the new workhorse model, in part, from my understanding, because of its popularity for repowering, you know, especially given the share gains GE seems to have made in the US market, as you look to the next up Um, you know, do you expect repowering to play a bigger role in this next upcycle than it did in the prior one?
William E. Siwek: Got it and then sticking with blade sizing and how important it is you know shifting back to.
Thomas Patrick Curran: And.
Thomas Patrick Curran: How seriously G seems to be deliberating.
Thomas Patrick Curran: Whether to stick with the $1 27 versus shifting to the new workhorse model in part from my understanding because of its popularity for Repowering.
Thomas Patrick Curran: Especially given the share gains do you seem to have made in the U S market as you look to the next up cycle in the U S.
Thomas Patrick Curran:
Thomas Patrick Curran: Do you expect Repowering to play a bigger role in this next upcycle than it did in the prior one.
William E. Siwek: Yeah, certainly more than it did in the prior one. I, you know, the numbers I've seen are pretty, fairly significant in the US between now and kind of the 2030 timeframe. So Yeah, I mean, the bulk of it will still be new installations, but there is a fair amount of repowering that we're seeing that we're seeing in the marketplace. So I do think that it will play a much bigger role this time around than it did last time.
Thomas Patrick Curran: Yeah, It certainly than it did in the prior one the numbers I've seen are pretty fair.
William E. Siwek: Significant.
William E. Siwek: In the U S between now and kind of 2030 timeframe. So.
William E. Siwek: Yeah, I mean, the bulk of it will still be new install but there is a fair amount of.
William E. Siwek: Repowering that that we're seeing that we're seeing in the marketplace. So I do think that will play a much bigger role this time around than it did last time for sure.
Speaker Change: Got it.
Thomas Patrick Curran: Thanks for taking my question.
Speaker Change: Thanks for taking my questions.
Speaker Change: Thanks, Tom.
Operator: The next question is from William Grippin with UBS. Please go ahead.
Thomas Patrick Curran: The next question is from William Griffin with UBS. Please go ahead.
Operator: Yeah.
William Spencer Grippin: Hey, good evening. Thanks for the time. Just one question here. Really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers, just given the pullback in a lot of US projects, and perhaps that maybe a shift away from offshore, creating some opportunities for some of your onshore production?
William Spencer Grippin: Hey, good evening. Thanks for the time just one for me here really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers just given the pullback in a lot of U S projects in and perhaps is that maybe shift away from offshore creating some opportunities for some of your onshore production.
William E. Siwek: So, on the first part of the question, we don't have a lot of active discussions today in the offshore space, and I'm not sure that that really has an impact on what we're doing from an onshore perspective. I will tell you, as we look at where onshore growth may be, we're always keeping in mind the offshore side of it as well. And where we might think about different geographies, we would certainly keep in mind an offshore play at some point in time. But today, that's certainly on the back.
Speaker Change: So on.
William Spencer Grippin: The first part of the question not having a lot of active discussions today.
William E. Siwek: In the offshore space.
William E. Siwek: And I'm not sure that that really has an impact on what we're doing from an on shore perspective, I will tell you is as we look at where onshore growth may be.
William E. Siwek: We're always keeping in mind, the offshore side of it as well and where we might think about it.
William E. Siwek: Different geographies, we would certainly keep in mind and offshore play at some point in time, but today that certainly on the backburner.
Speaker Change: Got it.
Speaker Change: Thanks very much.
Speaker Change: Yeah, Thanks, well.
Operator: The next question is from Patrick Ouellette with Stifle. Please go ahead.
Patrick Ouellette: Hey, it's Pat on for Steven Jaguar. Thanks for taking the question. So just a quick one on the ASP side. Price came down from last year. Is the expectation still here that you get a rebound in ASP from the better mix of any of those lines coming on from the transition or a pickup in ASP from any of the lines that came on recently? Does the expected increase in ASP look like a step up in a flat line, or should we be anticipating somewhat of a gradual increase into 2025?
Patrick Ouellette: Hey, it's Pat on for Steven Gerard Thanks for taking the question. So just a quick one on the AFP side price came down from last year as.
Patrick Ouellette: Is the expectation still here that you get a rebound in AFP from the better mix of any of those lines coming on from a transition or a pickup in AFP from any of the lines that came on recently.
Patrick Ouellette: Because we expect to increase and I see what looked like a step up in flatline or should we be anticipating somewhat of a gradual increase into 2025.
William E. Siwek: Yeah, Patrick, I think this quarter was a little bit of an anomaly. I think, you know, we had material costs come down a little bit. So that also impacts ASPs for us. But it was really just a mix issue with the mix of the blades. We had a pretty low volume quarter, so that mix issue can be exaggerated when that occurs.
Speaker Change: Yes, Patrick I think this quarter it was a little bit of an anomaly I think we had material costs come down a little bit. So that also impacts asp's for us, but it was really just a mix a mix issue with the mix of the place we had a pretty low volume quarter. So that mix issue can be exasperated when that occurs the new blue.
Patrick Ouellette: The new blades that we're bringing online are all bigger, longer, heavier, more expensive blades. They're all refreshed blades from the OEMs that we expect will be in production for many years to come. So because of that, they're bigger, longer, and they'll have higher ASPs, which drove our guidance when we originally said our ASPs were expected to be up about $8,000 a blade or so. So I would expect that you'll see that gap close here in the second quarter. In the second half, you'll really see a difference there when we're in serial production on all the newer blades.
William E. Siwek: <unk> that we're bringing online they're all bigger longer heavier more explicit blade theyre all refresh blades from the Oems.
Patrick Ouellette: We expect to be in production for many years to come so.
Patrick Ouellette: Production and all the newer blades.
Patrick Ouellette: All right, thanks a lot. That's all for me.
Speaker Change: Alright, Thanks, a lot that's all for me.
William E. Siwek: This concludes the question and answer session. I would now like to turn the conference back over to Bill Siwek for any closing remarks.
Patrick Ouellette: This concludes the question and answer session I would now like to turn the conference back over to Bill <unk> for any closing remarks.
William E. Siwek: Yes, thank you, and thanks again for your time today and continued interest and support of TPI. I look forward to talking to you again soon.
William E. Siwek: Yes, Thank you and thanks again for your time today and continued interest and support of TPI look forward to talking to you again soon thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.