Q2 2024 TPI Composites Inc Earnings Call
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Hello, I'm Jason Wegmann, I'm Ryan Miller, I'm Ryan Miller, I'm Ryan Miller, I'm Ryan Miller [inaudible]
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Standby, we're about to begin.
Operator: Good afternoon everyone, and welcome to the TPI Composites second quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing star 2. Also, today's call is being recorded, and if you should need any assistance during the call today, please press star 0. And now, at this time, I would like to turn things over to Jason Wegmann, Investor Relations, for TPI Composites. Mr. Wegmann, please go ahead, sir.
Speaker Change: Good afternoon everyone and welcome to the TPI Composites second quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session.
Speaker Change: If you would like to ask a question at that time, please press star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing star 2.
Jason Wegmann: Also, today's call is being recorded, and if you should need any assistance during the call today, please press star zero. And now at this time, I would like to turn things over to Jason Wegmann, Investor Relations for TPI Composites. Mr. Wegmann, please go ahead, sir.
Jason Wegmann: Thank you, operator. I would like to welcome everyone to TPI Composites' second 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: Thank you, Operator. I would like to welcome everyone to TPI Composites' second 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.
Jason Wegmann: which can be found on our website tbicomposets.com.
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: In addition, please note that our financial statements and our reports are former automotive business as discontinued operation.
Jason Wegmann: In June, we divested the automotive business to clear creek investments LLC. Accordingly, the store for results of our automotive business have been presented as discontinued operations in our condensed consolidated statements of operations and condensed consolidated balance sheets.
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. In addition, please note that our financial statements now report our former automotive business as a discontinued operation. In June, we divested the automotive business to Clear Creek Investments, LLC. Accordingly, the historical results of our automotive business have been presented as discontinued operations in our condensed consolidated statements of operations and condensed consolidated balance sheet. As we discuss the year we are comparing, please know we will refer to continuing operations on me. With that, let me turn the call over to Bill Siwek, TPI Composites President and CEO.
Jason Wegmann: As we discuss the year we are comparisons, please know we will refer to continuing operations on me.
Jason Wegmann: with that. Let me turn the call over to Bill Siwek, TBI Composence, President and CEO.
Bill Siwek: Thanks, Jason. Good afternoon, everyone, and thank you for joining our call. In addition to Jason, I am here with Ryan Miller, our CFO. Please turn to slide 5.
Bill Siwek: Thanks Jason, good afternoon everyone and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller or CFO. Please turn to slide five.
Bill Siwek: We knew coming into the year that it would be a tale of two halves. As we've been discussing for some time, the first half of the year would be heavily impacted by startups and transitions, with the second half benefiting from the exit of the Nordex Matamoros facility, the disposition of our automotive business, and increased utilization at our plants as we complete the transitions and start-ups. The year is playing out largely as expected, and we are on track to have a profitable second half of the year after a challenging first half.
Jason Wegmann: We're new coming into the year that it would be a tale of two halves.
Jason Wegmann: As we've been discussing for some time, the first half of the year will be heavily impacted by startups and transitions, with the back half benefiting from the exit of the Nordex Matamoros facility, the disposition of our automotive business, and increased utilization at our plants as we complete the transitions and startups.
Jason Wegmann: The year is playing out largely as expected and we are on track to have a profitable second half of the year after a challenging first half.
Bill Siwek: Sales and Adjusted EBITDA were lower than expectations in Q2 due to a couple of facts. First, a heightened emphasis on quality related to new blade models slowed our startup and transition timelines at two of our facilities, impacting our sales by about $20 million in the quarter. However, we do anticipate a recovery of most of this volume in the second half of the year and setting us up nicely to enter 2025 at full speed. 2nd Nordics unexpectedly cancelled purchase orders for the Mata Morse facility and requested that we wind down the factory and cease production prior to quarter-end.
Jason Wegmann: Sales and adjusted EBITDA were lower than expectations in Q2 due to a couple of factors.
Jason Wegmann: First, a heightened emphasis on quality related to new blade models slowed our startup and transition timelines at two of our facilities, impacting our sales by about $20 million in the quarter.
Jason Wegmann: However, we do anticipate a recovery of most of this volume in the second half of the year and set us up nicely to enter 2025 at full speed.
Jason Wegmann: Second, Nordax unexpectedly canceled purchase orders for the Matamoros facility and requested that we wind down the factory and cease production prior to quarter end. As a result, Q2 revenue and adjusted EBITDA from this plant fell short of our expectations.
Jason Wegmann: While Nordex ultimately funded all the severance related to the shutdown early in the third quarter, we were burdened with significantly less volume than expected and the inefficiencies of hastily shutting down a factory while maintaining our contractual commitments to deliver blades to Nordex.
Jason Wegmann: The good news is that we now have the losses from this plant in the rearview mirror.
Bill Siwek: The $24.9 million adjusted EBITDA loss in the second quarter included $20.7 million in startup and transition costs and $21.9 million in losses from the now-closed Nordex Matamoros facility. Excluding these amounts, our adjusted EBITDA was nearly 5%. With the losses from the Nordex Matamoros plant and the automotive business behind us, and as lines in startup and transition reach serial production, and we make up most of the lost volume from the first half of the year, we anticipate at least mid-single-digit adjusted EBITDA margins in Q3 and Q4, as well as positive free cash flow as factory utilization approaches 90%. Please turn to slide 6.
Jason Wegmann: The $24.9 million adjusted EBITDA loss in the second quarter included $20.7 million in start-up and transition costs and $21.9 million in losses from the now-closed Nordex Matamoros facility.
Jason Wegmann: excluding these amounts, our adjusted EBITDA was nearly 5%.
Jason Wegmann: With the losses from the Nordex Matamoros plant and the automotive business behind us, and as lines in startup and transition reach serial production, and we make up most of the lost volume from the first half of the year, we anticipate at least mid-single-digit adjusted EBITDA margins in Q3 and Q4.
Jason Wegmann: as well as positive free cash flow as factory utilization approaches 90%.
Bill Siwek: Our blade facilities in India and Turkey continued to be profitable, delivering 257 blade sets, representing 1.2 gigawatts of capacity during the quarter, while our Mexico plants are beginning to show performance improvement driven by the renewed focus on lean and quality initiatives implemented over the past year. We expect all regions to be profitable in the second half, including Mexico, as the lines in transition and startup, as well as lean and quality initiatives mature.
Jason Wegmann: Please turn to slide 6.
Jason Wegmann: Our Blade Facilities in India and Turkey A continues to be profitable delivering 257 bladesets representing 1.2 gigawatts that could pass it either in the quarter, while our Mexico plants are beginning to show performance improvement driven by the renewed focus on lean and quality initiatives implemented over the past year.
Jason Wegmann: We expect all regions to be profitable in the second half, including Mexico, as the lines in transition and start up as well as lean and quality initiatives in the chair.
Bill Siwek: We believe we are truly at a pivotal point in time for TPI, and our second half will serve as a great launching point for 2025, where we plan to achieve at least $100 million of adjusted EBITDA and generate free cash flow for the year. Our supply chain continues to operate efficiently with costs remaining steady. Romaterial prices have declined year over year and are expected to be stable to slightly down as Chinese manufacturing capacity surpasses demand. While logistics expenses have seen a modest increase recently, our management strategy has mitigated any operational or financial impact.
Jason Wegmann: We believe we are truly at a pivotal point in time for TPI and our second half will serve as a great launching point for 2025 where we plan to achieve at least a hundred million dollars of adjusted EBITDA and generate free cash flow for the year.
Jason Wegmann: Our supply chain continues to operate efficiently with cost remaining steady. Raw material prices have declined year over year and are expected to be stable to slightly down as Chinese manufacturing capacity surpasses demand.
Jason Wegmann: While logistics expenses have seen the modest increase recently, our management strategies have mitigated any operational or financial impact.
Bill Siwek: With respect to the wind market, we remain optimistic about the long-term recovery of onshore wind energy, though we remain cautious about the exact timing for the overall market. The structural foundation for sustained growth and onshore wind is in place, robust, and global demand for clean energy continues to rise. Driven by factors such as the growing power needs for data centers, some are conductor chip manufacturers, the adoption of electric vehicles, and the electrification of just about everything.
Jason Wegmann: With respect to the wind market, we remain optimistic about the long-term recovery of onshore wind energy, though we remain cautious about the exact timing for the overall market.
Jason Wegmann: The Structural Foundation for Sustained Growth in Onshore Wind is in place and robust and global demand for clean energy continues to rise, driven by factors such as the growing power needs for data centers, semiconductor chip manufacturers, the adoption of electric vehicles, and the electrification of just about everything.
Bill Siwek: Global Onshore Wind Installations, excluding China, are expected to bottom out in 2024 before beginning to accelerate in 2025. Wood McKenby forecasts US Onshore Wind Installments to reach six gigawatts in 2024 and nearly 15 gigawatts annually by the end of the deck. Although there are very promising long-term prospects driven by support of policies in the U.S. and the EU, we expect significant growth within our key markets to be pushed to the back half of 25 or into 2026. Challenges such as high interest rates, inflation, capital constraints, permitting issues, grid access, and uncertainties in the U.S. around the upcoming election are hindering certain project timelines.
Jason Wegmann: Global onshore wind installations, excluding China, are expected to bottom out in 2024 before beginning to accelerate in 2025. Wood MacKenzie forecasts U.S. onshore wind installations to reach 6 gigawatts in 2024 and nearly 15 gigawatts annually by the end of the decade.
Speaker Change: Although there are very promising long-term prospects driven by supportive policies in the US and EU, we expect significant growth within our key markets to likely be pushed to the back half of 25 or into 2026.
Speaker Change: Challenges such as high interest rates, inflation, capital constraints, permitting issues, grid access, and uncertainties in the U.S. around the upcoming election are hindering certain project timelines.
Bill Siwek: With that said, given the strong position of our primary customers, we do anticipate volume growth for TPI in the U.S. in 2025. This growth will be supported by blade lines that will be in full production throughout the year, including the four new lines for GE that are in startup today, along with being bolstered by guidance from the U.S. Treasury and IRS on the Inflation Reduction Act's domestic content bonus, supporting the competitiveness of our Mexico plan.
Speaker Change: With that said, given the strong position of our primary customers, we do anticipate volume growth for TPI in the U.S. in 2025.
Speaker Change: This growth will be supported by blade lines that will be in full production throughout the year, including the four new lines for G.E., that are in start-up today, along with being bolstered by the guidance from the U.S. Treasury and IRS on the inflation reduction acts domestic content bonus.
Bill Siwek: Our U.S. girls will be partially offset by a modest decline in demand for our blades in the EU as we work with our customers on future blade models and optimization of our blade footprint to cost effectively serve the EU as market demand and wider Europe recover. Before I turn it over to Ryan, our financial outlook for the four years remains unchanged with 2024 being a year of transition, with the loss-making operations wrapped up lines, and transition, and start-up maturing an operational improvement implemented.
Jason Wegmann: supporting the competitiveness of our Mexico plants.
Jason Wegmann: Our U.S. Grills will be partially offset by a modest decline in demand for our blades in the E.U. as we work with our customers on future blade models and optimization of our blade footprint to cost effectively serve the E.U. as market demand in lighter year up the covers.
Jason Wegmann: Before I turn it over to Ryan, our financial outlook for the full year remains unchanged with 2024 being a year of transition.
Ryan Miller: with the loss-making operations wrapped up, lines and transition and start-up maturing and operational improvements implemented. We're looking forward to a strong second half of 2024 and putting us on track for our targeted EBITDA of at least $100 million in 2025.
Jason Wegmann: With that, I'll turn the color over to Ryan to review our financial results.
Ryan Miller: Thanks, Bill. Please turn to slide 8. In the second quarter of 2024, net sales were $309.8 million compared to $374 million for the same period in 2023, a decrease of 17 percent.
Ryan Miller: Best sales of blade two in another win-related sales decreased 58.4 million by 16.1% to 34.3 million dollars. This decrease is driven by a 20% increase in the number of windblades produced, the number and pace of start-ups and transitions, expected volume decline in space and market activity levels, canceled orders for the Nordics and, at a more facility, an unfavorable foreign currency fluctuation. These decreases were partially offset by higher average sales prices of Windblades due to the changes in the mix of Windblade models produced, the startup of production at one of our previously idle facilities in Juarez, Mexico, and an increase in tooling sales in preparation for manufacturing line startup and transitions.
Ryan Miller: Net sales of blade, tooling, and other wind-related sales decreased 58.4 million, or 16.1%, to $304.3 million.
Jason Wegmann: This decrease is driven by a 28% decrease in the number of windblades produced due to the number and pace of start-ups and transitions, expected volume decline space and market activity levels, canceled orders for the Nordics and at a more specificity and unfavorable foreign currency fluctuations.
Jason Wegmann: Feet decreases will partially offset by higher average sales prices of wind blades due to the changes in the mix of wind blade models produced. The start of a production at one of our previously idle facilities in war as Mexico, and an increase in tuned sales and preparation for manufacturing line start-ups and transitions.
Ryan Miller: Field services revenue declined by $5.8 million in the second quarter of 2024 compared to the same period in 2023. This was primarily due to a reduction in technicians deployed to revenue-generating projects due to an increase in time spent on non-revenue-generating inspection and repair activities.
Jason Wegmann: Field services revenue declined by $5.8 million in the second quarter of 2024 compared to the same period in 2023. This was primarily due to a reduction in technicians deployed to revenue-generating projects due to an increase in time spent on non-revenue-generating inspection and repair activities.
Ryan Miller: We expect the transition back to revenue-generating activity in the second half of the year. Adjusted EBITDA for the second quarter of 2024 was a loss of $24.9 million compared to an adjusted EBITDA loss of $33.3 million through the same period in 2023. The decrease was primarily driven by the absence of a $32.7 million warranty charge recorded in the prior year.
Jason Wegmann: We expect that transition back to revenue-generating activities in the second half of the year.
Jason Wegmann: Adjusted EBITDA for the second quarter of 2024 was a loss of $24.9 million, compared to an adjusted EBITDA loss of $33.3 million during same period in 2023.
Jason Wegmann: The decrease is primarily driven by the absence of a $32.7 million warranty charge recorded in the prior year. Favorable foreign currency fluctuations and cost savings initiatives partially are set by lower sales.
Jason Wegmann: Higher startup and transition costs, higher losses from the Nordics matter more explained, higher wages and overall inflation.
Jason Wegmann: Moving to slide 9. We ended the quarter with $102 million of unrestricted cash and cash equivalents and $554 million of net debt.
Jason Wegmann: 3 cash flow was a negative $44 million in the second quarter of 2024 compared to 3 cash flow of $6.2 million in the same period in 2023.
Jason Wegmann: The net use of cash in the second quarter of 2024 was primarily due to our EBITDA losses, capital expenditures related to the transitions and startups, interest and tax payments.
Ryan Miller: While the shutdown of the Nordic Tomato Morris plant has put some unplanned pressure on our cash resources, we have 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 resources to execute key initiatives moving forward. A summary of our financial guidance for 2024 can be found on slide 10. We are reaffirming our full year 2024 guidance but narrowing our adjusted EBITDA guidance to the lower end of the range.
Ryan Miller: While the shutdown of the Nordics Mine and Morris Plant has put some unplanned pressure on our cash resources, we have had much success improving the efficiency of our balance sheet over the past couple quarters, and we will remain focused on preserving cash and optimizing working capital to ensure we have resources to execute key initiatives moving forward.
Jason Wegmann: A summary of our financial guidance for 2024 can be found on slide 10.
Jason Wegmann: We are reaffirming our full year 2024 guidance, but narrowing our adjusted EBITDA guidance to the lower end of the range.
Ryan Miller: This adjustment reflects higher than expected losses from the Nordics Matamoros plant, which was shut down on June 30th of this year, as well as some foreign currency headwinds from the Turkish Lira compared to expectations of its rate of devaluation at the time we set our plan for the year.
Ryan Miller: This adjustment reflects the higher-than-expected losses from the Nordex Matamoros plant.
Jason Wegmann: which was shut down on June 30th of this year.
Jason Wegmann: as well as the foreign currency headwins from the Turkish Celira compared to expectations of its rate of devaluation at the time we set our plans to the year.
Bill Siwek: We anticipate sales from continuing operations in the range of $1.3 to $1.4 billion. We believe we are well-positioned to return TPI to profitability in the second half of the year and drive positive free cash flow, particularly in the fourth quarter. As Bill stated earlier, we expect our adjusted EBITDA margin to improve to at least mid-single digits in the second half as we have now shed the losses from both the Nordex Matamoros plan and the automotive business.
Bill Siwek: We anticipate sales from continuing operations in the range of $1.3 to $1.4 billion.
Bill Siwek: We believe we are well positioned to return TPI to profitability in the second half of the year and drive positive free cash flow, particularly in the fourth quarter. As Bill stated earlier, we expect our adjusted EBITDA margin to improve to at least mid-single digits in the second half as we have now shed the losses from both the Nordex Matamoros plan and the automotive business.
Bill Siwek: In addition, as the lines that we have been in start-up and transition achieve serial production rates, we expect to drive utilization to near 90 percent over the second half of the year. It is for these reasons that we are confident we are on a path to recovery. And finally, 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 targets and restarting our idle line. With that, I'll turn the call back over to Bill.
Bill Siwek: In addition, as the lines that we have done in start-up and transition achieve serial production rates,
Bill Siwek: We expect to drive utilization to near 90% over the second half of the year.
It is for these reasons we are confident we are on a path to recovery.
Jason Wegmann: and finally...
Bill Siwek: 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 targets and restarting our idle line. With that, I'll turn the call back over to Bill.
Bill Siwek: Thanks Ryan. Please turn to slide 12.
Bill Siwek: Thanks, Ryan. Please turn to slide 12. Long-term market prospects remain promising, with a solid structural foundation in place for sustained onshore growth.
Operator: The long-term market prospects remain promising, with a solid structural foundation in place for sustained onshore growth. We will continue to work with our customers to efficiently and profitably provide the market with high-quality, cost-effective blades. We are confident that we are on the path to profitability given the operational progress we have made over the last several quarters. The process of startup and transitions is progressing well, and we are confident in our expected full-year financial guidance as we are planning a return to at least mid-single-digit adjusted EBITDA margins and positive key at cash flow in the second half of 2024.
Operator: We will continue to work with our customers to efficiently and profitably provide the market with high-quality, cost-effective blades. We are confident that we are on the path to profitability given the operational progress we have made over the last several quarters.
Operator: The process of start-ups and transitions is progressing well and we are confident in our expected full-year financial guidance as we are planning a return to at least mid-Single-Vigil Adjusted EBITDA margins and positive Kiat cash flow in the second half of 2024.
Operator: We believe our long-term prospects remain strong and are well-positioned to achieve adjusted EBITDA of at least $100 million in 2025.
Speaker Change: Finally, I want to extend my gratitude to all our TPI associates for their continued commitment and dedication to TPI and our mission to decarbonize and electrify the world. I'll now turn it back to the operator to open the call for questions.
Operator: Thank you, Mr. Siwek. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, star 1, please, for questions. We'll go first this afternoon to Eric Stine of Craig Hallam.
Operator: Thank you Mr. Siwek. Ladies and gentlemen at this time if you would like to ask a question please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing a star 2. Once again star 1 please for questions. We'll go first this afternoon to Eric Stine of Craig Hallam.
Eric Stine: Hi, Bill. Hi, Ryan.
Eric Stine: How are you doing? Hey, doing all right. Thanks. So maybe just on fiscal 25, so clearly you're pretty confident about that $100 million EBIT level, but I also know your commentary was about uncertainty about the timing of a meaningful recovery in wind markets. So I'm just trying to kind of square the two things up. Do you think... 100 million is a realistic goal without a meaningful recovery, or is a meaningful recovery needed, and this could be more back-half loaded?
Eric Stine: Hey, Eric, how you doing? Hey, doing all right, thanks.
Eric Stine: So maybe just on fiscal 25, so clearly you're pretty confident about that $100 million EBITDA level. But I also know your commentary was about uncertainty on timing of a meaningful recovery in wind markets, so I'm just trying to kind of...
Eric Stine: You know, square the two things up, I mean, do you think 100 million is a realistic goal without a meaningful recovery or is a meaningful recovery needed and this could be more back half loaded?
Bill Siwek: Yeah, we wouldn't put out the 100 if we weren't confident we would get there. But with that said, there are really two components here, Eric.
Bill Siwek: Yeah, we wouldn't put out the hundred if we if we weren't confident we would get there But with that said there's there's really two components here Eric. Number one is the
Bill Siwek: Number one, when I talk about the market, I'm talking about, kind of, the U.S. market in general, and then I was pretty specific about TPI's volumes in 2025. So notwithstanding the fact that we may not see as robust a recovery of the U.S. market in 2025, from a TPI perspective, we are, our volumes will be up year over year and, you know, from 24 to 25. And our customers are looking for everything we can deliver. So the overall market is probably not recovering as fast. We're pushing to the right a little bit. From a TPI perspective, we're full out.
Bill Siwek: When I talk about the market, I'm talking about kind of in general the U.S. market and then I was pretty specific about TPI's volumes in 2025. So, notwithstanding the fact that we may not see
Bill Siwek: As a real buster of a cover of the US market in 2025, from a TPI perspective, we are, our volumes will be up year over year and you know, from 24 to 25.
Bill Siwek: and our customers are looking for everything we can deliver. So, overall market, probably not recovering as fast, we're pushing to the right a little bit. From a TPI perspective, we're full out.
Bill Siwek: Okay, that's great, Culler, great to hear. And maybe, just, can you remind me of the EIDL facility in Juarez that you're starting up? Is that, is that something that has been discussed and I'm just spaced on it, or is that a new development and how does that figure into your outlook for 24 and 25?
Bill Siwek: Okay, that's great color. Great to hear. And maybe just...
Bill Siwek: Can you remind me on that, the EIDL facility in Juarez that you're starting up, is that something that has been discussed and I'm just spacing on it, or is that a new development and how does that figure into your outlook for 2024 and 2025?
Bill Siwek: Yeah, no, we announced it last year, it's a four-line facility, and we started that early in the year. So we've been really in start-up mode for the first two quarters of the year. So it does have a meaningful impact this year, and we'll certainly have a meaningful impact.
Bill Siwek: Yeah, no, we announced it, I think last year, we started up for GEF, so it's a four-line facility.
Bill Siwek: And we started that early in the year. So we've been really in startup for the first two quarters
Bill Siwek: of the year. So it does have a meaningful impact this year and will certainly have a meaningful impact next year.
Eric Stine: Okay, now you've jogged my memory. Sorry about that. All right, I'll turn it over to you. Thanks.
Eric Stine: Okay, now you jog my memory. Sorry about that. All right, I'll turn it over. Thanks.
Bill Siwek: Great. Thanks, Eric.
Speaker Change: Great. Thanks, Eric.
Operator: Thank you. We go next to Mark Strouse of J.P. Morgan.
Speaker Change: Thank you, we go next now to Mark Strauss of J.P. Morgan.
Operator: Yeah, good afternoon. It's Jerome from Mark.
Mark Strouse: Good afternoon. It's drawn from Mark. Thank you for taking our questions. I guess just just firstly start with the Iowa facility and what's the latest there from GE and what the potential timing could be there. Also, just on that, once they give you the go ahead, how long until you can really start ramping volumes there.
Bill Siwek: Thank you for taking our questions. I guess just firstly, start with the Iowa facility and what's the latest there from GE and what the potential timing could be there. And also, just on that, once they give you the go-ahead, how long until you can really start ramping volumes there?
Bill Siwek: Yeah, so really nothing has changed from last quarter at this point. We're still probably looking at early 2025 as my best case. I'm still working through some scenarios. And if that were to happen, we'd have to start ramping it up relatively soon. I mean, with the tight employment market in the Midwest, especially in Iowa, I think that'll be the biggest challenge is hiring, you know, the associates that we need to run that facility. So it's probably a six month process to hire and get rolling again.
Bill Siwek: Yeah, so I really nothing has changed from last quarter at this point. We're still probably best case looking at early 2025 would be my best estimate at this point.
Bill Siwek: still working through some scenarios.
Bill Siwek: And if that were to happen, we'd have to start ramping it relatively soon. I mean, with the tight employment market in the Midwest, especially in Iowa, I think that'll be the biggest challenge is hiring, you know, the associates that we need to run that facility. So it's probably a six-month...
Bill Siwek: process to hire and get rolling again.
Speaker Change: Okay, okay, that's the helpful thank you.
Bill Siwek: Okay, okay, that's helpful, thank you. And then, I guess, just transitioning, looking at the cash generation comments, I mean, it sounds like it's, you know, positive for the second half, but any more detailed commentary on what you think of how the timing looks like that for 3Q versus 4Q, and do we, I'm sorry if I miss this in the prepared remarks, but do you still think 2Q is going to be the low watermark for cash for the year, or is there, you know, any risk to cash coming in lower in the third quarter?
Bill Siwek: [inaudible]
Bill Siwek: And then, I guess, just transitioning, looking at the cash generation comments, I mean, it sounds like it's, you know, positive for the second half, but any more detailed commentary on what you think of how the timing looks like that for 3Q versus 4Q? And do we – I'm sorry if I miss this in the prepared remarks, but do you still think 2Q is going to be the low watermark for cash for the year, or is there any risk to cash coming in lower in the third quarter?
Bill Siwek: Yeah, you know, as we look at cash over the balance of the year, I think our fourth quarter is going to be, we're going to generate more cash in the fourth quarter than we will in the third. I think we're kind of right now bouncing along the bottom edge of where cash is going to be. I think you'll continue to see that in Q3, probably at a similar level. And the reason is that we're continuing to have some CapEx investments.
Bill Siwek: Yeah, you know, as we look at cash over the balance of the year, I think our fourth quarter is going to be is we're going to drink more cash in the fourth quarter than we will the third. I think we're kind of right now bouncing along the bottom edge of our cash is going to be I think you've continued to see that in Q3 probably at a similar level and the reason is we're continuing to have some capex.
Ryan Miller: Thanks Bill, please turn this by day. In the second quarter of 2024, net sales are 39.8 million compared to 374 million for the same period in 2023. I'd be through for 17 percent.
Bill Siwek: We'll liquidate some advanced payments, and then with interest and taxes, probably be kind of a flattish type of quarter in the third quarter, with most of our cash that we bring in will happen in the fourth. Okay, great.
Bill Siwek: Investments will liquidate some advance payments and then with interest and taxes probably be kind of a flattish type of quarter in a third quarter with most of our cash that we that we bring in will happen in the fourth quarter.
Bill Siwek: Okay, great, thanks for having us all pass it on.
Bill Siwek: Okay, great. Thanks, Ryan. I'll pass it on.
Bill Siwek: Thanks.
Operator: Thank you. Just a reminder, ladies and gentlemen, call number one please for any questions this afternoon. We go next now to Pavel Molchanov at Raymond James.
Speaker Change: Thank you. Just a reminder, ladies and gentlemen, star one, please for any questions this afternoon. We'll go next now to Pawville, Mulch and Off at Raymond James.
Pavel Molchanov: Thanks for taking the question. You referenced in the press release the fact that unit pricing on the blades was... kind of on the high side, and that indeed shows up in the top line. Is that a sustainable run rate, or was there something, you know, very kind of specific in Q2 to explain?
Pavel Molchanov: Thanks for taking the question. You referenced in the press release the fact that unit pricing on the blades was...
Pavel Molchanov: kind of on the high side and that indeed shows up in the top line. Is that a sustainable run rate or was there something very kind of specific in Q2 to explain that?
Bill Siwek: Yeah, Pavel, we had a pretty big mix impact in the quarter. And so you saw that rate of $208,000 a blade. It will come down. The biggest impact is that a lot of these new blades are ramping up. They come with a lot higher price. They're longer, heavier blades that are more expensive. But a couple dynamics occurred in the quarter.
Bill Siwek: Yeah, Pavel, we had a pretty big mixed impact in the quarter. And so you saw that rate of $208,000 a blade. It will come down. The biggest impact is a lot of these new blades are ramping up. They come with a lot higher price. They're longer, heavier blades that are more expensive. But a couple of dynamics occurred in the quarter. For example, in one of our Juarez facilities where we make the shorter GE blade, we diverted a good share of that workforce to help with the startup on the longer blade, on GE's workhorse blade. And so the volumes on those lower priced blades were down in the second quarter. We will start ramping those back up and there'll be a higher percentage of the mix as we move forward.
Bill Siwek: For example, in one of our Juarez facilities where we make the shorter GE blade, we diverted a good share of that workforce to help with the startup on the longer blade on GE's workhorse blade. And so the volumes on those lower price blades were down in the second quarter. We will start ramping those back up, and there'll be a higher percentage of the mix as we move forward. And then a couple other factories too; just the timing of some of the shorter versus longer blades impacted the mix as well. So this will probably be the peak of ASPs, and you'll see that work its way down as some of the shorter blades ramp up in production over the second half of the year.
Bill Siwek: Moving forward, and then a couple other factories too, just the timing of some of the shorter versus longer blades impacted mix as well. So this will probably be the peak of ASPs and you'll see that work its way down as some of the shorter blades ramp up in production over the second half of the year.
Speaker Change: Okay. We don't talk a whole lot about the field services business, but you know, obviously with the lack of, you know, EV sales in the future. That will be, I suppose, a little bit more meaningful in the revenue mix.
Speaker Change: How is that portion of the revenue mix contributing to EBITDA? Yes, you don't really break it out in the financials.
Bill Siwek: Yeah, well, right now, Pavel, we're still working through the inspection and repair campaign that we started last year, so we've had a fairly significant number of our field service technicians on that as opposed to revenue-generating work, and therefore, it has made a very minimal contribution to EBITDA. As we get through those campaigns, which you'll start to see the impact of in the second half of this year, then you'll start to see The margins are clearly better in the field service business, and once we get our techs back to the revenue-generating work, you'll start to see that. It doesn't move the needle significantly yet just because, from a size perspective, it's still relatively small, but that's an area we anticipate investing more in and growing both in the U.S. and in the EU.
Bill Siwek: Yeah, well right right now, Pavel, we're still, you know, we're still working through the inspection and repair campaign that we started last year. So we've had a fairly significant number of our
Bill Siwek: field service techs on that as opposed to revenue generating work and therefore has been very minimal contribution to EBITDA. As we get through those campaigns, which you'll start to see
Bill Siwek: The impact of that in the second half of this year, then you'll start to see a much more significant impact. The margins are clearly better.
Bill Siwek: and the field service business, and once we get our text back on the revenue-generating work, you'll start to see that it's not.
Bill Siwek: It doesn't move the needle significantly yet just because from a size perspective it's still relatively small, but that's an area we anticipate investing more in and growing both in the U.S. and in the EU.
Pavel Molchanov: Last question, you know, offshore wind has been in the headlines of late ice boats, but you guys have never really played in that slice of the pie, any interest in, um..., getting into the offshore segment on either side of the Atlantic?
Pavel Molchanov: Last question, you know offshore wind has been in the headlines of late I suppose. You guys have never really
Pavel Molchanov: played in that slice of the pie, any interest in, um...
Pavel Molchanov: getting into the offshore segment in another side of the Atlantic.
Bill Siwek: Yeah, I mean, the growth, especially in Europe, is fairly significant. It's a much, it's a much more mature supply chain there. So I think it's quite a ways beyond where the US market is today. With that said, is there interest? Yes, today, not really. But over time, potentially.
Bill Siwek: Yeah, I mean, there's...
Bill Siwek: It's clearly interesting, Pavel. I mean, the growth, especially in Europe , is fairly significant.
Bill Siwek: It's a much more mature supply chain there, so I think it's quite a ways beyond where the U.S. market is today. With that said, is there interest? Yes, today, not really, but over time, potentially.
Pavel Molchanov: Got it. Thanks very much.
Pavel Molchanov: I've got it. Thank you very much.
Speaker Change: Yep, thank you.
Operator: Thank you. We go next now to Jeff Osborne with the TD Calendar.
Operator: Thank you, we're going to now to Jeff Osborne with TD Cowling.
Jeffrey Osborne: Thank you, Bill. Just two questions. One is you made a comment in the prepared remarks about a $20 million hit with a greater focus on quality. Was that in post-production or pre-production, and did that tie up the service staff?
Jeffrey Osborne: Thank you. Bill, just two questions. One is you made a comment in the prepared remarks about a $20 million hit with a greater focus on quality. Was that in post-production or pre-production, and did that tie up the service staff?
Bill Siwek: No, nothing to do with the service staff, Jeff; this was just as we were working with our customers, building the initial blades, working through the design, unique characteristics of the design, and just making sure that we got the process right so that when we did get the serial production, we didn't have any issues with blades escaping the plant. So it was really just slowing things down a little bit from what we would normally do, but nothing to do with the field service staff; these blades won't have any issues as it relates. It was just slowing down the process, making sure we've got it right before we get to serial production.
Speaker Change: No, that...
Bill Siwek: and nothing to do with the service staff, Jeff, this was just as we're working with our customers, building the initial blades.
Bill Siwek: Working through the design, you need characteristics of the design and just making sure that we get the process right.
Bill Siwek: So that when we do get to serial production, we don't have any issues with blades escaping the plant. So it was really just slowing things down a little bit from what we would normally do, but nothing to do with the field service stuff. These blades won't have any issues as it relates to field service.
Bill Siwek: Service. It was just slowing down the process, making sure we've got it right before we get the serial production.
Bill Siwek: And just to follow up on that, have you remediated those problems at those two sites so that you're entering 3Q with, you know, heading to the ground running, or is there like an overhang in the third quarter?
Speaker Change: And just to follow up on that, have you remediated those problems at those two sites so that you're entering 3Q with, you know, heading to ground running or is there like an overhang in the third quarter?
Bill Siwek: There was nothing to remediate. We slowed the process down to make sure with our customers that we were comfortable with the serial production quality of the blade. We feel like we've got great processes. We've got great collaboration with our customers. We'll see in the third and fourth quarter our utilization rates get up close to 90 percent. So we'll be in good shape in the back.
Speaker Change: Yeah, we, we, we, we, we, we,
Bill Siwek: There was nothing to remediate. We slowed the process down to make sure with our customers that we were comfortable with the serial production quality of the blade. So, yeah, we feel like we've got great processes, we've got great collaboration with our customers, and we'll see in the third and fourth quarter our utilization rates get up close to 90%, so we'll be in good shape in the back half.
Jeffrey Osborne: Her big dinner last one is just you also made reference in the prepared remarks about Europe and working with your customers on new designs and potentially new, it sounded like new sites. Would that be an expansion of Turkey or would you evaluate, you know, building up a facility in another low-cost country in the region?
Jeffrey Osborne: Perfect. And the last one is just, you also made reference in the prepared remarks about Europe and working with your customers on new designs and potentially new, it sounded like new sites. Would that be an expansion of Turkey or would you evaluate, you know, building a facility in another low-cost country and region there?
Bill Siwek: Yeah, I think we're, you know, the EU is an important market for us, serving it cost effectively is very important. Turkey has been very cost effective for a long, long period of time, but we will continue to look at options, whether they be in Turkey or somewhere else either in the EU or in wider Europe, to continue to support our customers where they need us to be from a total delivery cost.
Bill Siwek: Yeah, I think we're, we're, we're, you know, the EU is an important market for us, serving it cost-effectively is important.
Bill Siwek: Turkey has been very cost effective for a long period of time, but we will continue to look at options whether they be in Turkey or somewhere else either in the EU or in wider Europe to continue to support our customers where they need us to be from a total delivered cost standpoint.
Jeffrey Osborne: And just to follow up on that, any sense of what the CapEx obligation for such a facility would be, just given the debt that's due next year?
Jeffrey Osborne: and just to follow up on any sense on what the CapEx obligation for such a facility would be just given the debt that's due next year.
Bill Siwek: Yeah, we don't have any debt due next year, but other than the turkey stuff, which is just, you know, evergreen revolver stuff. But, no, it would really depend, Jeff. It varies by country. Whether, you know, land costs are very different. Sometimes land is free.
Speaker Change: Thank you very much.
Bill Siwek: Yeah, we don't have any debt due next year, but um...
Bill Siwek: Other than the turkey stuff, which is just...
Bill Siwek: you know, evergreen revolver stuff, but...
Bill Siwek: No, it would depend, really, Jeff, it varies by country, whether, you know, land costs are very different, sometimes land is free, sometimes it's not, so it would vary pretty significantly, but from our perspective, our rule of thumb has always been six to seven million dollars per line.
Speaker Change: from a CapEx perspective, that's what it would be. So you can kind of take that times the number of lines and that's the CapEx requirement it would be for us.
Bill Siwek: and I hope it's done.
Bill Siwek: Yep!
Operator: Thank you, we're going next to Greg Lofickowski at Webber Research.
Speaker Change: Thank you very much for watching this video.
Operator: Thank you. We go next now to Greg Wasikowski at Weber Research.
Greg Lofickowski: Hey, good afternoon guys. I just want to ask this, diplomatically as possible, but could you speak to your ongoing relationship with Nordex following the Matamoros exit?
Greg Lofickowski: Hey, good afternoon, guys. It's what I asked this diplomatically as possible, but could you speak to your ongoing relationship with Nordics following the Madamores exit?
Bill Siwek: Yeah, obviously, that was a difficult period for both of us, for both Nordex and TPI, but I've had a number of conversations with their CEO since and during, and I think the relationship is fine. I'll see him again in the next month or two in Europe. I do believe we'll have a good opportunity to participate in their U.S. blade, the new design for the U.S. market. So, I would say the relationship, notwithstanding the strains of a tough situation like we had in Matamoros, is actually in a pretty good place. I got it.
Bill Siwek: Yeah I you know obviously that was that that was a difficult period for both of us for both Nordex and TPI but
Bill Siwek: I've had a number of conversations with their CEO since and during, and I think the relationship is fine. I'll see him again in the next month or two in Europe .
Bill Siwek: I do believe we'll have a good opportunity to participate in their U.S. blade, the new design for the U.S. market.
Bill Siwek: So, I would say the relationship, notwithstanding, you know, the strains of a tough situation like we had in Matamoros is actually in a pretty good place.
Greg Lofickowski: Got it, okay, appreciate the color. And then for the next two quick ones, apologize if I missed it, it's got a couple balls in the air right now. Can you give us a sense of timing on the field service and kind of getting that back into... Maybe normalizing it back to normal revenue production and less QC?
Greg Lofickowski: Got it. Okay. Appreciate the color. And then for the next two quick ones, apologize if I missed it. Just got a couple balls in the air right now. Can you give us a sense of timing on the field service and kind of getting that back into...
Greg Lofickowski: Maybe normalizing it back to normal revenue production and less QC.
Bill Siwek: You know, I think as we get into what is kind of the busy season right now in the summer, we've already started to see some some of the techs migrate over to more revenue-producing. So I think you'll see a more robust third quarter from us, not standing still, you know, we're having to utilize so many technicians on our own internal campaigns, it will take a little bit to build up a backlog of external campaigns to be revenue-producing. And so, while I think you'll see improved numbers in Q3, we still have a little work to do to build it back up to where it was before and grow beyond that.
Bill Siwek: You know I think as we get into what's kind of the busy season right now in the summer you know we've already started to see some some of the techs.
Bill Siwek: migrate over to more revenue producing. So I think you'll see a more robust third quarter from us.
Bill Siwek: Notwithstanding, you know, we're, we're...
Bill Siwek: Having utilized so many technicians on our own internal campaigns, it will take a little bit to build up a backlog of external campaigns to be revenue producing. So, while I think you'll see improved numbers in Q3, still got a little work to do to build it back up to where it was before and grow it beyond that.
Greg Lofickowski: Okay, great, that's good to hear. And then lastly, just from a modeling perspective, it's always helpful to have a recap of dedicated manufacturing lines and manufacturing lines installed and decayed. To close out this year and into 2025, if you have that handy, that'd be great.
Greg Lofickowski: Okay, great. That's good to hear. And then lastly, just from a modeling perspective, it's always helpful to have a recap of dedicated manufacturing lines and manufacturing lines installed and the cadence
Greg Lofickowski: to close out this year and into 2025. If you have that handy, that'd be great.
Bill Siwek: Yeah, did you want to just go through kind of an inventory of all our lines there? I mean, we're going to have 34 lines that will be operating at the end of this year and throughout the balance of this year. All the lines in Iowa right now are obviously idle, and then we currently have two lines in India that have molten a bit of an idle, and then two more lines of capacity in India, but outside of that, right now, all of our lines are filled up. It's really Iowa in India where we have capacity that will look to fill in in 25.
Bill Siwek: Yeah did you want to did you want to just go through kind of inventory of all our lines or I mean so we're gonna have 34 lines that will be operating at the end of this year through throughout the balance of this year there are
Bill Siwek: All the lines in Iowa right now are obviously idle.
Bill Siwek: And then we currently have...
Bill Siwek: 2 lines in India that have molten at that event idol.
Bill Siwek: and then two more lines of capacity in India. But outside of that right now, all of our lines are filled up. So it's really Iowa and India where we have capacity that we'll look to fill in in 2025.
Greg Lofickowski: Got it. Okay, that's all. What would be your updated kind of plan for operating lines in 2025, maybe the second half of 2025?
Speaker Change: Got it. Okay, that's helpful.
Speaker Change: What would be, what's your updated kind of plan for operating lines in 2025, maybe the second half of 2025?
Bill Siwek: The second half of 2025, yeah, we certainly have plans, but we haven't provided that, and we're not prepared to provide that, Justin. Got it. Okay, that's fair. All right, guys.
Bill Siwek: The second half of 2025, yeah, we certainly have plans, but we haven't provided that and we're not prepared to provide that just yet.
Greg Lofickowski: Got it. Okay. That's fair. All right, guys. That's it for me. Thanks.
Greg Lofickowski: Got it. Okay, that's fair. All right guys, that's it for me. Thanks.
Greg Lofickowski: Great. Thanks, Greg.
Operator: Thank you. We go next now to Justin Clare with Roth Capital Partners.
Operator: Thank you, we're next now to Justin Claire with Roth Capital Partners.
Justin Clare: Hi, good afternoon. Thanks for taking our questions.
Justin Clare: So, you were saying that really your customers are looking for all the capacity that you can provide into 2025 here. I was wondering if that's in reference to only U.S. customers in that market, or does that also include Europe, you know, trying to get a sense for, basically, are you fully booked, you know, across the facilities? You know, I know you mentioned you do have open lines in India, but I just want to get a sense for kind of the demand, you know, U.S. versus Europe, and whether you have open capacity.
Justin Clare: So, I just wanted to follow up on a comment you made. So, you were saying that really your customers are looking for all the capacity that you can provide into 2025 here. I was wondering if that's in reference to really U.S. customers in that market, or does that also include...
Justin Clare: Europe, basically are you fully booked, you know, across the facilities? You know, I know you mentioned you do have the open lines in India.
Speaker Change: But you just want to get a sense for kind of the demand, you know, U.S. versus Europe and whether you have open capacity.
Bill Siwek: Thanks, Justin, for the question. My comment about being kind of sold out is U.S.-related, so it's for the U.S. market. To your point, we do have some capacity available in India, and that we're still working with our customers on what the ultimate volumes required will be next year from our turkey plants as well as from our Indian facilities. A lot of what we build in India comes to the U.S. as well, but we're much more certain right now in volumes for the U.S. than we are for India.
Bill Siwek: Thanks, Justin, for the question. My comment with being kind of sold out is U.S.-related, so it's...
Bill Siwek: It's for the U.S. market. To your point, we do have some capacity available in India.
Bill Siwek: and that is where we're still working with our customers and what the ultimate volumes required will be next year from our Turkey plant as well as from our India plant.
Bill Siwek: A lot of what we build in India comes to the U.S. as well, but we're much more certain right now in volumes for the U.S. than we are for EU.
Justin Clare: John, I got it. Okay. And then, just given the strength of the U.S. market, is it fair to assume that it's unlikely to see transitions at the facilities that are serving the U.S. next year given that customers are looking for all the capacity you can get, so a transition would reduce the amount of volume that you can supply. Is that a reasonable expectation?
Justin Clare: Got it. Got it. Okay. And then just, you know, given the strength of the U.S. market, is it fair to assume that, you know, it's unlikely to see transitions at the facilities that are serving the U.S. next year, given that customers are looking for all the capacity you can get, so a transition would reduce the amount of volume that you can supply? Is that a reasonable expectation?
Bill Siwek: Yeah, I'd say that's reasonable. We will have a couple lines transitioning late this year that will leak into the next year. But again, it's to get to the right blade model for a customer. But yeah, I think in the US, we'll have very few transitions, if any, next year other than those. Okay.
Bill Siwek: Yeah, I'd say that's reasonable. We will have a couple lines transitioning late this year that will leak in the next year. But again, it's to get to the right blade model for a customer. But yeah, I think in the US, we'll have very few transitions if any next year other than those two.
Justin Clare: Okay, I got it. That's it for me. Thank you.
Justin Clare: Okay, got it. That's it for me. Thank you. Yep, thank you.
Operator: And gentlemen, it appears we have no further questions this afternoon. Mr. Siwek, I'd like to turn things back to you, sir, for any closing comments.
Speaker Change: and gentlemen, it appears we have no further questions this afternoon, Mr. Siwek, I'd like to turn things back to you, sir, for any closing comments.
Bill Siwek: Again, thank you, everybody, for your time and, of course, for the questions and your continued interest. I look forward to our next discussion.
Siwek: Yep again thank you everybody for your time and for the questions of course and your continued interest and look forward to our next discussion.
Operator: Thank you, Mr. Siwek. Again, ladies and gentlemen, this will conclude the TPI Composites second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great remainder of your day. Goodbye.
Operator: Thank you, Mr. Siwek. Again, ladies and gentlemen, this will conclude the TPI Composites second quarter earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great remainder of your day. Goodbye.
Pavel Molchanov: We don't talk a whole lot about the field services business, but obviously, with the lack of EV sales in the future, that will be, I suppose, a little bit more meaningful in the revenue mix. How is that? A portion of the revenue mix contributing to EBITDA, I guess; you don't really break it out in the financials.
Justin Clare: Hi, good afternoon; thanks for taking our questions. So, I just wanted to follow up on a comment you made.
Bill Siwek: We're looking forward to a strong second half of 2024 and putting us on track for our targeted EBITDA of at least $100 million in 2025. With that, I'll turn the call over to Ryan to review our financial results.
Bill Siwek: As a result, Q2 revenue and adjusted EBITDA from this plant fell short of our expectation. While Nordics ultimately funded all the severance related to the shutdown early in the third quarter, we were burdened with significantly less volumetric expected demand and the inefficiencies of hastily shutting down a factory while maintaining our contractual commitments to deliver blades to Nordics. The good news is that we now have the losses from this plant in the rearview mirror.
Operator: We believe our long-term prospects remain strong and we are well-positioned to achieve adjusted EBITDA of at least $100 million in 2025. Finally, I want to extend my gratitude to all our TPI associates for the continued commitment and dedication of TPI and our mission to decarbonize and electrify the world. I'll now turn it back to the operator to open the call for questions. Thank you, Mr. Siwek.
Ryan Miller: Favorable foreign currency fluctuations and cost savings initiatives were partially offset by lower sales, higher startup and transition costs, higher losses from the Nordics matter more explained, higher wages, and overall inflation. Moving his 5-9, we ended the quarter with $102,000 of unrestricted cash and cash equivalents and $550,000,000,000 of next step. Free cash flow was a negative $44 million in the second quarter of 2024 compared to free cash flow of $6.2 million in the same period of 2023. The net use of cash in the second quarter of 2024 was primarily due to our EBITDA losses, capital expenditures related to the transitions, and startup interest, and tax payments.
Bill Siwek: Sometimes it's not, so it would, it would vary pretty significantly. But, from our perspective, our rule of thumb has always been six to seven million dollars per line for the cap X requirement. So you can kind of take that times the number of lines, and that's what the cap X requirement would be for us.