Q2 2024 Broadwind Inc Earnings Call

Greetings and welcome to Broadwind's second quarter 2024 results conference call. At this time, all participants are on a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: At this time, all participants are on a listen-only line. If anyone should require operator assistance during the conference, please press star zero on your telephone.

Operator: time all participants are on a listen-only mode. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference call is being recorded.

Operator: I would now like to turn the call over to your host, Mr. Tom Ciccone. Thank you, you may begin.

Thomas Ciccone: Eric Blashford, Sameer Joshi, Thomas Ciccone, Eric Stine, Broadwind Energy Inc. I would now like to turn the call over to your host, Mr. Tom Ciccone. Good morning and welcome to the Broadwind second quarter 2024 results conference call. Leading the call today is our CEO, Eric Blashford, and I'm Tom Ciccone, the company's Vice President, Financial Office.

Speaker Change: As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Tom Ciccone. Thank you.

Tom Ciccone: Good morning, and welcome to the Broadwind second quarter 2024 results conference call.

Thomas Ciccone: We issued a press release before the market opened today detailing our second quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectation and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest annual and quarterly filings with the SEC.

Speaker Change: Thank you very much for joining us today.

Speaker Change: Good morning and welcome to the Broadwind second quarter 2024 results conference call. Leading the call today is our CEO Eric Blashford and I'm Tom Ciccone, the company's vice president and chief financial officer.

Tom Ciccone: Leading the call today is our CEO, Eric Blashford, and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today, detailing our second quarter results.

Speaker Change: We issued a press release before the market opened today detailing our second quarter results.

Tom Ciccone: I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliation of the historical, non-GAAP financial measures discussed during our call in the press release issued today.

Speaker Change: I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control.

Speaker Change: Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.

Speaker Change: For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest annual and quarterly filings with the SEC.

Speaker Change: Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today.

Tom Ciccone: At the conclusion of our prepared remarks, we will open the line for questions.

Speaker Change: At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric.

Tom Ciccone: With that, I'll turn the call over to Eric.

Thomas Ciccone: Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric.

Eric Blashford: Thanks, Tom, and welcome to those joining us today. Broadwind delivered a solid Q2, highlighted by double-digit EBITDA margin, consistent with prior year results despite reduced revenue. Offsetting, a transitional pause in new wind tower demand, second quarter results benefited from a higher value sales mix, improved execution, and targeted cost reduction actions. We booked $18 million of orders in the second quarter, a year-over-year decline, as we saw reduced demand across all segments. Heavy fabrication saw reduced demand for our pressure reduction systems, partially offset by increased orders from the wind-repowering market. Gearing orders were reduced year-over-year, largely due to decreased demand from the industrial and steel sectors, while orders from our industrial solution segment softened compared to the unusually strong aftermarket orders seen last year.

Eric Blashford: Thanks, Tom, and welcome to those joining us today. Broadwind delivered a solid Q2, highlighted but double-digit, EVA margin, consistent with prior year results. Despite reduced revenue. Offsetting, a transitional pause in new wind tower demand. Second quarter results benefited from a higher-value sales mix, improved execution, and targeted cost reduction actions. We booked $18 million in orders in the second quarter, a year-over-year decline as we saw reduced demand across all segments.

Eric Blashford: Thanks, Tom. And welcome to those joining us today.

Eric Blashford: Brodwin delivered a solid Q2, highlighted with double-digit EBITDA margin, consistent with prior year results, despite reduced revenue.

Eric Blashford: Offsetting a transitional pause in new wind tower demand, second quarter results benefited from a higher value sales mix, improved execution, and targeted cost reduction actions.

Speaker Change: We booked $18 million of orders in the second quarter, a year-over-year decline as we saw reduced demand across all segments.

Eric Blashford: Heavy fabrication saw reduced demand for our pressure reduction system, partially offset by increased orders from the wind repowering market. Gearing orders were reduced year-over-year, largely due to decreased demand from the industrial and steel sectors, while orders from our industrial solutions segment softened compared to the unusually strong aftermarket orders seen last year.

Speaker Change: Heavy fabrication saw reduced demand for our pressure reduction systems, partially offset by increased orders from the wind repowering market.

Speaker Change: Gearing orders were reduced year-over-year, largely due to decreased demand from the industrial and steel sectors, while orders from our industrial solutions segment softened compared to the unusually strong aftermarket orders seen last year.

Eric Blashford: At a commercial level, we continue to expand our product mix within higher margin adjacent markets. The Broadwind Clean Fuels L-70, low-flow PRS unit, a third model in this product family, will be released in Q3 as planned, with customer interests expected to be high for this new model. Quoting activity is elevated at all segments and in nearly all markets served, including some green shoots and oil and gas, which has been soft in recent quarters. Furthermore, the Gearing division has completed all requirements for the AS 9100 quality certification, for which we expect to receive final approval later this quarter.

Eric Blashford: At a commercial level, we continue to expand our product mix within higher-margin adjacent markets; the Broadwind Clean Fuels L70 low-flow PRS unit, the third model in this product family, will be released in Q3 as planned, with customer interest expected to be high for this new model. Quoting activity is elevated at all segments and in nearly all market sectors, including some green shoots and oil and gas, which has been soft in recent quarters.

Speaker Change: At a commercial level, we continue to expand our product mix within higher-margin adjacent markets. The Broadwind Clean Fuels L70 low-flow PRS unit, the third model in this product family, will be released in Q3 as planned, with customer interest expected to be high for this new model.

Speaker Change: Quoting activity is elevated at all segments and in nearly all markets served, including some green shoots and oil and gas, which has been soft in recent quarters.

Eric Blashford: Furthermore, the Gearing Division has completed all requirements for the AS9100 Quality Certification, for which we expect to receive final approval later this quarter. Operationally, we continue to invest in cutting-edge technology to improve our process capabilities, reduce costs, and improve our profitability. Bradford Gearing has recently installed an industry-leading Teokoke Grinding Center. This new equipment replaces several older machines and includes real-time on-board quality inspection, ensuring that the finished product precisely matches the blueprint specifications before the part leaves the machine.

Speaker Change: Furthermore, the Gearing Division has completed all requirements for the AS 9100 Quality Certification, for which we expect to receive final approval later this quarter.

Eric Blashford: Operationally, we continue to invest in cutting-edge technology to improve our process capabilities, reduce costs, and improve our profitability. Bradford Gearing has recently installed an industry leading Tia Koki Grining Center. This new equipment replaces several older machines and includes real-time onboard quality inspection, ensuring that the finished product precisely matches the blueprint specifications before the park leaves the machine. We now have the people, qualifications, and technology to penetrate the aerospace and defense markets we target. Our focus on team member safety is yielded at 56% reduction, and our recordable incident rate so far in 2024, well below the industry average.

Speaker Change: Operationally, we continue to invest in cutting-edge technology to improve our process capabilities, reduce costs, and improve our profitability. Bradford Gearing has recently installed an industry-leading Teokoke Grinding Center.

Speaker Change: This new equipment replaces several older machines and includes real-time onboard quality inspection, ensuring that the finished product precisely matches the blueprint specifications before the part leaves the machine.

Eric Blashford: We now have the people, qualifications, and technology to penetrate the aerospace and defense markets we target. Our focus on team member safety has yielded a 56% reduction in our recordable incident rate so far in 2024, well below the industry average. We have had zero lost time incidents this year.

Speaker Change: We now have the people, qualifications, and technology to penetrate the aerospace and defense markets we target.

Speaker Change: Our focus on team member safety has yielded a 56% reduction in our recordable incident rates so far in 2024, well below the industry average.

Eric Blashford: We have had zero lost time incidents this year. Most importantly, we are keeping our people safe, but secondarily, we are seeing the financial benefit in reduced costs. Our quality systems, standard work deployment, and flexible skills training have allowed us to improve our response time and increase the profitability of the first article and smaller runs often associated with our new customers. Beginning in the first quarter, we undertook significant actions to align our cost structure with the current demand environment. In combination, these actions will contribute more than $4 million in annualized cost savings, which is evident in our results.

Eric Blashford: Most importantly, we are keeping our people safe. But secondarily, we are seeing the financial benefit and reduced costs. Our Quality Systems, Standard Work Deployment, and Flexible Skills Training have allowed us to improve our response time and increase the profitability of the first article and smaller runs often associated with our new customers. Beginning in the first quarter, we undertook significant actions to align our cost structure with the current demand environment. In combination, these actions will contribute more than $4 million in annualized cost savings, which is evident in our results.

Speaker Change: and we have had zero lost time incidents this year. Most importantly, we are keeping our people safe, but secondarily, we are seeing the financial benefit and reduced costs.

Speaker Change: Our quality systems, standard work deployment, and flexible skills training have allowed us to improve our response time and increase the profitability of the first article and smaller runs often associated with our new customers.

Speaker Change: Beginning in the first quarter, we undertook significant actions to align our cost structure with the current demand environment.

Speaker Change: In combination, these actions will contribute more than $4 million in annualized cost savings, which is evident in our results.

Eric Blashford: While total revenue declined versus year-ago levels given lower tower demand, our non-wind activity levels remain relatively stable as we see demand for our precision manufacturing capabilities across multiple markets. In Q2, we generated EBITDA about $3.6 million and net income of half a million dollars. This marks our sixth consecutive quarter of profitability, despite lingering wind-related demand headwinds. Quoting activity in our non-wind market has been robust so far in 2024. We expect consistent order flow through the remainder of this year, despite the continuing softness in the oil and gas gear market. Within our heavy fabrication segment, Q2 revenue was $20 million.

Eric Blashford: While total revenue declined versus year-ago levels given lower tower demand, our non-wind activity levels remain relatively stable, as we see demand for our precision manufacturing capabilities across multiple markets. In Q2, we generated EBITDA of $3.6 million and net income of half a million dollars. This marks our sixth consecutive quarter of profitability despite lingering wind-related demand headwinds. Quoting activity in our non-win markets has been robust so far in 2024, and we expect consistent order flow through the remainder of this year, despite the continuing softness in the oil and gas gear market within our heavy fabrication segment. Q2 revenue was $20 million, down 42% from a year ago, primarily due to the decline in tower production and PRS shipments, partially offset by increased sales of mining equipment. Gearing revenue was $10.5 million.

Speaker Change: While total revenue declined versus year ago levels given lower tower demand,

Speaker Change: Our non-wind activity levels remain relatively stable as we see demand for our precision manufacturing capabilities across multiple markets.

Speaker Change: In Q2, we generated EBITDA of $3.6 million and net income of $500,000. This marks our sixth consecutive quarter of profitability despite lingering wind-related demand headwinds.

Speaker Change: Quoting activity in our non-win markets has been robust so far in 2024, and we expect consistent order flow through the remainder of this year, despite the continuing softness in the oil and gas gear market.

Speaker Change: Within our heavy fabrication segment, Q2 revenue was $20 million, down 42% from a year ago, primarily due to the decline in tower production and PRS shipments, partially offset by increased sales of mining equipment.

Eric Blashford: Down 42% from a year ago, primarily due to the decline in tower production and PRS shipments, partially offset by increased sales of mining equipment. Gearing revenue was $10.5 million. A 5% reduction year-over-year due to broad-based softness across major markets offset by an uptick in wind-gearing sales. Industrial solutions revenue was $6.5 million, up 3% year-over-year, led by an increase in after-market gas-driven content, continuing the positive trend for this business which began in 2022. In summary, I am pleased with the operating performance of all divisions through the second quarter. Reflecting solid execution and the quick and substantial cost actions we took this year in response to demand fluctuations in both our heavy fabrications and gearing businesses.

Eric Blashford: 5% reduction year-over-year due to broad-based softness across major markets offset by an uptick in wind gearing sales. Industrial solutions revenue was $6.5 million, up 3% year over year, led by an increase in aftermarket gas-driven content, continuing the positive trend for this business, which began in 2022. In summary, I'm pleased with the operating performance of all divisions through the second quarter, reflecting solid execution and the quick and substantial cost actions we took this year in response to demand fluctuations in both our heavy fabrications and gearing businesses. With that, I'll turn the call back over to Tom for a discussion of our second quarter financial performance. Thank you, Eric.

Speaker Change: Gearing revenue was $10.5 million, a 5% reduction year-over-year due to broad-based softness across major markets, offset by an uptick in wind gearing sales.

Speaker Change: Industrial solutions revenue was 6.5 million dollars, up 3% year-over-year, led by an increase in aftermarket gas turbine content, continuing the positive trend for this business, which began in 2022.

Speaker Change: In summary, I am pleased with the operating performance of all divisions through the second quarter, reflecting solid execution and the quick and substantial cost actions we took this year in response to demand fluctuations in both our heavy fabrications and gearing businesses.

Tom Ciccone: With that, I'll turn the call back over to Tom for a discussion of our second quarter financial performance.

Speaker Change: With that, I'll turn the call back over to Tom for a discussion of our second quarter financial performance.

Tom Ciccone: Thank you, Eric.

Tom Ciccone: Turn to slide five for an overview of our second quarter performance. In Q2, we delivered our sixth consecutive quarter of profitability during a period of softness within the onshore wind energy sector.

Thomas Ciccone: I'll turn to slide 5 for an overview of our second quarter performance. In Q2, we delivered our sixth consecutive quarter of profitability during a period of softness within the onshore wind energy sector. While revenue was down both sequentially and versus the prior year period, we were still able to maintain a 10% EBITDA margin, which resulted from a favorable sales mix and targeted cost reduction. In Q2, we generated $3.6 million of EBITDA compared to $5.4 million in the prior year. We generated net income of $0.5 million, or $0.02 per diluted share, compared to $1.4 million, or $0.07 per diluted share, in the prior year.

Tom Ciccone: Thank you, Eric. Turn to slide 5 for an overview of our second quarter performance.

Speaker Change: In Q2, we delivered our sixth consecutive quarter of profitability during a period of softness within the onshore wind energy sector.

Tom Ciccone: after. While revenue was down both sequentially and versus the prior year period, we were still able to maintain a 10 percent EBITDA margin, which resulted from a favorable sales mix and targeted cost reductions. In Q2, we generated 3.6 million EBITDA compared to 5.4 million in the prior year quarter. We generated net income of 0.5 million, or 2 cents per due to share, compared to 1.4 million, or 7 cents per due to the share in the prior year quarter.

Tom Ciccone: While revenue was down both sequentially and versus the prior year period, we were still able to maintain a 10% EBITDA margin, which resulted from a favorable sales mix and targeted cost reductions.

Tom Ciccone: In Q2, we generated $3.6 million of EBITDA compared to $5.4 million in the prior year quarter.

Tom Ciccone: We generated net income of $0.5 million, or $0.02 per diluted share, compared to $1.4 million, or $0.07 per diluted share in the prior year quarter.

Tom Ciccone: Turning to slide 6 for discussion of our Heavy Fabrication segment. Second quarter orders of 9.1 million are down 26 percent versus the prior year period, as we experience a decrease in orders for our proprietary PRS units. When related orders were up, as we received orders for multiple wind-repowering projects, but tower-related orders continue to be limited as a result of the existing backlog that originated as part of our large Q4 2022 supply agreement. Outside of wind and PRS, we experience a 54 percent increase in orders within our other markets, most notably within mining and industrial. Second quarter revenues were 19.6 million, down approximately 14 million versus the prior year quarter.

Thomas Ciccone: Turning to slide six for a discussion of our heavy fabrication, second quarter orders of $9.1 million are down 26% versus the prior year period, as we experienced a decrease in orders for our proprietary PRS units. Wind-related orders were up as we received orders for multiple wind repowering projects. Power-related orders, however, continue to be limited as a result of the existing backlog that originated as part of our large Q4 2022 supply agreement, outside of wind and PRS.

Speaker Change: Turning to slide 6 for discussion of our heavy fabrication segment.

Speaker Change: Second quarter orders of 9.1 million are down 26% versus the prior year period as we experienced a decrease in orders for our proprietary PRS units.

Speaker Change: Wind-related orders were up as we received orders for multiple wind repowering projects, but tower-related orders continue to be limited as a result of the existing backlog that originated as part of our large Q4 2022 supply agreement.

Thomas Ciccone: We experienced a 54% increase in orders within our other markets, most notably within mining and industrial. Second quarter revenues were $19.6 million, down approximately $14 million versus the prior year quarter. We sold 58 power sections versus 138 in the prior year period, a reduced level of power sales versus the prior year. We've been consistent with our previous commentary regarding the slowdown of Abilene production late in Q4 in response to customer demand. During the second quarter, we recognized segment EBITDA of $2.8 million, a decrease of $2.2 million versus the prior year period, primarily driven by decreased revenue levels, partially offset by targeted cost actions taken towards the end of 2023 and into 2024.

Speaker Change: Outside of wind and PRS, we experienced a 54% increase in orders within our other markets, most notably within mining and industrial.

Speaker Change: Second quarter revenues were $19.6 million, down approximately $14 million versus the prior year quarter.

Tom Ciccone: We sold 58 tower sections versus 138 in the prior year period. This reduced level of tower sales versus the prior year is consistent with our previous commentary regarding the slowdown of Avalan production late in Q4 in response to customer demand. During the second quarter, we recognized segment EBITDA of 2.8 million, a decrease of 2.2 million versus the prior year period, primarily driven by the decrease revenue levels, partially offset by targeted cost actions taken towards the end of 2023 and into 2024.

Speaker Change: We sold 58 tower sections versus 138 in the prior year period.

Speaker Change: This reduced level of tower sales versus the prior year is consistent with our previous commentary regarding the slowdown of abling production late in Q4 in response to customer demand.

Speaker Change: During the second quarter, we recognized segment EBITDA of $2.8 million, a decrease of $2.2 million versus the prior year period, primarily driven by the decreased revenue levels, partially offset by targeted cost actions taken towards the end of 2023 and into 2024.

Tom Ciccone: Turning to slide 7, gearing orders of 4.7 million are down both sequentially and versus the prior year. Oil and gas borders continue to remain muted due to the ongoing low and domestic development activity. We also saw decreases in orders within our steel and industrial markets. Starting in Q3, we have begun to see increased quoting activity specifically with our oil and gas customers and expect those orders to start to materialize. Segment revenue was 10.5 million, up over 2 million sequentially, but down 0.5 million compared to the prior year quarter. EBITDA increased 14% to 1.2 million in the second quarter, reflective of a higher margin sales mix and targeted cost reductions when compared to the prior year period.

Thomas Ciccone: Turn to slide 7, gearing orders of $4.7 million are down both sequentially and versus the prior year. Oil and gas orders continue to remain muted due to the ongoing lull in domestic development. We also saw decreases in orders within our steel and industrial markets.

Speaker Change: Turning to slide 7, gearing orders of $4.7 million are down both sequentially and versus the prior year.

Speaker Change: Oil and gas orders continue to remain muted due to the ongoing lull in domestic development activity.

Speaker Change: We also saw decreases in orders within our steel and industrial markets.

Thomas Ciccone: Starting in Q3, we have begun to see increased quoting activity, specifically with our oil and gas customers, and expect those orders to start to materialize. Segment revenue was $10.5 million, up over $2 million sequentially, but down $0.5 million compared to the prior year quarter. EBITDA increased 14% to $1.2 million in the second quarter, reflective of a higher margin sales amount, and targeted cost compared to the prior year. Turn to slide 8.

Speaker Change: Starting in Q3, we have begun to see increased quoting activity, specifically with our oil and gas customers, and expect those orders to start to materialize.

Speaker Change: segment revenue was 10.5 million up over 2 million sequentially but down 0.5 million compared to the prior year quarter

Speaker Change: EBITDA increased 14% to 1.2 million in the second quarter, reflective of a higher margin sales mix and targeted cost reductions when compared to the prior year period.

Tom Ciccone: Turning to slide 8, industrial solutions recorded orders of 4.5 million in the second quarter, down from 7.2 million in the prior year period. This was attributable to a decrease in demand for our core natural gas turbine offerings, most notably our aftermarket products. Segment revenue of 6.5 million represents a 3% increase over the prior year period. Despite the increase in revenue, we did see a modest decrease in EBITDA from 1 million in the prior year to 0.8 million in the current quarter. This decrease is a result of a less profitable mix of product sold and slightly higher operating costs when compared to the prior year period.

Thomas Ciccone: Industrial Solutions recorded orders of $4.5 million in the second quarter, down from $7.2 million in the prior year. This was attributable to a decrease in demand for our core natural gas turbine offerings, most notably our aftermarket products. Segment revenue of $6.5 million represents a 3% increase over the prior year period. However, despite the increase in revenue, we did see a modest decrease in EBITDA from $1 million in the prior year to $0.8 million in the current quarter. This decrease is a result of a less profitable mix of products sold and slightly higher operating costs when compared to the prior year period. Turning to slide nine.

Speaker Change: Turning to slide 8, Industrial Solutions recorded orders of $4.5 million in the second quarter, down from $7.2 million in the prior year period.

Speaker Change: This was attributable to a decrease in demand for our core natural gas turbine offerings, most notably our aftermarket products.

Speaker Change: Stagnant revenue of $6.5 million represents a 3% increase over the prior year period.

Speaker Change: Despite the increase in revenue, we did see a modest decrease in EBITDA from $1 million in the prior year to $0.8 million in the current quarter.

Speaker Change: This decrease is a result of a less profitable mix of products sold and slightly higher operating costs when compared to the prior year period.

Tom Ciccone: During the slide 9, during the second quarter, operating work in capital increased approximately $10 million. As we noted last quarter, this increase was expected as primarily a result of a change in terms of the major customer. Our deposit balance has now returned to a more normal operating level, and we expect there to be less volatility in this balance going forward. During the quarter, we did increase borrowings on our credit facility to fund the working capital increase, but we ended the quarter with greater than $18 million of cash and liquidity. This represents an increase over the prior year of more than $3 million at a comfortable level to support our operations.

Thomas Ciccone: During the second quarter, operating working capital increased approximately $10 million. As we noted last quarter, this increase was expected and is primarily a result of a change in terms with a major customer. Our deposit balance has now returned to a more normal operating level, and we expect there to be less volatility in this balance going forward. During the quarter, we did increase borrowings on our credit facility to fund the working capital increase, but we ended the quarter with greater than $18 million of cash and liquidity.

Speaker Change: Turn to slide nine.

Speaker Change: During the second quarter, operating working capital increased approximately $10 million. As we noted last quarter, this increase was expected and is primarily a result of a change in terms with a major customer.

Speaker Change: Our deposit balance has now returned to a more normal operating level, and we expect there to be less volatility in this balance going forward.

Speaker Change: During the quarter, we did increase borrowings on our credit facility to fund the working capital increase, but we ended the quarter with greater than 18 million of cash and liquidity.

Thomas Ciccone: This represents an increase over the prior year of more than $3 million and a comfortable level to support our operation. We expect operating working capital to remain relatively stable for the balance of 2020. Finally, with respect to our financial guidance... Today, we are introducing financial guidance for the third quarter of 2025. Given current expectations and beliefs, we anticipate third quarter revenue to be in a range of $36 to $38 million and adjusted EBITDA to be in a range of $1.7 to $2.5 million. That concludes my remarks. I will turn the call back over to Eric to continue our discussion. Thanks, Tom.

Speaker Change: This represents an increase over the prior year of more than $3 million at a comfortable level to support our operations.

Tom Ciccone: We expect operating work in capital to remain relatively stable for the balance of 2024.

Speaker Change: We expect operating working capital to remain relatively stable for the balance of 2024.

Tom Ciccone: Finally, with respect to our financial guidance, today we are introducing financial guidance for the third quarter of 2024. Given current expectations and beliefs, we anticipate third quarter revenue to be in a range of $36 to $38 million and adjusted EBITDA to be in a range of $1.7 to $2.5 million.

Speaker Change: Finally, with respect to our financial guidance, today we are introducing financial guidance for the third quarter of 2024.

Speaker Change: Given current expectations and beliefs, we anticipate third quarter revenue to be in a range of $36 to $38 million, and adjusted EBITDA to be in a range of $1.7 to $2.5 million.

Tom Ciccone: That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Speaker Change: That concludes my remarks. I will turn the call back over to Eric to continue our discussion.

Eric Blashford: Thanks, Tom.

Eric Blashford: Allow me to provide some thoughts as we enter Q3, beginning with our heavy fabrication segment. We believe domestic entrepreneur wind activity is poised to accelerate meaningfully in the 2025-2026 timeframe, given current indications of interest from customers. We are encouraged by the momentum in the wind-repowering segment, which we support through manufacturing that custom tower adapters require to upgrade legacy turbines. A sustained higher interest rate environment has impacted project economics for some developers, leading them to temporarily delay or defer the timing of their investments. However, the price of steel has been dropping steadily in recent quarters, which is positive for the wind industry.

Eric Blashford: Now allow me to provide some thoughts as we enter Q3, beginning with our heavy fabrication segment. We believe domestic onshore wind activity is poised to accelerate meaningfully in the 2025-2026 time frame, given current indications of interest from customers. We're encouraged by the momentum in the wind repowering sector, which we support through manufacturing custom tower adapters required to upgrade legacy turbines. However, a sustained higher interest rate environment has impacted project economics for some developers, leading them to temporarily delay or defer the timing of their investment.

Eric Blashford: Thanks, Tom.

Eric Blashford: Now, allow me to provide some thoughts as we enter Q3, beginning with our heavy fabrication segment. Thank you.

Speaker Change: We believe domestic onshore wind activity is poised to accelerate meaningfully in the 2025-2026 timeframe, given current indications of interest from customers.

Speaker Change: We're encouraged by the momentum in the wind repowering segment.

Speaker Change: which we support through manufacturing.

Speaker Change: that custom tower adapters required to upgrade legacy turbines.

Speaker Change: A sustained higher interest rate environment has impacted project economics for some developers, leading them to temporarily delay or defer the timing of their investments. However, the price of steel has been dropping steadily in recent quarters, which is positive for the wind industry.

Eric Blashford: However, the price of steel has been dropping steadily in recent quarters, which is positive for the wind industry. Nevertheless, in the interim, our cost structure remains aligned to reflect the period of lower production volumes at our tower facility while reassigning key talent in available capacity toward non-wind demand across a diverse end market. We remain highly constructive on the long-term economics of wind, particularly with the 10-year tax credit visibility afforded by the IRA.

Eric Blashford: Nevertheless, in the interim, our cost structure remains aligned to reflect a period of lower production volumes that are tower facilities, while reassigning key talent and available capacity toward non-wind demand across our diverse and markets. We remain highly constructive on the long-term economics of wind, particularly with a 10-year tax credit visibility afforded by the IRA.

Speaker Change: Nevertheless, in the interim, our cost structure remains aligned.

Speaker Change: to reflect the period of lower production volumes at our tower facilities.

Speaker Change: while reassigning key talent in available capacity toward non-win demand across our diverse end markets.

Speaker Change: We remain highly constructive on the long-term economics of wind, particularly with the 10-year tax credit visibility afforded by the IRA.

Eric Blashford: We are excited about the launch of our newest model in the family of natural gas pressure-reducing systems or PRSs. This new model, the L70, has a compact footprint and lighter weight versus our larger units, making it the ideal solution for industrial applications, such as primary or backup power systems and pipeline integrity projects. We are in the prototype phase now, with full release expected later this year.

Eric Blashford: We're excited about the launch of our newest model in the family of Natural Gas Pressure Reducing Systems, or PRS. This new model, the L70, has a compact footprint and lighter weight versus our larger units, making it the ideal solution for industrial applications, such as primary or backup power systems and pipeline integrity projects.

Speaker Change: We're excited about the launch of our newest model in the family of Natural Gas Pressure Reducing Systems, or PRSs.

Operator: time all participants are on a listen only mode. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference call is being recorded.

Speaker Change: This new model, the L70, has a compact footprint and lighter weight versus our larger units, making it the ideal solution for industrial applications, such as primary or backup power systems and pipeline integrity projects.

Eric Blashford: We're in the prototype phase now, with full release expected later this year. In our gearing segment, efforts to broaden our sales mix into less cyclical markets continue, positioning us to realize a more balanced, stable revenue profile. We are seeing some early wins as we leverage our new capabilities to expand beyond traditional gearing and to other precision machine products such as spindles and spindle housings, using foundry operations for structural housings and material handling applications. In addition to the experienced commercial sales agent who joined our team last quarter, we've recently added yet another key commercial resource with specific relationships in our target markets of aerospace and defense. Quoting activity remains elevated, with a year-over-year increase of 162%.

Operator: I would now like to turn the call over to your host, Mr. Tom Ciccone. Thank you, you may begin.

Speaker Change: We're in the prototype phase now, with full release expected later this year.

Eric Blashford: In our hearing segment, efforts to broaden our sales mix into less cyclical markets continue, positioning us to realize a more balanced, stable revenue profile. We are seeing some early winds, as we leverage our new capabilities to expand beyond traditional gearing, into other precision machine products, such as spindles and spindle housings, using foundry operations to the structural housings in material handling applications.

Tom Ciccone: Good morning, and welcome to the Broadwind Second Quarter 2024 Results Conference Call. Leading the call today is our CEO, Eric Blashford, and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer. We issued a press release before the market opened today detailing our second quarter results.

Speaker Change: In our gearing segment, efforts to broaden our sales mix into less cyclical markets continue, positioning us to realize a more balanced, stable revenue profile.

Speaker Change: We are seeing some early wins as we leverage our new capabilities to expand beyond traditional gearing into other precision machine products such as spindles and spindle housings used in foundry operations to the structural housings and material handling applications.

Tom Ciccone: I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectation and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliation of the historical, non-gap financial measures discussed during our call in the press release issue today.

Eric Blashford: Communications. In addition to the experienced commercial sales agent who joined our team last quarter, we recently added yet another key commercial resource with specific relationships in our target markets of aerospace and defense. Quoting activity remains elevated, with a year-over-year increase of 162%. So we're confident that our commercial strategy, combined with our industry-leading capabilities, will yield the diverse revenue growth we want. In industrial solutions, the momentum that we've experienced in the gas turbine industry in the first quarter continued into the second quarter, as our key customers are seeing strong demand for gas turbine equipment and services.

Speaker Change: In addition to the experienced commercial sales agent who joined our team last quarter, we've recently added yet another key commercial resource with specific relationships in our target markets of aerospace and defense.

Speaker Change: Quoting activity remains elevated with a year-over-year increase of 162 percent.

Eric Blashford: So we're confident that our commercial strategy, combined with our industry-leading capabilities, will yield the diverse revenue growth we want and Industrial Solutions. The momentum that we experienced in the gas turbine industry in the first quarter continued into the second quarter, as our key customers are seeing strong demand for gas turbine equipment and services. Quoting activity remained robust, up over 30% from the prior year.

Speaker Change: So we're confident that our commercial strategy, combined with our industry-leading capabilities, will yield the diverse revenue growth we want.

Speaker Change: and Industrial Solutions.

Speaker Change: The momentum that we've experienced in the gas turbine industry in the first quarter continued into the second quarter.

Tom Ciccone: At the conclusion of our prepared remarks, we will open the line for questions.

Speaker Change: as our key customers are seeing strong demand for gas turbine equipment and services.

Eric Blashford: Quoting activity remained robust, up over 30% from the prior year. Also, we are working closely with our key customers to develop capacity expansion plans necessary to support higher-than-expected gas turbine demand that they are forecasting over the next several years. We are also expanding our product breadth within the gas turbine market by supporting other high growth platforms such as air derivative turbines.

Eric Blashford: With that, I'll turn the call over to Eric. Thanks, Tom, and welcome to those joining us today. Broadwind delivered a solid Q2, highlighted by double-digit EBITDA margin, consistent with prior year results despite reduced revenue. Offsetting, a transitional pause in new wind tower demand, second quarter results benefited from a higher value sales mix, improved execution, and targeted cost reduction actions. We booked $18 million of orders in the second quarter, a year-over-year decline, as we saw reduced demand across all segments.

Speaker Change: Quoting activity remained robust of

Eric Blashford: Also, we are working closely with our key customers to develop capacity expansion plans necessary to support higher than expected gas turbine demand that they are forecasting over the next several years. You're also expanding our product breadth within the gas turbine market by supporting other high growth platforms such as the Air Derivative Turbine. In summary, I'm pleased with the strong operational performance from our team this quarter, as we continue to demonstrate strong execution on a strategic priority. We've reduced our cost structure during a transitional period for domestic onshore wind demand, while retaining and redeploying our talent.

Speaker Change: Also, we are working closely with our key customers to develop capacity expansion plans necessary to support higher-than-expected gas turbine demand.

Speaker Change: that they are forecasting over the next several years.

Speaker Change: You're also expanding our product breadth within the gas turbine market by supporting other high growth platforms such as air derivative turbines.

Eric Blashford: In summary, I'm pleased with the strong operational performance from our team this quarter, as we continue to demonstrate strong execution on strategic priorities. We've reduced our cost structure during a transitional period for domestic onshore wind demand while retaining and redeploying our talent. We continue to build a firm foundation for steady, profitable growth, serving the energy transition, infrastructure, and other key markets, and look forward to capitalizing on improved demand in the years ahead.

Speaker Change: In summary, I'm pleased with the strong operational performance from our team this quarter, as we continue to demonstrate strong execution on our strategic priorities.

Eric Blashford: Heavy fabrication saw reduced demand for our pressure reduction systems, partially offset by increased orders from the wind-repowering market. Gearing orders were reduced year-over-year, largely due to decreased demand from the industrial and steel sectors, while orders from our industrial solution segment softened compared to the unusually strong aftermarket orders seen last year. At a commercial level, we continue to expand our product mix within higher margin adjacent markets. The Broadwind Clean Fuels L-70, low-flow PRS unit, a third model in this product family, will be released in Q3 as planned, with customer interests expected to be high for this new model.

Speaker Change: We've reduced our cost structure during a transitional period for domestic onshore wind demand while retaining and redeploying our talent.

Eric Blashford: We continue to build a firm foundation for steady, profitable growth serving the energy transition, infrastructure, and other key markets and look forward to capitalizing on improved demand in the years ahead. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star 1 on your telephone. For confirmation, tell them to indicate your line is in the question. You may press star 2 if you'd like to remove your questions. For participants, use the speaker. It may be necessary to pick up your handset before pressing the button.

Speaker Change: We continue to build a firm foundation for steady, profitable growth.

Speaker Change: serving the energy transition, infrastructure, and other key markets, and look forward to capitalizing on improved demand in the years ahead.

Operator: With that said, I'll turn the call over to the moderator for the Q&A session.

Speaker Change: With that said, I'll turn the call over to the moderator for the Q&A session.

Operator: Thank you.

Operator: At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants, use a speaker equipment and maybe necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants, use a speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Eric Blashford: Quoting activity is elevated at all segments and in nearly all markets served, including some green shoots and oil and gas, which has been soft in recent quarters. Furthermore, the gearing division has completed all requirements for the AS 9100 quality certification, for which we expect to receive final approval later this quarter. Operationally, we continue to invest in cutting-edge technology to improve our process capabilities, reduce costs, and improve our profitability. Bradford Gearing has recently installed an industry leading Tia Koki Grining Center.

Operator: One moment, please, while we poll for questions.

Operator: One moment, please while we pause. Our first question comes from Justin Clare with Roth M. Please proceed with your question. Hi, good morning. Morning, Justin.

Speaker Change: One moment, please, while we poll for questions.

Justin Clare: Our first question comes from Justin Claire with Roth MKN. Please proceed with your question.

Speaker Change: Our first question comes from Justin Clare with Roth MKN. Please proceed with your question.

Justin Clare: Hi, good morning. Good morning, Justin. Good morning.

Eric Blashford: Good morning. So I just wanted to start off on Q2. You know, it sounds like there's a higher-value sales mix in the quarter, but I was wondering if you could just speak to the specifics a little bit more. And then, you know, guidance suggests the EBITDA margin could decline quarter over quarter. So wondering, you know, how the sales mix is anticipated to change and, you know, how that's impacting the margin as we move into Q3.

Speaker Change: Hi, good morning.

Justin Clare: I just wanted to start off on Q2. It sounds like there's a higher value sales makes in the quarter, but I was wondering if you could just speak to the specifics a little bit more, and then, you know, guidance suggests the EBITDA margin could decline quarter over quarter. So, wondering, you know, how the sales makes is anticipated to change and, you know, how that's impacting the margin as we move into Q3 here. Yeah, we've talked about it. In the first half, it's really benefited from a higher margin sales mix. You know, the material content percentage of doesn't impact the margins that we realize on some of our revenues.

Speaker Change: Morning, Justin.

Speaker Change: Morning.

Justin Clare: So, I just wanted to start off on Q2, you know, it sounds like there's a higher value sales mix in the quarter, but I was wondering if you could just speak to the specifics a little bit more, and then, you know, guidance suggests the EBITDA margin could decline quarter over quarter.

Eric Blashford: This new equipment replaces several older machines and includes real-time onboard quality inspection, ensuring that the finished product precisely matches the blueprint specifications before the park leaves the machine. We now have the people, qualifications, and technology to penetrate the aerospace and defense markets we target. Our focus on team member safety is yielded at 56% reduction and our recordable incident rate so far in 2024, well below the industry average. We have had zero lost time incidents this year.

Justin Clare: So wondering, you know, how the sales mix is anticipated to change and, you know, how that's impacting the margin as we move into Q3 here.

Eric Blashford: Yeah, you know, we've talked about it in the first half, and the first half really benefited from a higher-margin sales mix. The material content percentage doesn't impact our margins that we realize on some of our revenue. So as that fluctuates, we do see better or worse margins. So it just happens to be where we're seeing this more profitable mix; we've had more, more aftermarket sales, which is one of our more profitable activities. And, you know, again, I think we've said this in Q1, we do anticipate that that will reverse in the second half of the year. We do anticipate margins to decrease over the balance of the year.

Speaker Change: Yeah, we've talked about it, the first half has really benefited from a higher margin sales mix, you know, the material content percentage doesn't impact our...

Eric Blashford: So, as that fluctuates, we do see better or worse margins. So, it just happens to be where we're seeing this more profitable mix. We've had more aftermarket sales, which is one of our more profitable work. And, you know, again, I think we've said this in Q1. We do anticipate that that will, that will reverse in the second half of the year. We do anticipate margins to decrease over the balance of the year. Okay, got it.

Speaker Change: the margins that we realize on some of our revenue. So as that fluctuates, we do see better or worse margins. So it just happens to be where we're seeing this more profitable mix. We've had more aftermarket sales, which is one of our more profitable work.

Eric Blashford: Most importantly, we are keeping our people safe, but secondarily, we are seeing the financial benefit in reduced costs. Our quality systems, standard work deployment, and flexible skills training have allowed us to improve our response time and increase the profitability of the first article and smaller runs often associated with our new customers. Beginning in the first quarter, we undertook significant actions to align our cost structure with the current demand environment. In combination, these actions will contribute more than $4 million in annualized cost savings, which is evident in our results.

Speaker Change: And, you know, again, I think we've said this in Q1, we do anticipate that that will reverse in the second half of the year. We do anticipate margins to decrease over the balance of the year.

Eric Blashford: Okay, got it. And then I was wondering if you could just provide an update on kind of where we are with the long-term wind order that you are, you know, continuing to deliver here. You know how much of the order is remaining and then what utilization level does that support? I mean, my understanding was it was about 25% utilization that would be supported through the end of 2025. So, if you could just provide an update on is that still the expectation and then any potential you see to upsize that order to deliver, you know, potentially, deliver on potentially higher Yeah, thanks. Thanks, Justin. This is Eric.

Justin Clare: And then, I was wondering if you could just provide an update on kind of where we are with the long-term wind order that, that you are, you know, continuing to deliver here. You know how much of the order is remaining, and then what utilization level does that support? I mean, my understanding was it was about 25% utilization that would be supported through the end of 2025.

Speaker Change: Okay, got it.

Speaker Change: And then, I was wondering if you could just provide an update on kind of where we are with the long-term wind order that you are, you know, continuing to deliver here.

Eric Blashford: While total revenue declined versus year-ago levels given lower tower demand, our non-wind activity levels remain relatively stable as we see demand for our precision manufacturing capabilities across multiple markets. In Q2, we generated EBITDA about $3.6 million and net income of half a million dollars. This marks our sixth consecutive quarter of profitability despite lingering wind-related demand headwinds. Quoting activity in our non-wind market has been robust so far in 2024. We expect consistent order flow through the remainder of this year, despite the continuing softness in the oil and gas gear market.

Speaker Change: you know, how much of the order is remaining and then what utilization level does that support? I mean, my understanding was it was about 25% utilization that would be supported through the end of 2025.

Eric Blashford: So, do you just provide an update on is that still the expectation and then any potential you see to up size that order to deliver, you know, potentially deliver on potentially higher demand? Yeah, thanks.

Speaker Change: So, if you could just provide an update on is that still the expectation and then any potential you see to upsize that order to deliver, you know, potentially, deliver on potentially higher demand.

Eric Blashford: Yeah, you're correct. We did have an agreement with the customer to take the second year of that contract and spread it over 2024 and 2025. We do the we are working with them to deliver just that. We do have good visibility through certainly most of 2025, which would end up completing this particular portion of the contract, and we are discussing follow-on orders after that. So I think we've got good visibility through virtually all of 2025, certainly through the first three quarters, and it's clearing up in the fourth quarter of 2025. You're right about the capacity. That takes up about half the capacity of our Abilene plant.

Eric Blashford: Thanks, Justin. This is Eric. Yeah, you're correct. We did have the agreement with the customer to take the second year of that contract in spread over 2024 and 2025. We do; we are working with them to deliver just that. We do have good visibility through certainly most of 2025, which would end up completing this particular portion of the contract and our discussing follow-on orders after that. So, I think we've got good visibility through virtually all of 2025, certainly through the first three quarters, and it's clearing up in the fourth quarter of 2025. We, you're right about the capacity.

Speaker Change: Yeah, thanks, Justin. This is Eric. Yeah, you're correct. We did have the agreement with the customer.

Eric Blashford: to take the second year of that contract and spread it over 2024 and 2025. We are working with them to deliver just that. We do have good visibility through certainly most of 2025, which would end up completing this particular...

Eric Blashford: Within our heavy fabrication segment, Q2 revenue was $20 million. Down 42% from a year ago, primarily due to the decline in tower production and PRS shipments, partially offset by increased sales of mining equipment. Gearing revenue was $10.5 million. A 5% reduction year-over-year due to broad-based softness across major markets offset by an uptick in wind-gearing sales. Industrial solutions revenue was $6.5 million, up 3% year-over-year, led by an increase in after-market gas-driven content, continuing the positive trend for this business which began in 2022.

Speaker Change: portion of the contract and are discussing...

Speaker Change: follow-on orders after that. So I think we've got good visibility through virtually all of 2025, certainly through the first three quarters, and it's clearing up in the fourth quarter of 2025. You're right about the capacity. That takes up about half the capacity in our Abilene plant.

Justin Clare: That takes up about half the capacity, and our appling plant, and so we have more to sell. We've got some customer interest in that, but again, it's a bit of a softer market through 324 and ramping up 325 to a higher market in 2026. Yeah, just to add some color, you know, our backlog in that segment's about, you're just almost 110 million. I would say 90 million of that roughly is related to that order. Okay, got it. Appreciate it.

Speaker Change: And so we have more to sell. And we've got some customer interest in that, but again, it's a bit of a softer market through 3.24 and ramping up 3.25 to a higher mark in 2026.

Eric Blashford: And so we have more to sell. We've got some customer interest in that. But again, it's a bit of a softer market through 3.24 and ramping up to a higher market in 2026. And just to add some color, you know, our backlog in that segment is about, you know, just almost $110 million. I would say $90 million of that, roughly, is related to that order. Okay, got it.

Speaker Change: Yeah, just to add some color, you know, our backlog in that segment is about, just almost 110 million, I would say 90 million of that roughly is related to that order.

Eric Blashford: In summary, I am pleased with the operating performance of all divisions through the second quarter. Reflecting solid execution and the quick and substantial cost actions we took this year in response to demand fluctuations in both our heavy fabrications and gearing businesses.

Eric Blashford: And then, just following on that, you know, what level of interest you're seeing for your Manitowoc facility in terms of wind towers? And then you mentioned Abilene, but just trying to think through when we might see an increase in your order flow for wind and when you think the utilization level of your facilities might ramp up. Is it more into the 2026 time frame before we see a meaningful kind of inflection point? What are your thoughts?

Justin Clare: And then, so, wondering, just the following on that, you know, what level of interest you're seeing for your Manatello Art facility in terms of wind towers, and then you mentioned Abilene, but just trying to think through when we might see an increase in your order flow for wind and when you think the utilization level of your facilities might ramp up. Is it more into the 2026 timeframe before we see a meaningful kind of inflection point? What are your thoughts? Well, I would say just that it would be, I would call it through 2025. I'd see the ramp up coming towards the end for the second half of 2025 into a stronger 2026, and even to get a stronger 2027.

Speaker Change: Okay, got it. Appreciate it.

Speaker Change: Just following on that, you know, what level of interest you're seeing for your Manitowoc facility in terms of wind towers?

Tom Ciccone: With that, I'll turn the call back over to Tom for a discussion of our second quarter financial performance. Thank you, Eric. Turn to slide five for an overview of our second quarter performance. In Q2, we delivered our sixth consecutive quarter of profitability during a period of softness within the onshore wind energy sector, after. While revenue was down both sequentially and versus the prior year period, we were still able to maintain a 10 percent EBITDA margin, which resulted from a favorable sales mix and targeted cost reductions.

Speaker Change: You mentioned Abilene, but just trying to think through when we might see an increase in your order flow for wind and when you think the

Tom Ciccone: In Q2, we generated 3.6 million EBITDA compared to 5.4 million in the prior year quarter. We generated net income of 0.5 million, or 2 cents per due to share compared to 1.4 million, or 7 cents per due to the share in the prior year quarter.

Speaker Change: Utilization level of your facilities might ramp up. Is it is it more into the 2026 time frame before we see a meaningful kind of inflection point? What are your thoughts?

Eric Blashford: What I would say, Justin, it would be, I would call it through 2025; I'd see the ramp-up coming towards the end, the second half of 2025, into a stronger 2026 and even yet a stronger 2027. Interest with Manitowoc? We have two customers that expressed interest in Manitowoc, but again, that's more towards the end of 2025 when they're seeing some of their projects come to fruition. Okay, I got it. I appreciate it. Thanks, Justin. Our next question comes from Amit Dayal, with H.C. Wainwright. Hey, good morning, everyone.

Speaker Change: What I would say, Justin, it would be, I would call it through 2025, I'd see the ramp-up coming towards the end, the second half of 2025, into a stronger 2026.

Justin Clare: Interest with Manatello Art; we have two customers that express interest in Manatello Art, but again, that's more towards the end of 2025 when they're seeing some of their projects come to fruition. Okay, got it. I appreciate it. Thank you. Thanks, Justin.

Speaker Change: and even to get a stronger 2027.

Speaker Change: Interest with Manitowoc. We have two customers that expressed interest in Manitowoc, but again that's more towards the end of 2025 when they're seeing some of their projects come to fruition.

Tom Ciccone: Turning to slide 6 for discussion of our heavy fabrication segment. Second quarter orders of 9.1 million are down 26 percent versus the prior year period, as we experience a decrease in orders for our proprietary PRS units. When related orders were up, as we received orders for multiple wind-repowering projects, but tower-related orders continue to be limited as a result of the existing backlog that originated as part of our large Q4 2022 supply agreement.

Speaker Change: Okay, got it. I appreciate it. Thank you.

Amit Dayal: Our next question comes from Amit Dael with HC Wayne Wright. Please proceed with your question. Good morning, everyone.

Speaker Change: Thanks, Justin.

Speaker Change: Our next question comes from Amit Dayal with H.C. Wainwright. Please proceed with your question.

Amit Dayal: Thank you for taking my questions.

Amit Dayal: Morning. I just feel like falling up in the wind questions. You know, it looks like you are seeing some positive developments for orders in the future, but at what point do you expect customers to start booking capacity for orders? You know, that may start materializing, or need to be delivered in 2025, you know, on top of the backlog you already have. I would expect to start seeing orders towards the end of 2024 to secure that capacity towards the end of 2025. Typically, again, as I mentioned before, the lead times for towers are about six months, a little bit shorter now because steel is shorter lead time.

Eric Blashford: Thank you for taking my questions. Good morning. I just feel like following up on the wind questions. You know, it looks like you are seeing some positive, I guess, developments for all those in the future. But at what point do you expect customers to start booking capacity for orders? You know, that may start materializing or need to be delivered in 2025. You know, on top of the backlog you already have, I'd expect to start seeing orders towards the end of 2025 and in the first quarter of 20, sorry, the end of 2024 into the first quarter of 2025 to secure that capacity towards the end of 2025.

Speaker Change: Hey, good morning everyone. Thank you for taking my questions. Good morning. I just feel like following up on the wind questions.

Amit Dayal: It looks like you are seeing some positive, I guess, developments for orders in the future, but at what point do you expect customers to start booking capacity for orders?

Tom Ciccone: Outside of wind and PRS, we experience a 54 percent increase in orders within our other markets, most notably within mining and industrial. Second quarter revenues were 19.6 million, down approximately 14 million versus the prior year quarter. We sold 58 tower sections versus 138 in the prior year period. This reduced level of tower sales versus the prior year is consistent with our previous commentary regarding the slowdown of avalan production late in Q4 in response to customer demand.

Speaker Change: You know that may start materializing or need to be delivered in 2025, you know on top of the backlog you already have

Eric Blashford: Typically, again, as I mentioned before, the lead times for towers are about six months, a little bit shorter now because steel has a shorter lead time. So they have time, but they certainly don't want to miss out on the capacity that they need. So I'd expect them to start booking orders for 2025, towards the end of 24, into the first quarter of 25 for deliveries at the end of 25 and into 2026. And just, again, on just a... Clarification on the available capacity, is it 50% available capacity in wind, or is it 75% available? Yes, that's a good question. If we assume that both of our plants are available for wind, then we don't have any other production going on.

Speaker Change: I would expect to start seeing orders towards the end of 2025 and in the first quarter of 20, I'm sorry, end of 2024.

Speaker Change: into the first quarter of 2025.

Speaker Change: to secure that capacity towards the end of 2025. Typically, again, as I mentioned before, the lead times for towers are about six months, a little bit shorter now because steel has a shorter lead time. So they have time, but they certainly don't want to miss out on capacity that they need. So I'd expect them to start booking orders for 2025.

Tom Ciccone: During the second quarter, we recognized segment EBITDA of 2.8 million, a decrease of 2.2 million versus the prior year period, primarily driven by the decrease revenue levels, partially offset by targeted cost actions taken towards the end of 2023 and into 2024.

Eric Blashford: So they have time, but they certainly don't want to miss out on capacity that they need. So I'd expect them to start booking orders for 2025 towards the end of 2024, in the first quarter, 25 for deliveries at the end of 2025 and into 2026.

Speaker Change: towards the end of 24, into first quarter 25 for deliveries at the end of 25 and into 2026.

Tom Ciccone: Turning to slide 7, gearing orders of 4.7 million are down both sequentially and versus the prior year.

Eric Blashford: And just again, on just clarification on the available capacity, is it 50 percent available capacity in wind, or is it 75 percent available capacity in wind? Yes, that's a good question. If we assume that both of our plants are available for wind, then we don't have other production going on. I would say we're at 75 percent; we're 25 percent booked through the majority of 2025 for our capacity. So we've got plenty of capacity to sell both in terms of winter wind tower capacity, but other industrial fabrication capacity as well.

Speaker Change: Okay, let's do that.

Speaker Change: and just again on just a clarification on the available capacity is it 50% available capacity in wind or is it 75% available capacity in wind?

Tom Ciccone: Oil and gas borders continue to remain muted due to the ongoing low and domestic development activity. We also saw decreases in orders within our steel and industrial markets.

Speaker Change: Yes, that's a good question. If we assume that both of our plants are available for wind, then we don't have other production going on. I would say we're at 25% booked.

Tom Ciccone: Starting in Q3, we have begun to see increased quoting activity specifically with our oil and gas customers and expect those orders to start to materialize. Segment revenue was 10.5 million, up over 2 million sequentially, but down 0.5 million compared to the prior year quarter. EBITDA increased 14% to 1.2 million in the second quarter reflective of a higher margin sales mix and targeted cost reductions when compared to the prior year period.

Eric Blashford: I would say we're a 25% book through the majority of 2025 for our capacity. So we've got plenty of capacity to sell, both in terms of wind tower capacity but other industrial fabrication capacity as well. Okay. Thank you, Eric, for that. You bet.

Speaker Change: through the majority of 2025 for our capacity. So we've got plenty of capacity to sell, both in terms of wind tower capacity, but other industrial fabrication capacity as well.

Amit Dayal: Okay, thank you very much for that. You bet. Sure.

Speaker Change: Okay, thank you, Eric, for that. You bet. Sure. On the industrial solution side, you know, you've been making good progress in sort of, you know, diversifying into new opportunities outside OWIN.

Eric Blashford: Sure. On the industrial solutions side, you know, you've been making good progress in sort of, you know, diversifying into new opportunities outside of WIM. It looks like the more recent efforts have been on just improving operational efficiencies, and you're seeing the results of that in your financials already. From an investing and just...

Amit Dayal: On the industrial solution side, you've been making good progress in sort of diversifying into new opportunities outside of wind. It looks like the more recent efforts have been on just improving operational efficiency than you're seeing the results of that in your financials already.

Tom Ciccone: Turning to slide 8, industrial solutions recorded orders of 4.5 million in the second quarter, down from 7.2 million in the prior year period. This was attributable to a decrease in demand for our core natural gas turbine offerings, most notably our aftermarket products. Segment revenue of 6.5 million represents a 3% increase over the prior year period.

Speaker Change: It looks like the more recent efforts have been on just improving operational efficiency, and you are seeing the results of that in your financials already. Thomas, investing and, you know, just…

Eric Blashford: From investing, and just an investment perspective in terms of continuing to grow the non-win side of things, are we already taking steps to capture some of those opportunities through new investments, et cetera? Or is that going to take a little bit longer, given maybe balance sheet constraints, et cetera that you may have? Well, we do have a three-year plan which includes investments in technology and capability improvement, both to keep ourselves current and competitive with our present customers, but also to provide capacity and capability for new customers. And so part of that three-year plan does include some investment in the Manitowoc facility to accommodate growth in such as material handling, steel, marine, a little bit of defense, up potential there in Manitowoc, as well as I mentioned, you didn't ask specifically, but I mentioned a prepared remarks what we've done for gearing.

Eric Blashford: Page 1 of 2, Are we already taking steps to, you know... Capture some of those opportunities through new investments, etc., or is that going to take a little bit longer, given sort of... Maybe balance sheet constraints, et cetera, that you may have? Well, we do have a three-year plan, which includes investments in technology and capability improvements, both to keep ourselves current and competitive with our present customers but also to provide capacity and capability for new customers.

Speaker Change: or an investment perspective in terms of, you know, continuing to grow the non-win side of things.

Tom Ciccone: Despite the increase in revenue, we did see a modest decrease in EBITDA from 1 million in the prior year to 0.8 million in the current quarter. This decrease is a result of a less profitable mix of product sold and slightly higher operating costs when compared to the prior year period.

Speaker Change: Are we already taking steps to, you know...

Speaker Change: Thank you.

Speaker Change: Maybe balance sheet constraints, et cetera, that you may have.

Tom Ciccone: During the slide 9, during the second quarter, operating work in capital increased approximately $10 million. As we noted last quarter, this increase was expected as primarily a result of a change in terms of the major customer.

Thomas: Well, we do have a three-year plan which includes investments in technology and capabilities improvements, both to keep ourselves current

Thomas: and competitive with our present customers, but also to provide capacity and capability for new customers.

Eric Blashford: And so part of that three-year plan does include some investment in the Manitowoc facility to accommodate growth in areas such as material handling, steel, marine, and a little bit of defense potential there in Manitowoc. As well, as I mentioned, you didn't ask specifically, but I mentioned in prepared remarks what we've done for gearing. We have a method in five multi-access, multi-task machines for gearing, which really allows us to penetrate new markets versus just traditional gearing and gearboxes.

Tom Ciccone: Our deposit balance has now returned to a more normal operating level and we expect there to be less volatility in this balance going forward. During the quarter, we did increase borrowings on our credit facility to fund the working capital increase, but we ended the quarter with greater than $18 million of cash and liquidity. This represents an increase over the prior year of more than $3 million at a comfortable level to support our operations. We expect operating work in capital to remain relatively stable for the balance of 2024.

Speaker Change: And so part of that three-year plan does include some investment in the Manitowoc facility to accommodate growth in such as material handling, steel, marine, a little bit of defense potential there in Manitowoc.

Speaker Change: As well, as I mentioned, you didn't ask specifically, but I mentioned in prepared remarks what we've done for gearing. We've invested in five multi-access, multi-task machines in gearing, which really allows us to penetrate new markets versus just traditional gearing and gearboxes.

Eric Blashford: We've met it in five multi-access multi-task machines in gearing, which really allows us to penetrate new markets versus just traditional gearing in gearboxes.

Amit Dayal: Okay, and let me think about the opportunity that you can address within for gearing, et cetera. That's how big good revenues potentially be with the current infrastructure you have for the gearing segment. We've modeled that, and depending on if the level of completeness we bring materials in, in other words, we can bring materials in roughly, rough machined, which helps with capacity, I think we could easily reach north of 70 million within our presence for walls here. So virtually, nearly, nearly double, nearly double. Okay. Understood. I would say, by and large, the vast majority of those changes have been implemented already.

Eric Blashford: Okay, and you know, when you think about the, Vikram Chandra, CEO of Alphabet and Google. We've modeled that, and depending on the level of completeness we bring materials in, in other words, we can bring materials in rough machined, which helps with capacity, I think we could easily reach north of 70 million within our present four walls here. So, virtually, nearly double, nearly double. Thank you. Just one last one on the cost side of things.

Tom Ciccone: Finally, with respect to our financial guidance, today we are introducing financial guidance for the third quarter of 2024. Given current expectations and beliefs, we anticipate third quarter revenue to be in a range of $36 to $38 million and adjusted EBITDA to be in a range of $1.7 to $2.5 million.

Speaker Change: Okay. And, you know, when you think about the...

Speaker Change: opportunity that you can address, you know, within, say, gearing, etc., but how big could revenues potentially be with, you know, the current infrastructure you have for the gearing segment?

Speaker Change: We've modeled that, and depending on...

Tom Ciccone: That concludes my remarks.

Eric Blashford: I will turn the call back over to Eric to continue our discussion. Thanks, Tom.

Speaker Change: If the level of completeness we bring materials in, in other words, we can bring materials in rough machined, which helps with capacity, I think we could easily reach north of 70 million within our present four walls here.

Eric Blashford: Allow me to provide some thoughts as we enter Q3, beginning with our heavy fabrication segment. We believe domestic entrepreneur wind activity is poised to accelerate meaningfully in the 2025-2026 timeframe, given current indications of interest from customers. We are encouraged by the momentum in the wind-repowering segment, which we support through manufacturing, that custom tower adapters require to upgrade legacy turbines. A sustained higher interest rate environment has impacted project economics for some developers, leading them to temporarily delay or defer the timing of their investments.

Speaker Change: So virtually, nearly double. Nearly double. Okay, understood.

Eric Blashford: There's $4 million in annualized cost savings. Have all of those, you know..., been implemented so far? Are you still working on making those changes? I would say, by and large, the vast majority of those changes have already been implemented.

Speaker Change: Institute.

Speaker Change: Have all of those, you know, been implemented so far? Are you still working on, you know,

Speaker Change: making those changes.

Speaker Change: I would say, by and large, the vast majority of those changes have been implemented already. We may not see 100% of the benefit until the second half of the year, but all of them have been implemented as of today.

Amit Dayal: We may not see 100% of the benefit until the second half of the year, but all of them have been implemented as of today. Okay.

Eric Blashford: However, the price of steel has been dropping steadily in recent quarters, which is positive for the wind industry. Nevertheless, in the interim, our cost structure remains aligned to reflect a period of lower production volumes that are tower facilities, while reassigning key talent and available capacity toward non-wind demand across our diverse and markets. We remain highly constructive on the long-term economics of wind, particularly with a 10-year tax credit visibility afforded by the IRA.

Eric Blashford: We may not see 100% of the benefits until the second half of the year, but all of them have been implemented as of today. Thank you. And that's all I have.

Amit Dayal: Thank you, John. So that's all I have, yes. I appreciate it. Thank you. Thanks, Amit.

Eric Blashford: I appreciate it. Thank you. Our next question comes from Eric Stine with Craig Hallam. Please proceed with your question. Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Hey, good morning.

Speaker Change: Okay. Thank you, Tom. That's all I have, guys. I appreciate it. Thank you. Thanks a lot.

Eric Stein: Our next question comes from Eric Stein with Craig Hallum. Please proceed with your question. Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Hey. Good morning.

Speaker Change: Our next question comes from Eric Stein with Craig Hallam. Please proceed with your question.

Eric Blashford: So just going back to the large wind order, just to clarify, it sounds like you are working towards potentially a follow-on order rather than an order that would fill up more of 25 capacity, and I just ask because that customer's got a pretty sizable project in that neck of the woods, you know, that it's quite bullish about, you know, just wondering if there is any potential that you could add to something that might impact 25 or Well, to reiterate, we've got lots of visibility through most of 2025, through the third quarter of 2025, and indications of interest and indications of interest from that and other customers beyond that.

Speaker Change: Hi, Eric. Hi, Tom.

Eric Stein: So just going back to the large wind order, just to clarify, so it sounds like you are working towards potentially a follow-on order rather than an order that would fill up more of 25 capacity. And I just asked because that customer has got a pretty sizable project in that neck of the woods, you know, that it's quite bullish about. You know, just wondering, is there any potential that you add to something that might impact 25, or is it really a 26 event, if there is a follow-on? Well, to reiterate, we've got lots of visibility through most of 2025, through the third quarter of 2025, and indications of interest and indications of interest from that and other customers beyond that.

Speaker Change: Hi Eric, good morning. Hey, good morning. So just going back to the large wind order, just to clarify. So it sounds like you are...

Eric Blashford: We are excited about the launch of our newest model in the family of natural gas pressure-reducing systems or PRSs. This new model, the L70, has a compact footprint and lighter weight versus our larger units, making it the ideal solution for industrial applications, such as primary or backup power systems and pipeline integrity projects. We are in the prototype phase now, with full release expected later this year.

Speaker Change: working towards potentially a follow-on order rather than an order that would fill up more of 25 capacity and I just asked because that customer's got a

Speaker Change: Pretty sizable project in that neck of the woods that it's quite bullish about. Just wondering, is there any potential that you add to something that might impact 25 or is it really a 26 event if there is a follow-on?

Eric Blashford: So the answer is yes, we could see a ramp-up of production towards the end of 25 or through 25 towards a higher level of output towards the end of 25 and into 26. Okay.

Eric Blashford: In our hearing segment, efforts to broaden our sales mix into less cyclical markets continue, positioning us to realize a more balanced, stable revenue profile. We are seeing some early winds, as we leverage our new capabilities to expand beyond traditional gearing, into other precision machine products, such as spindles and spindle housings, using foundry operations to the structural housings in material handling applications.

Speaker Change: Well, to reiterate, we've got lots of visibility through most of 2025, through the third quarter of 2025, and indications of interest from that and other customers beyond that.

Eric Blashford: So the answer is yes. We could see a ramp up production towards the end of 25 or through 25 towards a higher level of output towards the end of 25 and into 26.

Speaker Change: The answer is yes. We could see a ramp-up of production towards the end of 2025 or through 2025 towards a higher level of output towards the end of 2025 and into 2026.

Eric Blashford: Okay, got it. And maybe if you think about how past cycles have played out, you're sitting there right now with roughly 50% of Avalan open, but that isn't a pretty ideal location. So, I mean, do I anticipate that if I were to see another OEM put in an order that kind of starts to spur activity because there is some scarcity value to that open capacity, or is it something where, you know, it's just really hard to call the timing yet you're confident in the long term and you'll see how it plays out? Well, we try to; we follow the projects.

Eric Blashford: And maybe if you think about how past cycles have played out, you're sitting there right now with roughly 50% of Abilene open, but that is in a pretty ideal location. So, I mean, do you anticipate that if you were to see another OEM put in an order, that kind of starts to spur activity because there is some scarcity value to that open capacity? Or is it something where, you know, it's just really hard to call the timing, you're confident in the long term, and you'll just see how it plays out?

Eric Blashford: Communications. In addition to the experienced commercial sales agent who joined our team last quarter, we recently added yet another key commercial resource with specific relationships in our target markets of aerospace and defense. Quoting activity remains elevated with a year-over-year increase of 162%, so we're confident that our commercial strategy, combined with our industry leading capabilities, will yield the diverse revenue growth we want.

Speaker Change: Okay, got it. And maybe if you think about how past cycles have played out...

Speaker Change: You're sitting there right now with what roughly 50% of Abilene open

Speaker Change: but that is in a pretty ideal location. So, I mean, do you anticipate that if you were to see another OEM put in an order, that kind of starts to spur activity because there is some scarcity value to that open capacity? Or is it something where?

Eric Blashford: In industrial solutions, the momentum that we've experienced in the gas turbine industry in the first quarter continued into the second quarter, as our key customers are seeing strong demand for gas turbine equipment and services. Quoting activity remained robust, up over 30% from the prior year. Also, we are working closely with our key customers to develop capacity expansion plans necessary to support higher than expected gas turbine demand that they are forecasting over the next several years. We are also expanding our product breadth within the gas turbine market by supporting other high growth platforms such as air derivative turbines.

Speaker Change: It's just really hard to call the timing. You're confident in the long term, and you'll just see how it plays out.

Eric Blashford: Well, we try to follow the projects. We also follow the geography of the projects, Eric. So if a project that is an example were to the northwest of us, where we have some competition, customers might not need our capacity as much, but if it's east or southeast of us, they very much need it. I think the demand for Abilene will be strong, certainly through our planning period. When we look out three years, we think that demand will be strong. Wood Mackenzie and other data analytics firms support that.

Eric Blashford: We also follow the geography of the projects here. So if a project that is an example would be to the northwest of us where we have some competition, the customers might not need our capacity as much, but if it's east or southeast of us, they very much need it. So, I think the demand for Avalan will be strong certainly through our planning period. And we look out three years. We think that will be strong with McKenzie and other data analytics firms' support that. But again, it really depends on the project geographies when, when the projects come to fruition and where they come to fruition.

Speaker Change: Well, we follow the projects. We also follow the geography of the projects, Eric. So, if a project, as an example, would be to the northwest of us, where we have some competition,

Eric: The customers might not need our capacity as much, but if it's to the east or southeast of us, they very much need it. So, I think the demand for Abilene will be strong.

Eric: Certainly through our planning period, and we look out three years, we think that we'll be strong.

Eric: Wood Mackenzie and other data analytics firms support that, but again, it really depends on the project geographies, when the projects come to fruition and where they come to fruition.

Eric Blashford: But again, it really depends on the project geographies, when the projects come to fruition, and where they come to fruition. If it's near Abilene, there's definitely a demand for us. If it's 400 or 500 miles to the north or the west of us, the customers have other choices besides Broadwind. Okay, that is helpful, Culler. And then lastly, you mentioned the ultimate capacity you see in

Eric Blashford: In summary, I'm pleased with the strong operational performance from our team this quarter, as we continue to demonstrate strong execution on strategic priorities. We've reduced our cost structure during a transitional period for domestic onshore wind demand while retaining and redeploying our talent. We continue to build a firm foundation for steady, profitable growth, serving the energy transition, infrastructure, and other key markets, and look forward to capitalizing on improved demand in the years ahead.

Eric Stein: If there's near Abilene, there's definitely a demand for us. If it's 400 or 500 miles to the north or the west of us, the customers have other choices besides Broadwood. Okay. That is helpful color.

Speaker Change: If it's near Abilene, there's definitely a demand for us. If it's four or five hundred miles to the north or the west of us, the customers have other choices besides Broadwind.

Eric Blashford: And then lastly, you mentioned the ultimate capacity you see in gearing of an I know error based on defense or two key markets. With that, with what AS 9100 approval on the horizon, I don't know if you've done it, but are you willing to kind of size how you see the aerospace and defense opportunities you think medium and long term? Well, I'll tell you that the opportunity is huge. It's in the billions. These, the customers are interested in our capabilities because they are somewhat unique within our size of company. That's why I call it kind of industry-leading technology.

Speaker Change: Okay.

Speaker Change: That is helpful, Culler. And then, lastly, you mentioned the ultimate capacity you see in gearing. And I know aerospace and defense are two key markets with that.

Eric Blashford: I know aerospace and defense are two key markets with the AS9100 approval on the horizon. I don't know if you've done it, but are you willing to size how you see the aerospace and defense opportunity as you think medium and long term? I'll tell you that the opportunity is huge. It's in the billions.

Tom Ciccone: With that said, I'll turn the call over to the moderator for the Q&A session. Thank you.

Speaker Change: with the, what, AS9100.

Speaker Change: Correct. Approval on the horizon. I don't know if you've done it, but are you willing to, you know, kind of size how you see the aerospace and defense opportunity as you think medium and long term?

Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants, use a speaker equipment and maybe necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Speaker Change: I'll tell you that the opportunity is huge. It's in the billions.

Eric Blashford: The customers are interested in our capabilities because they are somewhat unique within our size of company. That's why I call it kind of industry-leading technology. We're having indications of interest from multiple customers. But when you're talking about defense or aerospace, the timing of FAIs, the timing of qualifications, tends to be rather lengthy in terms of a year to 18 months.

Speaker Change: The customers are interested in our capabilities because they are somewhat unique.

Speaker Change: within our size of company. That's why I call it kind of industry-leading technology. We're having indications of interest from multiple customers, but when you're talking about defense or aerospace, the timing of the FAIs, the timing of qualifications.

Eric Blashford: We're having indications of interest from multiple customers, but when you're talking about the fence of aerospace, the timing of the F.A.I., the timing of qualifications tends to be rather lengthy in terms of a year to 18 months. I think it could be a size of a portion of our business certainly as we end to 2025. We're talking in certainly seven figures. I don't know that I would call it 5 million, but certainly the expectations are high in that market. But again, it takes time to earn these customers. And once you do, they're very sticky. Yep.

Eric Blashford: Our first question comes from Justin Claire with Roth MKN. Please proceed with your question. Hi, good morning. Good morning, Justin. Good morning. I just wanted to start off on Q2. It sounds like there's a higher value sales makes in the quarter, but I was wondering if you just speak to the specifics a little bit more, and then, you know, guidance suggests the EBITDA margin could decline quarter over quarter. So, wondering, you know, how the sales makes is anticipated to change and, you know, how that's impacting the margin as we move into Q3 here.

Speaker Change: tends to be rather lengthy in terms of a year to 18 months. I think it could be a sizable portion of our business, certainly as we end 2025. We're talking in certainly seven figures.

Eric Blashford: I think it could be a sizable portion of our business. Certainly, as we end 2025, we're talking in seven figures. I don't know that I would call it five million, but certainly the expectations are high in that market. But again, it takes time to earn these customers, and once you do... They are very sticky.

Speaker Change: I don't know that I would call it $5 million, but certainly the expectations are high in that market. But again, it takes time to earn these customers, and once you do,

Eric Blashford: Yep. Okay. Thank you very much. Thank you, Eric. Our next question comes from Martin Malloy with Johnson Rice. Please proceed with your question. Good morning.

Eric Stein: Okay. Thank you very much. Thank you, Eric.

Speaker Change: They are very sticky.

Speaker Change: Yep. Okay, thank you very much.

Martin Malloy: Our next question comes from Martin Malloy with Johnson Rice. Please proceed with your question. Good morning. Just wanted to ask about the natural gas systems business within industrial. Could you maybe talk about what you're seeing from customers in terms of demand, and remind us a little bit about that business, in terms of who you're working for, there, OEMs or the owners of the facilities, and it appears that demand for natural gas turbines is, that took some right here. Just curious how you'd see your growth. Right. Yeah. Thank you.

Speaker Change: Thank you, Eric.

Speaker Change: Our next question comes from Martin Malloy with Johnson Rice. Please proceed with your question.

Eric Blashford: Yeah, we've talked about it. In the first half, it's really benefited from a higher margin sales mix. You know, the material content percentage of doesn't impact the margins that we realize on some of our revenues. So, as that fluctuates, we do see better or worse margins. So, it just happens to be where we're seeing this more profitable mix. We've had more aftermarket sales, which is one of our more profitable work, and, you know, again, I think we've said this in Q1. We do anticipate that that will, that will reverse in the second half of the year. We do anticipate margins to decrease over the balance of the year.

Eric Blashford: Just wanted to ask about the natural gas systems business within industrial. Could you maybe talk about what you're seeing from customers in terms of, and remind us a little bit about that business in terms of who you're working for there, the OEMs or the owners of the facilities. And it appears that demand for natural gas turbines is all right here. Thank you, that's a great question. We do see demand for virtual pipeline equipment increasing.

Speaker Change: Good morning. Just wanted to ask about the natural gas systems business within industrial. Could you maybe talk about what you're seeing from customers in terms of

Speaker Change: demand and remind us a little bit about that business in terms of who you're working for there, the OEMs or the owners of the facilities and you know it appears that demand for natural gas turbines is

Speaker Change: That took all right here.

Speaker Change: and just curious how you...

Speaker Change: Thank you. We do see demand for virtual pipeline equipment increasing. We see that market to be between $500-600 million, growing to about $900 million over the next 7-8 years.

Eric Blashford: That's a great question. We do see demand for virtual pipeline equipment increasing. We see that market to be between five and six hundred million, growing to about nine hundred million dollars over the next seven or eight years. It is capital intense. It's a capital product. So our customers who are natural gas providers, if you're a company that needs natural gas or via virtual pipeline, if you don't have a traditional pipeline to your facility, and you need either temporary or permanent gas supply, you will call one of our customers, such as Sunbridge, Liberty. There's a number of them that are operators and provide natural gas.

Eric Blashford: We see that market to be between $500 million and $600 million, growing to about $900 million over the next seven or eight years. It is capital-intensive, it's a capital product, so our customers who are natural gas providers, if you're a company that needs natural gas via a virtual pipeline, if you don't have a traditional pipeline to your facility and you need either a temporary or permanent gas supply, you will call one of our customers, such as Sunbridge, Liberty, there are a number of them that are operators and provide natural gas.

Eric Blashford: Okay, got it. And then, I was wondering if you could just provide an update on kind of where we are with the long-term wind order that, that you are, you know, continuing to deliver here. You know, how much of the order is remaining and then what utilization level does that support? I mean, my understanding was, it was about 25% utilization that would be supported through the end of 2025. So, do you just provide an update on is that still the expectation and then any potential you see to up size that order to deliver, you know, potentially, deliver on potentially higher demand?

Speaker Change: It is capital intense, it's a capital product, so our customers, who are natural gas providers...

Speaker Change: If you're a company that needs natural gas via virtual pipeline, if you don't have a traditional pipeline to your facility and you need either temporary or permanent gas supply, you will call one of our customers, such as Sunbridge, Liberty. There's a number of them.

Eric Blashford: And so, the reason this market can be somewhat spiky is because there are initial tranches of orders as they build up their equipment to satisfy the market, but as the market expands and they get jobs that they may not have thought they were going to get, they buy equipment, which is why our PRS demand was a little bit softer in Q2. We're seeing great indications of interest in our... funnel. But when customers need the products, it's normally when they win a job, and then they'll purchase them from us directly.

Martin Malloy: And so the reason this market can be somewhat spiky is because there's been an initial tranche of orders as they build up their equipment to satisfy the market, but as the market expands and they get jobs that they may not have thought they were going to get, they buy equipment, which is why our PRS demand was a little bit softer in Q2. We're seeing great indications of interest in our funnel. But when the customers need the products, it's normally when they win a job, and then they'll purchase from us directly. Thank you. I'll turn back.

Speaker Change: that are operators and provide natural gas.

Speaker Change: And so the reason this market can be somewhat spiky is because there's been an initial tranche of orders as they build up their...

Eric Blashford: Yeah, thanks. Thanks, Justin, this is Eric. Yeah, you're correct. We did have the agreement with the customer to take the second year of that contract in spread over 2024 and 2025. We do, we are working with them to deliver just that. We do have good visibility through certainly most of 2025, which would end up completing this particular portion of the contract and our discussing follow on orders after that. So, I think we've got good visibility through virtually all of 2025, certainly through the first three quarters, and it's clearing up in the fourth quarter of 2025.

Speaker Change #101: their equipment to satisfy the market, but as the market expands and they get jobs that they may not have thought they were going to get, they buy equipment. Which is why our PRS demand was a little bit softer in Q2. We're seeing great indications of interest in our

Speaker Change #102: funnel, but when the customers need the products is normally when they win a job and then they'll purchase from us directly.

Eric Blashford: Thank you. I'll turn back. Thanks, Marty. We have reached the end of the question and answer session. I'd now like to turn the call back over to Eric Blashford for closing. Yes, thanks everyone for listening, and I look forward to coming back to you to report our Q3 results. Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change #102: Thank you. I'll turn it back.

Operator: Thanks, Marty. We have reached the end of the question to answer session.

Speaker Change #103: Thanks Marty.

Eric Blashford: I'd now like to turn the call back over to Eric Lashford for closing comments. Yes, thanks everyone for listening, and I look forward to coming back to you to report our Q3 results. Thank you.

Speaker Change #103: We have reached the end of the question and answer session. I'd now like to turn the call back over to Eric Blashford for closing comments.

Eric Blashford: We, you're right about the capacity. That takes up about half the capacity and our appling plant, and so we have more to sell. We've got some customer interest in that, but again, it's a bit of a softer market through 324 and ramping up 325 to a higher market in 2026. Yeah, just to add some color, you know, our backlog and that segment's about, you're just almost 110 million, I would say 90 million of that roughly is related to that order.

Speaker Change #104: Yes, thanks everyone for listening and I look forward to coming back to you to report our Q3 results.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your...

Speaker Change #105: Thank you.

Eric Blashford: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change #106: Hello, I'm Thomas Ciccone, I'm Thomas Ciccone, I'm Thomas Ciccone,

Eric Blashford: Okay, got it. Appreciate it. And then, so, wondering, just the following on that, you know, what level of interest you're seeing for your Manatello Art facility in terms of wind towers, and then you mentioned Abilene, but just trying to think through when we might see an increase in your order flow for wind and when you think the utilization level of your facilities might ramp up. Is it more into the 2026 timeframe before we see a meaningful kind of inflection point?

Eric Blashford: What are your thoughts? Well, I would say just that it would be, I would call it through 2025. I'd see the ramp up coming towards the end for the second half of 2025 into a stronger 2026, and even to get a stronger 2027. Interest with Manatello Art, we have two customers that express interest in Manatello Art, but again, that's more towards the end of 2025 when they're seeing some of their projects come to fruition.

Justin Clare: Okay, got it. I appreciate it. Thank you. Thanks, Justin.

Amit Dayal: Our next question comes from Amit Dael with HC Wayne Wright. Please proceed with your question.

Amit Dayal: Good morning, everyone. Thank you for taking my questions. Morning. I just feel like falling up in the wind questions. You know, it looks like you are seeing some positive, I guess, developments for orders in the future, but at the what point do you expect customers to start booking capacity for orders? You know, that may start materializing, or need to be delivered in 2025, you know, on top of the backlog you already have.

Amit Dayal: I would expect to start seeing orders towards the end of 2024 to secure that capacity towards the end of 2025. Typically again, as I mentioned before, the lead times for towers are about six months, a little bit shorter now because steel is shorter lead time. So they have time, but they certainly don't want to miss out on capacity that they need. So I'd expect them to start booking orders for 2025 towards the end of 2024, in the first quarter, 25 for deliveries, at the end of 2025 and into 2026.

Amit Dayal: And just again, on just clarification on the available capacity, is it 50 percent available capacity in wind or is it 75 percent available capacity in wind? Yes, that's a good question. If we assume that both of our plants are available for wind, then we don't have other production going on. I would say we're at 75 percent, we're 25 percent booked through the majority of 2025 for our capacity. So we've got plenty of capacity to sell both in terms of winter wind tower capacity, but other industrial fabrication capacity as well. Okay, thank you very much for that. You bet. Sure.

Eric Blashford: On the industrial solution side, you've been making good progress in sort of diversifying into new opportunities outside of wind. It looks like the more recent efforts have been on just improving operational efficiency than you're seeing the results of that in your financials already.

Eric Blashford: From investing, and just an investment perspective in terms of continuing to grow the non-win side of things, are we already taking steps to capture some of those opportunities through new investments, et cetera? Or is that going to take a little bit longer, given maybe balance sheet constraints, et cetera that you may have? Well, we do have a three-year plan which includes investments in technology and get capabilities improvement, both to keep ourselves current and competitive with our with our present customers, but also to to provide capacity and capability for new customers.

Eric Blashford: And so part of that three-year plan does include some investment in the Manitwock facility to accommodate growth in such as material handling, steel, marine, a little bit of defense, up potential there in Manitwock, as well as I mentioned, you didn't ask specifically, but I mentioned a prepared remarks what we've done for gearing. We've met it in five multi-access multi-task machines in gearing, which really allows us to penetrate new markets versus just traditional gearing in gearboxes.

Eric Blashford: Okay, and let me think about the opportunity that you can address within for gearing, et cetera. That's how big good revenues potentially be with the current infrastructure you have for the gearing segment. We've modeled that and depending on If the level of completeness we bring materials in, in other words, we can bring materials in, roughly, rough machined, which helps with capacity, I think we could easily reach north of 70 million within our presence for walls here.

Eric Blashford: So virtually, nearly, nearly double, nearly double. Okay. Understood. I would say by and large, the vast majority of those changes have been implemented already. We may not see 100% of the benefit until the second half of the year, but all of them have been implemented as of today. Okay. Thank you, John. So that's all I have, yes. I appreciate it. Thank you. Thanks, Amit.

Eric Stine: Our next question comes from Eric Stein with Craig Hallum. Please proceed with your question. Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Hey. Good morning.

Eric Blashford: So just going back to the large wind order, just to clarify, so it sounds like you are working towards potentially a follow-on order rather than an order that would fill up more of 25 capacity. And I just asked because that customer has got a pretty sizable project in that neck of the woods, you know, that it's quite bullish about. You know, just wondering, is there any potential that you add to something that might impact 25 or is it really a 26 event, if there is a follow-on?

Eric Blashford: Well, to reiterate, we've got lots of visibility through most of 2025 through the third quarter of 2025 and indications of interest and indications of interest from that and other customers beyond that. So the answer is yes. We could see a ramp up production towards the end of 25 or through 25 towards a higher level of output towards the end of 25 and into 26. Okay, got it.

Eric Blashford: And maybe if you think about how past cycles have played out, you're sitting there right now with roughly 50% of avalan open, but that isn't a pretty ideal location. So, I mean, do you anticipate that if you were to see another OEM put in an order that kind of starts to spur activity because there is some scarcity value to that open capacity or is it something where, you know, it's just really hard to call the timing yet you're confident in the long term and you'll see how it plays out?

Eric Blashford: Well, we try to, we follow the projects. We also follow the geography of the projects here. So if a project that is an example would be to the northwest of us where we have some competition, the customers might not need our capacity as much, but if it's east or southeast of us, they very much need it. So, I think the demand for avalan will be strong certainly through our planning period. And we look out three years.

Eric Blashford: We think that will be strong with McKenzie and other data analytics firms support that. But again, it really depends on the project geographies when, when the projects come to fruition and where they come to fruition. If there's near Abilene, there's definitely a demand for us. If it's 400 or 500 miles to the north or the west of us, the customers have other choices besides Broadwood. Okay. That is helpful color.

Eric Blashford: And then lastly, you mentioned the ultimate capacity you see in gearing of an I know error based on defense or two key markets. With that, with what AS 9100 approval on the horizon, I don't know if you've done it, but are you willing to kind of size how you see the aerospace and defense opportunities you think medium and long term? Well, I'll tell you that the opportunity is huge. It's in the billions.

Eric Blashford: These, the customers are interested in our capabilities because they are somewhat unique within our size of company. That's why I call it kind of industry leading technology. We're having indications of interest from multiple customers, but when you're talking about the fence of aerospace, the timing of the F.A.I., the timing of qualifications tends to be rather lengthy in terms of a year to 18 months. I think it could be a size of a portion of our business certainly as we end to 2025.

Eric Blashford: We're talking in certainly seven figures. I don't know that I would call it 5 million, but certainly the expectations are high in that market. But again, it takes time to earn these customers. And once you do, they're very sticky. Yep. Okay.

Eric Stine: Thank you very much.

Eric Stine: Thank you, Eric.

Martin Malloy: Our next question comes from Martin Malloy with Johnson Rice.

Martin Malloy: Please proceed with your question. Good morning. Just wanted to ask about the natural gas systems business within industrial. Could you maybe talk about what you're seeing from customers in terms of demand, and remind us a little bit about that business, in terms of who you're working for there, OEMs or the owners of the facilities, and it appears that demand for natural gas turbines is, that took some right here. Just curious how you'd see your growth. Right. Yeah. Thank you.

Eric Blashford: That's a great question. We do see demand for virtual pipeline equipment increasing. We see that market to be between five and six hundred million growing to about nine hundred million dollars over the next seven or eight years. It is capital intense. It's a capital product. So our customers who are natural gas providers, if you're a company that needs natural gas or via virtual pipeline, if you don't have a traditional pipeline to your facility, and you need either temporary or permanent gas supply, you will call one of our customers, such as sunbridge, liberty.

Eric Blashford: There's a number of them that are operators and provide natural gas. And so the reason this market can be somewhat spiky is because there's been initial tranche of orders as they build up their equipment to satisfy the market, but as the market expands and they get jobs that they may not have thought they were going to get, they buy equipment, which is why our PRS demand was a little bit softer in Q2. We're seeing great indications of interest in our funnel. But when the customers need the products, it's normally when they win a job and then they'll purchase from us directly. Thank you. I'll turn back. Thanks, Marty.

Operator: We have reached the end of the question to answer session.

Eric Blashford: I'd now like to turn the call back over to Eric Lashford for closing comments. Yes, thanks everyone for listening, and I look forward to coming back to you to report our Q3 results. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your...