Q4 2024 TPI Composites Inc Earnings Call
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Good afternoon, and welcome to the TPI composites fourth quarter and full year of 'twenty 'twenty four earnings conference call.
Speaker Change: At this time I'd like to turn the conference over to Jason Workman Investor Relations for TPI composites.
You may begin.
Jason Workman: Thank you operator, I would like to welcome everyone to TPI composites fourth quarter 2024 earnings call, we will be making forward looking statements. During this call that are subject to risks and uncertainties, which could cause actual results to differ materially.
Jason Workman: Detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which.
Which can be found on our website TPI composites dotcom.
Jason Workman: Today's presentation will include references to non-GAAP financial measures.
Jason Workman: You should refer to the information contained in the slides accompanying today's presentation for definitions information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures.
Jason Workman: With that let me turn the call over to Bill cyclic TPI composites, President and CEO.
Speaker Change: Thanks, Jason and good afternoon, everyone and thank you for joining our call. In addition to Jason and I'm here with Ryan Miller, our CFO.
Jason Workman: Let's turn to slide five.
Jason Workman: In the first half of the year, we took decisive action to restructure the TPI portfolio by divesting the automotive business and shutting down the Nordics Matamoros plant both of which were lossmaking businesses that had burdened our financial results. We also started up our transition 10 lines to next generation blades, which significantly improved our performance.
Jason Workman: And utilization in the second half of the year.
Jason Workman: Building on the momentum from the third quarter I'm pleased to report that our operational performance continues to improve fourth quarter revenue increased year over year by over 17% with utilization of 91% free cash flow was also very strong in the quarter at $83 million and we ended the year with 197 million of unrestricted cash.
Jason Workman: We continue to maintain ongoing dialogues with our customers and suppliers to align on short and midterm demand operational priorities quality expectations and cost targets as we mentioned on our last call. Our customers are asking for all the volume we can get out of our Mexico factories for the U S market in 2025, So I think we have.
Jason Workman: Responded by ramping up production lines in Mexico to support 24 by seven operations.
Jason Workman: While we began investing in the additional shifts in the fourth quarter of 'twenty 'twenty four the impact of the added volume won't be realized until the second quarter. However will continue to benefit our business moving forward.
Jason Workman: Our commitment to continuous improvement driven by our lean culture, and our relentless pursuit of operational excellence has put us on a trajectory in 2025 to realize an $80 million improvement in adjusted EBITDA over 'twenty 'twenty four we will continue to explore opportunities for further footprint optimization with our customers. We recently signed in.
Jason Workman: Agreement with GE ever know about to restart production at our Iowa facility. Later this year. This facility initially focused on supporting G. East two megawatt platform is expected to create over 400, good paying jobs with further additions expected as additional lines under discussion are at at.
Jason Workman: Last quarter, we announced that we had secured rights to a strategically located manufacturing facility to support anticipated growth in the U S market.
Jason Workman: Interest in in discussions with Oems regarding this facility had been strong we anticipate announcing the next steps for this facility soon.
Jason Workman: Last quarter, we also announced an expansion of our relationship with vast etc, India facility, while discussions with other Oems regarding the remaining idle capacity at that facility are encouraging both for an Indian onshore market experiencing significant growth as well as the cost competitiveness of our Indian operation to serve the global market.
Jason Workman: From a finance perspective sales for the quarter were $346 5 million adjusted EBITDA was $1 2 million and below our expectations for a few reasons first sales were impacted by a targeted reduction in wind blade inventory included in contract assets driven by working capital initiatives. This inventory.
Jason Workman: Lori reduction impacted net sales for the quarter as lower blade inventory cost directly correlate to lower revenue under the cost to cost revenue recognition method for our blade contracts now that that we lowered overall inventory by $54 million in the quarter, which favorably impacted free cash flow for the quarter as well next we recorded a net.
Jason Workman: $6 million change in estimate for legacy warranty matters to account for updated cost and execution plans.
Jason Workman: As I mentioned earlier, we also invested $2 million in additional resources to enable that 24 by seven schedule at certain of our Mexico facilities to support our customers' demand in the U S market in 'twenty five and beyond.
Jason Workman: When looking at our ongoing operations and without the items I just outlined our adjusted EBITDA margin in the fourth quarter was approximately 5% very nice progress towards our long term EBITDA target.
Jason Workman: Please turn to slide six.
Jason Workman: As we continue our lean journey and focus on driving down costs through operational efficiencies and eliminating waste, while delivering world class quality no manufacturing initiative will ultimately be more impactful to T. P. I N. The wind industry than the implementation of blade a share over the past 18 months, we have been working internally too.
Jason Workman: Establish manufacturing operations that will enable us to drive what we believe will be the industry's gold standard for quality blades latest share represents a unique combination of technologies and processes to control and validate the manufacturing of utility scale wind turbine blades. These technologies include methods to document verify.
Jason Workman: Automate and prevent inconsistency or abnormalities from occurring during the manufacturing process technologies.
Jason Workman: Technology is unique to blade of share include AI aided vision solutions selective automation and robotic systems advanced sensors and inspection technologies.
Speaker Change: We are looking to move beyond trailing indicators that have been the norm of our industry since its inception to providing real time feedback to correct and prevent issues from occurring during the manufacturing process. We are also evaluating the capabilities of the methods of manufacturing inspection used to validate the products produced today and it's only by understanding.
Speaker Change: The unique intersection between requirements manufacturing methods and inspection solutions and the capabilities of each can we build and validate products in a new and robust way.
Speaker Change: We are rolling out the initial features a blade assure now and expect to have all of our plants up and running by the end of the year.
Speaker Change: We have also recently launched a centralized lean awareness, providing employees with access to training materials dashboards and best practices across the organization. This one stop resource will empower every member of the TPI families to contribute to continuous improvement and innovation in their daily work moving forward, we will continue to.
Speaker Change: Best in innovation and technology to strengthen our competitive edge and solidify tpi's position as the Premier Global blade provider in the onshore wind market.
From a supply chain perspective, we continue to prioritize strong relationships with our supply chain partners and open communication is crucial as we navigate industry uncertainty to enable us to ensure timely delivery cost optimization and operational flexibility.
Speaker Change: We faced logistics challenges in 'twenty 'twenty four we anticipate a much smoother operating environment in 2025, given the uncertainty potential tariffs may bring to the market. We will closely monitor new developments and continue our contingency planning with our customers with that said, we expect our supply chain to deliver our projected year over year.
Speaker Change: Decrease in raw material costs of nearly 8%.
Speaker Change: Yeah.
Speaker Change: With respect to the wind market, while acknowledging near term challenges, including regulatory uncertainty and obstacles such as permitting delays interconnection issues chare offs inciting restrictions as well as broader economic factors like elevated interest rates and nagging inflation, we remain confident in the long term prospects of onshore.
Speaker Change: Our wind with global energy demand expected to double in the coming years, driven by increased demand coming from AI and data centers, along with expanded advanced manufacturing and all of the above approach will be required to meet that demand renewables, namely onshore wind are able to cost effectively meet that demand right now.
Speaker Change: Well the EU market also presents a long term growth opportunity significant challenges remain competition from Chinese manufacturers and the ongoing impact of hyperinflation in Turkey, a continue to pose risks for TPI steps proposed by the EU like the net zero industrial accident auction resilience guide.
<unk> could help to level the playing field for certain players the ultimate benefit to component suppliers like TPI. However is still uncertain.
Speaker Change: In December we committed to a restructuring plan in Turkey, a to rationalize our workforce in response to lower forecasted near term demand primarily for the EU.
Speaker Change: Notwithstanding we remain encouraged by the interest expressed from Oems and our available capacity demand for domestically manufactured wind energy equipment trick Yea remained strong in part due to the resumption of the Yucca tender process announced late last year as well as Turkey, a being one of Europe's largest wind markets given the domestic content rich.
Speaker Change: Clairmont for blades, we are optimistic that there will be continued demand for capacity in Turkey with.
Speaker Change: With the operational challenges of 'twenty 'twenty four behind US, we anticipate significant financial improvement in 2025.
Speaker Change: We expect revenue from continuing operations to increase to a range of 1.4 to $1 $5 billion driven by increased blade shipments from Mexico for the U S market, partially offset by reduced revenue from Turkey, and India. While adjusted EBITDA is expected to improve by 80 plus million dollars over 'twenty 'twenty four driven by <unk>.
Speaker Change: Higher sales volume lower startup and transition costs, the absence of losses from the Nordics Matamoros facility and cost savings as.
Speaker Change: As we enter 'twenty 'twenty five the inflection point in the U S. Wind market continues to shift to the right and the ultimate impact of proposed tariffs and or changes or modifications to existing regulations in the U S is presently unknown. This coupled with the challenges in the EU creates uncertainty in the industry's near term outlook and as.
Speaker Change: We increased our focus on ensuring that we have sufficient liquidity to weather the storm and the right level of leverage realized relative to our EBITDA and free cash flow generation and therefore, we are working with our board of directors and our external advisers to evaluate options to optimize our capital structure for the current environment.
Speaker Change: Definitive plants have not yet been finalized this remains a priority we anticipate providing further details of our plans throughout the year with that I'll turn the call over to Ryan to review our financial results. Thanks, Bill. Please turn to slide eight in the fourth quarter of 2024, net sales were $346 $5 million compared to 200.
Ryan: $94 $3 million for the same period in 2023, an increase of 17, 7% net sales of wind blades to another wind related sales increased by 54 $2 million or 19, 2% to $336 million for the three months ended December 31, 2024, as compared to $281 $8 million.
Speaker Change: For the same period in 2023.
Speaker Change: The increase was primarily driven by higher sales volume and higher average sales prices for wind blades due to a shift of product mix to new and longer blade, including the resumption of production at our previously idle facility in Juarez, Mexico. This.
Speaker Change: This increase also reflects the absence of a four week shutdown at one of our plants in the prior year due to supply chain disruption caused by out of specification materials.
Speaker Change: These increases were partially offset by lower volumes at our India facility as we began the transition of ablate site and the closure of our Nordics Matamoros plant.
Speaker Change: Gil surface inspection and repair services sales decreased $2.1 million or 19, 9% to $10 $5 million for the three months ended December 31, 2024, as compared to $12 $6 million in the same period in 2023. The decrease was primarily due to the mix of revenue versus warranty activity in the quarter.
Speaker Change: Adjusted EBITDA was $1 $2 million for the three months ended December 31, 2024, as compared to an adjusted EBITDA loss of $24 $5 million during the same period in 2023.
Speaker Change: Adjusted EBITDA margin was <unk>, 4% as compared to an adjusted EBITDA margin loss of eight 3% in the same period in 2023. The improvement was primarily driven by the absence of losses from our Nordics Matamoros facility, which was shut down at the end of the second quarter 2024 increased volume at our other Mexico locations, lower startup and transition costs and <unk>.
Speaker Change: Cost savings initiatives. These improvements were partially offset by unfavorable changes in estimate for pre existing warranties and higher labor costs in Turkey and Mexico.
Speaker Change: Moving to slide nine we ended the quarter with $197 million of unrestricted cash and cash equivalents and $670 million net debt free cash flow was $83 $2 million in the fourth quarter of 2024 compared to negative free cash flow of $15 4 million in the same period in 2023, the net generation of cash in the fourth quarter of 2024 was.
Speaker Change: Primarily due to improved cash earnings and working capital improvements focused on our contract asset balance, where we decreased inventory levels and increased customer advances.
Speaker Change: We continue to believe our current cash position provides us with the flexibility to meet the near term demands of the business and continued to invest in growth for lines into rooftop today.
Speaker Change: A summary of our financial guidance for 2025 can be found on slide 10.
Speaker Change: We anticipate sales from continuing operations in the range of $1 4 billion to $1 5 billion, representing a high single digit year over year growth at the midpoint of the guidance.
Speaker Change: This projected growth is primarily driven by increased bleach shipments for our Mexico facilities to support the U S market and the planed reopening of our iOS site, partially offset by projected reduced sales from our Turkey, and India facilities, driven by primarily by anticipated lower demand from our Nordics lines.
Speaker Change: We expect to have six lines in startup and transition in 2025, we expect average selling prices to remain relatively flat year over year field Services' revenue is expected to greatly increase more than 50% driven by a shift of technicians back to historical levels of revenue generating activity.
Speaker Change: We expect EBITDA margin from continuing operations to be in the range of 2% to 4%.
Speaker Change: This improvement from 2024 is primarily driven by higher sales volume reduced startup and transition costs. The absence of losses from the Nordics Matamoros facility and cost savings achieved through supply chain optimization and lean initiatives.
Speaker Change: We expect capital expenditures of about $25 million to $30 million in 2025.
Speaker Change: We concluded 2024 with 34 dedicated production lines anticipate exiting 2025 at this level. He line changes planned for 2025 included the startup of two new lines in Iowa, the transition of two lines in Mexico in the first quarter addition of two new lines in India to replace two lines no longer at the contract and a planned reduction in <unk>.
Speaker Change: Your lines in Turkey are expected in the middle of the year 2025 utilization expected to improve to the mid eighties compared to 77% in 2024, driven by reduced startup and transition activity versus 2024.
Bill Cyclic: With that I'll turn the call back over to Bill.
Bill Cyclic: Thanks, Ryan Please turn to slide 12, while acknowledging near term global and industry challenges, including regulatory uncertainty in the U S and the EU with global energy demand expected to double in the coming years and all of the above approach will be required to meet that demand onshore wind is able to cost effectively meet a significant portion of that demand right.
Bill Cyclic: Now we are a critical part of the onshore wind value chain to the long term future of onshore wind remains a significant opportunity for us and we will continue to focus on driving safety quality productivity and cost to remain a key player in the industry.
Bill Cyclic: We also in the call for Q&A, I'll conclude saying I'm encouraged by the progress we've made over the last year, including shedding lossmaking operation starting after transitioning 10, new manufacturing lines and significantly streamlining operations and improving quality all while doing it safely as we ever have and I want to once again extend my gratitude.
Bill Cyclic: To all of our TPI associates for their continued commitment and dedication to TPI in our mission to safely decarbonize in electrified the world I'll now turn it back to the operator and open the call for questions.
Speaker Change: Thank you Sir at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Yourself from the queue at any time by pressing star one.
Speaker Change: Again that is star one to ask a question.
Speaker Change: I'll pause for a moment to allow questions to queue.
Speaker Change: And we'll move first to Mark Strouse with J P. Morgan.
Mark Strouse: Yes, good evening, thanks for taking our questions.
Mark Strouse: So I wanted to start with policy Bill I mean, as you said theres a lot of uncertainty about what may or may not happen with the I R. A but just curious if you can talk about with with what has been enacted so far has there been any impact maybe from.
Mark Strouse: The day, one executive orders with permitting anything like that that you can comment on.
Mark Strouse: Yeah, I, you know and thanks for your thanks for listening and thanks for your question Mark.
Mark Strouse: I would say we haven't felt the direct impact today as as we've talked about before we are.
Mark Strouse: We're doing whatever we can to to produce as much volume after the U S market this year.
Mark Strouse: That has not changed from our from a customer standpoint.
Mark Strouse: We have heard as you probably have in the press discussions about federal permitting on private land et cetera et cetera.
Mark Strouse: That would be.
Mark Strouse: F. A a or 404 permits from Army Corps of engineers et cetera, but again from our perspective, we have not seen a direct impact at this point.
Mark Strouse: Okay, and then just a couple of modeling questions. If I can so the the startup fences go into 24, seven with a couple of lines in Mexico.
Mark Strouse: It sounds fairly immaterial from a from a transition expense, but just wanted to see if you could quantify what that impact might be in <unk>.
Mark Strouse: And then.
Mark Strouse: You know obviously there was a lot going on in 2024 with utilization rates on a quarterly basis, just curious how we should be thinking about.
Mark Strouse: You've guided to 85% for the year, but how should we think about that kind of on a quarterly cadence. Thank you.
Mark Strouse: Yeah.
Speaker Change: Hey, Mark I'll start with the investments, we're making in 24 seven.
Mark Strouse: So.
Mark Strouse: As we move forward, we were converting three of our four factories down in Mexico. The 24 seven operations.
Mark Strouse: And some of that is behind us or it was that we invested a couple of million dollars in at towards the end of Q3, and then a couple more million in Q4, it'll probably end up being four 5 million that will invest in that with most of that being in the first quarter and then that will more than pay itself back in the second half of the year as we get that increased volumes.
Mark Strouse: Mark I apologize is staring to another question can you repeat your second question.
Mark Strouse: Yeah, sorry, Ryan try to jam it in there.
Mark Strouse: Just how to think about utilization rates throughout the year on a quarterly basis, Yes, you bet.
Mark Strouse: Yeah. So the first quarter is going to be kind of interesting its our weaker weakest quarter as we get things ramped back up after the holidays.
Mark Strouse: For the year, we're expecting mid eighties, the second and third quarter will be our best quarters as they traditionally are in the third quarter will probably be a little bit better than second I would expect that our first quarter will be somewhere around the 70% range, maybe low 70 east because we are we have six lines in startup and transition and for those lines will be in existing.
Mark Strouse: Plants that will be starting up in the first quarter and then the other two lines or in Iowa that will start up probably towards the tail end of the second quarter.
Mark Strouse: For the first quarter will be our weakest kind of I think in the low seventies, and then migrating up to the mid to upper eighties, and the second second and third quarter with some opportunity to go a little bit above that depending on.
Mark Strouse: How successful we are in converting to 24, seven and how rapidly that pays off fourth quarter will probably step down just a touch of it easily doesn't the holidays for us.
Mark Strouse: Okay. Thank you.
Mark Strouse: Once again.
Speaker Change: A question. It is star one on your telephone Keypad will go next to Andrew <unk> with Morgan Stanley.
Speaker Change: Good evening guys. Thanks for taking the question.
Speaker Change: I wanted to start out.
Speaker Change: With the question on on demand.
Speaker Change: <unk> centre at the start of the call you talked about strong demand out of your facilities in Mexico, and I guess I'm just trying to cross some commentary that we're hearing out of one of your big customers in North America really highlighting that demand for onshore wind.
Speaker Change: Remains relatively soft outside of Repower and it feels like repowering might be the area of strength. So is it fair to conclude that the demand that youre seeing in 2025 for North America is mostly driven by the Repowering opportunity and then I guess second to that if that is true and this is mostly repowering is how.
Speaker Change: Or are you conversing with your.
Speaker Change: Customers to ensure that utilization remains steady beyond 2025, just given how lumpy repowering.
Speaker Change: Thank you.
Speaker Change: Yeah, I I guess I would say, there's probably a portion of our.
Speaker Change: Production, that's going to Repowering, Andrew but.
Speaker Change: We're working off their backlog and I think the latest I heard was soft order volume in the first half.
Speaker Change: But that doesn't mean that we're not fulfilling orders from last year or the year before so again all of our demand from our customers for 25 is as I said, we're all out in our U R.
Speaker Change: Mexico plants.
We don't know what volumes look like yet.
Speaker Change: Im a firm perspective for 26 and beyond.
Speaker Change: That will well, we'll learn about that a little bit more as we get through through the first half of the year, but from a 25 perspective. The demand remains strong we haven't seen any any let down from that perspective.
Speaker Change: And my guess is there is a share of that that is re power just given the size blades, we're building but.
Speaker Change: Again.
Speaker Change: I, we haven't seen anything any meaningful drop off or indications of drop off for 2025 deliveries at this point.
Speaker Change: Okay. That's helpful context.
Speaker Change: And then maybe just a follow up on the tariff point for a second.
Kevin: Yes, Kevin.
Speaker Change: 90 day window here of delaying on tariffs in Mexico, but curious how you how the conversations have gone with the customers. What are what are they sharing arrangements look like are they built into the contracts or is it more a.
Speaker Change: Delivery by delivery negotiation with the customer in terms of who is bearing the risk associated with those tariffs.
Speaker Change: Yes, most of it are driven by the standard inco terms in our poser or contract so.
Speaker Change: In some cases, we are ex works, which means as soon as we complete the blade and roll it out the doors of the factory at peak times, the responsibility of our customers. So they would be responsible for any import duties or export duties.
Speaker Change: And so that's that's the case with our contracts with our customers out of Mexico is that our customers today are responsible for tariffs or or border taxes. If you will.
Speaker Change: So how are the discussions we're having with our customers are we don't know what's going to happen.
Speaker Change: We've looked at options as far as accelerating delivery or not.
Speaker Change: Obviously, we continue to look at footprint from a long term standpoint.
Speaker Change: But right now it's business as usual and.
Speaker Change: Contingency planning in the background on what we May do with those if those tariffs come into play and then and just remember if you look at the overall cost of a blade compared to the entire turbine itself as well as balance of plant.
Speaker Change: About 17%. So if you if even if it was a 25% tariff and again I'm not downplaying the impact, but it's about a 3% to 4% impact on the overall cost.
Speaker Change: Woodmac, just put out a study that set of 7% to 10% for the entire turbine if those 25% tariffs went into effect for both Canada and Mexico based on their estimate of what source from both countries. So again.
Speaker Change: When and if they come into play.
Speaker Change: We will have alternatives, there and we will look at.
Speaker Change: Options with our customers but.
Speaker Change: Again, whether they can come into play or not is still a big question at this point.
Speaker Change: Okay, Great. That's helpful context I appreciate it.
Speaker Change: Yes.
Speaker Change: We will go next to Eric Stine with Craig Hallum.
Speaker Change: Hi, Bill Hi, Ryan.
Speaker Change: Eric how are you.
Speaker Change: Thanks, a lot. So you had mentioned on your last call and also on this call additional manufacturing capabilities that Youre looking for I believe in the United States.
Speaker Change: To meet demand here in 'twenty five given that Mexico's full conversations with potential partners. So just curious you know what what are the next steps that maybe we should look for there and then curious how do you balance that and the potential investment with.
Speaker Change: With some of the uncertainty beyond 2025.
Speaker Change: Yes, so there's two things there.
Speaker Change: We've got the facility in Iowa that we've talked about that we are in the process of ramping as we speak and expect to start production there in the middle of the year.
On two lines. So the question. There is do we go to more than two lines and when do we go there and I think Eric to your point well, our customer will wait until there's a little bit more certainty.
Speaker Change: With respect to policy in demand before we make a decision to expand beyond the two lines the other facility.
Speaker Change: I think.
Speaker Change: We are we are in we are in discussions.
Speaker Change: As far as timing on that.
Again that one well the actual timing will probably depend it will depend on the ultimate certainty with policy and when we have some certainty.
Speaker Change: That was really never meant for 2025 volume that was always 26 and beyond.
Speaker Change: Opportunity as far as from a volume perspective, so again once we have a little bit more certainty from a policy standpoint, whether it's related to the <unk> tariffs et cetera.
Speaker Change: Then we will be able to finalize what the plans are for that second facility.
Got it well and I guess, the fact that that is thinking about 2026 would be that I guess, that's a little bit of a calendar to the narrative that.
Speaker Change: There is quite a bit of uncertainty into that versus 25, but I guess, we'll wait and see on that.
Speaker Change: Maybe just on startups and transitions I know 2024 was a heavy year.
Speaker Change: Part of that by design expected for 'twenty five to be lower.
Speaker Change: Is it <unk>.
Speaker Change: Early enough or is it too soon to have a view of what 2026 might look like.
Just trying to judge it without looking for an outlook, what what your momentum might be entering the year.
Speaker Change: Yeah, I would Eric.
Speaker Change: Eric I think.
Speaker Change: Other than new capacity, if you will or I'm, sorry, filling existing capacity. So as you as you know we have four lines of capacity available in India.
Speaker Change: And we will have we have some capacity available in Turkey as well as then the capacity in Iowa.
Speaker Change: So I would say if demand.
Speaker Change: If we get some level of certainty and policy in the U S in demand.
Speaker Change: Rebounds, after we have some certainty.
Speaker Change: And you could see you could see some startup or transition if if if we if the uncertainty remains and the demand for 26 remained soft my guess is you won't see.
Speaker Change: Any lines being started or transitioned quite frankly, so kind of a long answer in kind of a depends answer but if demand solidifies you could see some activity if demand remains soft because of uncertainty on policy. Then I would suggest there probably will be very few transitions yep.
Speaker Change: Okay makes sense. Thank you.
Speaker Change: Yes.
Speaker Change: We'll move next to Jeff Osborne with TV Cowen.
Okay, great. Thank you Bill a couple of quick ones.
Speaker Change: Is there a way you could just give us a high level walk between the 2% to 4% EBITDA margin guide relative to if I heard you right. I think you said, 5% is what you reported in Q4 ex the numerous one time items like what what's the drag.
Speaker Change: Relative to what you saw in Q4.
Speaker Change: Yes, we can kind of start with.
Speaker Change: Just kind of as we think about where we ended for the year Bill mentioned on the prepared remarks that we expect to be up 80 million plus in EBITDA from last year to this year, probably a couple of things I'd point to you is one the nordics Matamoros as losses are behind us.
Speaker Change: That's in the range of 30 ish or so for.
Speaker Change: For the year.
Speaker Change: For the impact this year and the other thing is our surf and transition cost will probably be probably less than half of what they were this year and then.
Speaker Change: As we think about the other moving parts volumes up we'll have good flow on that Oh, we have a lot of cost savings initiatives, we expect warranty to be down a little bit so that'll be a benefit to us but to your question on what the drag is.
Speaker Change: It really relates to the underutilized factories, we have in Turkey, and India those factories as we look out at our volumes next year. They are a headwind for us we have a lot of really good growth in Mexico, and you have to start with <unk>, but the Underutilization is the drag and in addition to that is continued inflation in Turkey with the production that we do have that's really where the drag is.
Speaker Change: That with the under utilization of those factories and inflation.
Speaker Change: That's helpful. And then just to rapid fire ones does the Capex guide assume the second facility is built out in the U S or no.
Speaker Change: It does not no.
Speaker Change: And then remind me what would that be if you proceeded with that.
Speaker Change: Or would you like to do Iowa first and then.
Speaker Change: Build out after that.
Speaker Change: Well, yes that depends but if you're talking about the other facility to capex is probably in the $30 million range.
Mark Strouse: Got it and then in your prepared remarks, Bill you mentioned sort of a drag on EBITDA.
Reported numbers, if I heard you right it changed our legacy warranty.
Speaker Change: What was the nature of that is.
Speaker Change: Articulate what that was and what the yes aviation. It's just it's just kind of normal course warranty that we are working through and changes in estimates just based on inflation and costs and execution of the actual warranty program.
Speaker Change: So it's just it's it's stuff from from a few years back.
Speaker Change: Okay. So theres no noticeable change in field performance or quality control or anything like that as it relates to the program that you announced on the call. The weighted share program that I just want to make sure those two things are linked.
Speaker Change: No they are definitely not linked.
Speaker Change: Our quality performance over the last.
Speaker Change: Over the last year two years has been actually been very very solid.
Speaker Change: Great to hear that's all I had thank you.
Jeff Osborne: Thanks, Jeff.
Okay.
Speaker Change: We'll move next to Justin Clare with Roth Capital Partners.
Justin Clare: Hey, guys. Thanks for taking my questions here.
Speaker Change: Just wanted to.
Speaker Change: Hey.
Speaker Change: I wanted to just start out on the Q4 results so utilization in the quarter was actually quite strong at 91%.
Speaker Change: But the gross margins were negative 1%.
Speaker Change: Dissipated something a bit higher there.
Speaker Change: Mentioned the cost to cost method that you use as.
Speaker Change: As well as a reduction in inventory, but just wanted to see if there are on the other notable factors in the quarter product mix our warranty charges.
That drove the margin results and then do you see a reversal potentially in the inventory as we move into Q1 that could support our margin expansion.
Speaker Change: Yeah, Justin I would start with it I think you've got the moving parts there.
Bill Cyclic: What bill talked about was about a 5% margin without the reduction in work in process inventory that we had without some of the investments we made in 24 by seven operations and without the there's that youll see in the warranty footnote Theres, a net $6 million charge in there that we took so that was the amount.
Bill Cyclic: If you back all of those things out, it's we're around 5% or so in margin for the for the quarter.
Bill Cyclic: That's where we're at as far as for the for the year.
Bill Cyclic: I would tell you this.
Bill Cyclic: We also have a lot as we look forward to 'twenty five.
Bill Cyclic: There's a lot of cost reduction initiatives that were working through in our Mexico operations.
Bill Cyclic: Youll be able to follow those are.
Bill Cyclic: Mexico sites, along as we get those all ramped up we had a lot of startups and transitions that we are now maturing and so that'll be an area as we move forward that you'll see a large improvement on as we go forward.
Bill Cyclic: Okay got it got it. Thanks, and then you also mentioned the <unk>.
Bill Cyclic: Underutilization in Turkey, as a drag in 2025 here.
Bill Cyclic: Just wondering if following the restructuring actions that you've taken can you generate positive EBITDA in 2025 from that facility.
Bill Cyclic: Or do you need to take further actions or do you see any potential for policy changes in Turkey that Mike.
Bill Cyclic: Support that improvement there.
Bill Cyclic: Yes, well we're challenged there we will have positive EBITDA in Turkey for the year for those two plants combined so we do feel like we've taken the prudent actions to keep those factories into cash positive position as we move forward. There are two lines as we mentioned earlier that we do plan that will likely go away in the middle of the year and so that will drive a further head count reduction at <unk>.
Bill Cyclic: That time that'll happen around the middle of the summer in the June July timeframe.
Bill Cyclic: Yes.
Bill Cyclic: Okay got it that's all I have thank you.
Speaker Change: Thanks, Justin.
Speaker Change: And a final reminder to star one if you had a question or comment at this time.
Speaker Change: Okay.
Bill Cyclic: With no other questions holding I will turn the program back over to Mr. Bill <unk> for any additional or closing remarks.
Bill Cyclic: Thank you again for your time today and your continued interest in and support of TPI until next quarter. Thank you.
Speaker Change: Thank you, Sir ladies and gentlemen that does conclude today's program. Thank you for your participation you may disconnect at this time.
Bill Cyclic: Okay.
Bill Cyclic: Hum.
Bill Cyclic: Hum.
Bill Cyclic: Okay.
Bill Cyclic: [music].
Bill Cyclic: Hum.
Bill Cyclic: Hum.
Bill Cyclic: [music].
Okay.