Q1 2025 Broadwind Inc Earnings Call
Speaker Change: Greetings and welcome to Broadwinds, First Quarter, and Full Year 2025 Results Conference School. At this time, all participants are going to listen only mode.
A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press stars are on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tom Ciccone. Thank you, you may begin.
Tom Ciccone: Good morning, and welcome to the Broadwind first quarter 2025 results conference call.
Speaker Change: Leading the call today is our CEO , Eric Blashford, and I'm Tom Ciccone, the company's Vice President and Chief Financial Officer.
Speaker Change: We issued a press release before the market opened today, detailing our first quarter results.
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 meet different materially.
Speaker Change: For 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.
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 issue today.
Speaker Change: At the conclusion of our prepared remarks, we will open the line for questions.
With that, I'll turn the Colourward Eric Eric Blashford, Thomas Ciccone,
Thanks, Tom.
and welcome to those joining us today.
Broadwind delivered solid, commercial, and operational execution during the quarter.
Speaker Change: with revenue and adjusted EBITDA of $37 million and $2.4 million, respectively, with increasing momentum reflected in sequential growth in both revenue and gross margin.
Stronger demand for wind repowering adapters supported our revenue this quarter.
while our disciplined operations produced a positive EBITDA margin.
Despite a lower margin product mix and supply chain delays.
Speaker Change: Customer activity continues to accelerate with order rates increasing 5% year-over-year to 30 million dollars.
Speaker Change: Stronger demand for wind repowering adapters and natural gas turbine content.
More than offset lower demand and mining.
and natural gas pressure-reducing systems or PRSs.
Speaker Change: These market dynamics highlight the importance of our diverse customer base, especially during times of U.S. trade policy uncertainty.
Orders Within Our Heavy Fabrication Business Increased 10% Your Overyear Thank you.
Speaker Change: Due to continued strong demand for the adapters used to repower wind.
Speaker Change: orders for our gearing business continue their upward sequential trajectory increasing 13% versus Q4 2024.
as we have begun to realize.
sizable wins in the strategic power generation market.
Speaker Change: as well as a lift and oil and gas gearing, which we believe is partially due to tear-related
Order from an industrial solution segment, increase 38% year-to-year .
Speaker Change: Due to continued strength in the global gas turbine market, setting another record for orders and backlog in this segment.
Speaker Change: At a commercial level, we continue to expand our product mix within higher margin adjacent markets.
Speaker Change: Quoting activity remains elevated in all segments, but most notably in our heavy fabrications and industrial solutions businesses, where we're seeing strong interest from the power generation market.
We are prudently adding resources to meet this increasing demand.
Speaker Change: In the gearing market, we're pleased to see that the investments made in equipment and quality certifications over the last year are returning dividends in the form of new orders from new customers, in power generations and defense.
Speaker Change: Operationally, we continue to invest in equipment technology to improve our process capabilities, reduce costs, and improve our profitability.
Speaker Change: In the Industrial Solutions segment, we're investing in advanced testing equipment to expand our transmitter panel offering.
Speaker Change: and are moving forward with a UL certification for electrical panels to further expand our offering.
In heavy fabrications, we've invested in new milling and beveling equipment.
Speaker Change: to improve throughput and precision in our wind tower and repowering adaptor manufacturing processes.
while reducing costs
Speaker Change: Looking at sales in the first quarter, revenue was slightly below the prior year quarter due to the absence of a large natural gas turbine aftermarket shipment in the prior year.
Speaker Change: and Softness and the oil and gas gearing market, offset by stronger shipments into the wind market.
Speaker Change: Within our heavy fabrication segment, Q1 revenue was $25 million, up 15% from a year ago. Mostly due to the aforementioned increase in demand for wind tower adapters.
Partially offset by slower sales of our PRS units.
During Revenue with $6 million in Q1
Down 28% year-over-year .
Speaker Change: Due to broad-based softness in the oil and gas-gurring market in the oil and gas-gurring market.
Partially offset by Strength and Wind and the Industrial Sector.
Speaker Change: We've taken further cost actions to align production capacity with the present demand levels.
Speaker Change: While maintaining key manufacturing and engineering talent required to accommodate the anticipated increase in orders later this year.
Speaker Change: Industrial solutions revenue was $5.6 million, down 29% year-over-year primarily due to the timing of certain after-market shipments.
into the natural gas turbine market.
In summary, the team and business continues to perform well.
Speaker Change: as we navigate demand fluctuations and policy uncertainty while we maintain our key operating talent.
and execute our diversification strategy.
Speaker Change: With that, I'll turn the call over to Tom for a discussion of our first quarter financial performance.
Tom Ciccone: Thank you, Eric. Turn to slide five for an overview of our first quarter performance.
Tom Ciccone: First quarter consolidated revenues were 36.8 million, a 2% decrease as our production levels continue to be impacted by the extended slowdown within the oil and gas sector.
Tom Ciccone: Sequentially, revenue was up almost 10% as we have experienced a stronger demand for wind
Tom Ciccone: Adjusted EBITDA margin was 6.4%, due primarily to low capacity utilization, particularly within our gearing segment, and a lower margin mix of product sold across all three operating segments.
Tom Ciccone: Q-1 orders total $30.5 million in increase of 5% versus the prior year of first quarter.
Tom Ciccone: Orders and heavy fabrications and industrial solutions increased due to strong demand from the wind repowering and power generation markets, while orders and gearing remain muted.
Turning slide 6 for discussion of our heavy fabrication segment.
Tom Ciccone: First quarter orders of 12.4 million are up versus the 11.2 million, both in the prior year period.
Tom Ciccone: as we continue to realize improved demand for win-repowering projects.
Tom Ciccone: This is partially offset by decrease in orders for our PRS units.
Tom Ciccone: First quarter revenues of 25.2 million are up both sequentially and versus the prior year quarter driven by an increase in windtower section sold and increased revenue related to repowering adapters.
Tom Ciccone: They're in the first quarter. We recognize segment-adjusted EBITDA of 3.4 million, an increase sequentially and versus the prior year of first quarter, driven by increased revenue and overall production levels.
Tom Ciccone: as we ramp up for increased shipments expected in the second quarter.
Turn to Slide 7.
Tom Ciccone: Gearing orders of $8 million are down approximately $2.5 million.
Tom Ciccone: Although down versus the prior year, Q1 gearing orders are up sequentially and are well above the quarterly average for the past two years within the segment.
Tom Ciccone: We have books of meaningful oil and gas volume for the first time in over a year as we may be benefiting from the possible onshoring in reaction to recent U.S. trade policies.
Tom Ciccone: Segment revenue was $6 million, down $2.4 million versus the prior year quarter.
Tom Ciccone: We experience an adjusted EBITDA loss of 0.2 million driven by lower revenue resulting from softer order intake levels in recent quarters in addition to operational inefficiencies experienced
Tom Ciccone: Turning to slide 8. Industrial solutions recorded more than $10 million of orders in the first quarter, surpassing the previous $8 million record achieved last quarter.
Tom Ciccone: The segment continues to operate in a robust demand environment and there continues to be strong commercial interests for its natural gas-tuberant content
Tom Ciccone: Seigman Backlogg also hit a new record high of nearly $23 million at the end of the first quarter, eclipsing the previous record of $18.5 million set in Q4 2024.
Tom Ciccone: Q1 segment revenue was $5.6 million, and Q1 segment adjusted EBITDA was $0.5 million. Both down versus the prior year period, as we experienced supply chain headwinds which impacted shipments during the quarter.
Tom Ciccone: We believe these issues to be temporary and expect revenue totals to improve over the balance of 2025.
Tom Ciccone: Turning to Slide 9. We ended the first quarter with cash and availability on our credit facility of approximately $23 million.
Tom Ciccone: Reflective of our deposit balance, returning to a more normal operating level.
Tom Ciccone: In addition, we experienced a significant inventory building Q1 as we began a tower-run in Manitwok early in Q2, and transitioned to a new tower design with increased material content enablling.
Finally, with respect to our financial guidance.
Tom Ciccone: Today we are reiterating our full year 2025 revenue and adjusted EVA guidance.
Tom Ciccone: We anticipate full year revenue to be in the range of 140 to 160 million and adjusted EBITDA to be in the range of 13 to 15 million.
Tom Ciccone: That concludes my remarks, I will turn the call back over to Eric to continue our discussion.
Thanks Tom.
Now allow me to provide some thoughts.
as they move in the DQ-2.
Beginning with our heavy fabrication segment.
Tom Ciccone: We believe that Domestic Entrepreneur of Wind Tower Activity will continue at its present rate through 2026.
Tom Ciccone: We are encouraged by the continued momentum in the wind-repowering market.
Tom Ciccone: As we are seeing sustained demand from our OEM customers for the adapters we manufacture, which are used to upgrade most legacy turbines.
We believe that the terrorist announced earlier this year.
Combined
with the existing anti-dumming measures in place.
We'll continue to benefit domestic wind-tower manufacturers.
Tom Ciccone: We have good visibility for tower production through the balance of 2025.
Tom Ciccone: and are in active discussions with several OEM customers for 2026 volume.
We continue to re-allocate production capacity.
Tom Ciccone: towards stable, recurring project revenue streams across diverse end markets, with recent gearing winds and the power generation market and expanded opportunities in large, utility scale natural gas turbines.
Tom Ciccone: We continue to seek quote activity from the power generation in greed-harding space, especially for products supporting the nation's electrical infrastructure, such as the large transformers required to support the grid.
Tom Ciccone: We are expanding our service and commercial teams for our Clean Fuels PRS line to better serve customers outside the Permium and Eagle Ford Regions into the DJ and Bakken Regions.
Tom Ciccone: The newest model in our line, the L70 Low Flow Unit, continues to perform well in fuel trials.
and we'll be ready for full release this summer.
Tom Ciccone: Customers appreciate the unit's performance specifications, compact footprint, simplicity of operation, remote monitoring capability and attractive price point, making it the ideal solution for industrial applications, such as primary or backup power supply systems and pipeline integrity projects.
Tom Ciccone: Furthermore, we're evaluating certain export opportunities, which we will address through key distribution partners who will provide local service and support after the sale.
Tom Ciccone: In our gearing segment, we continue to execute our strategy to move beyond traditional gearing toward other precision machine products.
Tom Ciccone: Replease at the increasing level of customer activity we're seeing in various new markets, such as air derivative gas turbines, aggregate material processing.
and large high speed compressors to name a few.
Tom Ciccone: An industrial solution, so my mum meant them that we've experienced in the gas-turban industry. Last year, it continues this year.
as we set another quarterly record for bookings in Q1.
Tom Ciccone: Our key customers will see strong demand for gas turbine equipment and services.
reporting strong backlogs and are increasing their production capacity and response.
Tom Ciccone: The strength in a natural gas turbine market is attributable, at least in part, to data centers and other sources of an increasing electrical load.
and is expected to continue for years.
Tom Ciccone: So we are taking the necessary steps to increase capacity, add capabilities such as electrical panel manufacturing, and improve processes so that we can take full advantage of this significant growth opportunity.
Tom Ciccone: As a reminder, our industrial solutions business provides supply chain solutions.
Tom Ciccone: Custom Fabrications and Control Panel Manufacturing for the growing combined cycle natural gas turbine market worldwide.
in Summary.
I am pleased with our start this year.
Tom Ciccone: as we continue to demonstrate strong execution of our strategic priorities.
Tom Ciccone: Each of our divisions is well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us.
Tom Ciccone: Our quality, quick response and reliable deliveries continue to win new customers for us.
Particularly within the gearing business.
We've reduced our cost structure during a transitional period for domestic onshore wind and oil and gas gearing demand.
Prudent Capabilities Investment and Product Expansion
Tom Ciccone: We value our people and are committed to keeping them safe, fulfilled, and productive.
We are five plants, all US-based.
Tom Ciccone: So we're prepared to capitalize on any opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current administration.
while the potential impacts of both tariffs.
and Renewable Energy Policy Changes are unknown.
Tom Ciccone: We are confident that we can support the necessary rebuilding of the country's infrastructure.
We're encouraged that our order intake continues to grow.
Tom Ciccone: As we build a firm foundation for steady, profitable growth, serving the power generation, infrastructure, and other key markets with high quality precision components and proprietary products to capitalize on improved demand in the years ahead.
Tom Ciccone: With that said, I'll turn the call back over to the moderator for the Q&A session.
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 one on your telephone keypad.
Tom Ciccone: A confirmation tell and indicate your line is in the question queue. You may press start too if you'd like to remove your question from the queue. One moment please, while we hold for questions.
Speaker Change: My first question comes from Justin Clare with Roth Capital Partners. Please proceed with your question.
Justin Clare: Hi, good morning. Thanks for the questions here. So I just wanted to start off on the heavy fabrication segment. Q1 revenue was the strongest we've seen and I think over a year for for that segment and...
Justin Clare: of 2025, and then if you could speak to 2026 a little bit, it sounds like you are anticipating kind of flat demand year-over-year, but do you see any mixed shift between Abilene or Manitouac or between the repowering opportunity or tower segments?
Justin Clare: Yeah, thanks, Justin. You know, I think some of the strength that we've seen in Q1 really had to do with...
Justin Clare: A strong demand for our repowering adapters that we produce for our customers, so that seems to be a very strong market right now, and we're building for several OEMs in both of our plans right now.
Justin Clare: That's been a real good tailwind for us as it relates to the rest of 2025.
Justin Clare: You know, we are expecting to see some some some increase in our overall revenue in that segment is particularly in Manif walk as we are starting we did start a tower run in Q2. I mean we expect to start reading some of the you know some of the revenue recording some of that revenue.
Q-2 and Q-3
Justin Clare: Yeah, and Justin, this is Eric just to add on to that. Regarding 26, we expect 26 to be about the same, from a new wind tower perspective and repowering adapters to be at the same level. That's not a hair hire.
Justin Clare: We're actually producing from multiple OEMs and another one is actually interested in our capacity to in repowering.
Speaker Change: Okay, that's good to hear. Maybe just shifting over to tariffs. I know all your manufacturing is in the U.S., but wondering if tariffs are having any effect on...
Speaker Change: that your cost structure, any materials that you might source from overseas, and they're just wondering on the competitive environments, are the tariffs changing anything in terms of your...
Speaker Change: Relative cost structure to others you make compete against, really across any of your segments.
Well, we'll start with Wind.
Speaker Change: which typically come from China out of other countries that are less suspect or less impacted by tariffs. So I think it could have a minor impact, but that would be a pass-through for us.
Speaker Change: So we don't see a lot of impact because of the kind of advanced change that we did within our supply chain with regard to the other locations, the other divisions that we have.
Speaker Change: We're seeing a little bit of lift in terms of the consumables such as welding wire and whatnot that we're able to pass through to our customers because as you know, we quote virtually every job independently.
Speaker Change: Even with oil and gas gearing, we haven't seen before, we're seeing a lift, and we suspect that it could have something to do with our customers' concerns with regard to tariffs out of, especially the Far East, and so looking to read to reshore or onshore more gearing components to the U.S.
Speaker Change: Okay, got it. And then I guess just following up on gearing, you know, we have seen oil prices drop this year and they're still at a relatively low level. I guess what's your visibility into the demands outlook for gearing and how might the outlook for oil and gas be a second that?
Speaker Change: As far as oil and gas gearing, as we've reported before, that's on a, certainly 18 months to two-year law, because fracking, new frack rigs and whatnot are not being brought online.
Speaker Change: Some upgrades, updates to existing fleets and we're selling into the aftermarket there.
Speaker Change: So I would say that would be soft to a little bit of a lift. We had some stronger orders and revenue in gearing that we have seen in several years.
which is interesting.
and certainly, certainly...
Attractive To Us [inaudible]
but the Paragen section.
Power Gen Sector [inaudible]
Speaker Change: which is obviously not drilling, it's using natural gas and oil. We're seeing a lift in, and those were strategic target markets we went after specifically with gearing.
Speaker Change: with this AS9100 certification, those air derivatives and whatnot, we're starting to see some green shoots in that, so notwithstanding the price of oil and gas being down, we're seeing some real opportunities in power generation from that sector.
Okay, got it. Thank you all, have a seat on.
Thanks, Justin. This is.
Speaker Change: Our next question comes from Samir Joshi with HC Wainwright. Please proceed with your question.
Hey, good morning and thanks for taking my questions.
I will focus on the industrial solution segment.
Speaker Change: and also it looks like the outlook and the backlog. It seems to be quite strong here.
Speaker Change: is the assessment that the Q1 performance only attributable to supply chain or delivery pushouts to the correct assumption.
Speaker Change: Yes, that's a correct assumption. We're attributing the drop in revenue. It's simply a temporary delay as a role of supply chain issues that we've been experiencing in Q1. I think we've largely made up for that already in the beginning of Q2.
Speaker Change: Yes, so with regards to the industrial solutions, if you remember, we're providing some pretty complex and large packages for utility-scale installations and upgrades of turbines and with several hundred...
Pieces and Components in each package.
Speaker Change: If one is delayed, we have to delay the whole package. But within our supply chain and our OEM support with their supply chain specifications, we are qualifying new suppliers.
Speaker Change: and actually US and international suppliers, so we've resolved that supply chain.
Speaker Change: I would say constraint, but it's largely because of the growth in the industry, the overall growth in the industry as being absorbed by Broadwind, our customers and the supply chain.
Speaker Change: understood. And maybe I'm reading too much into the inventory growing up, almost $10 million this quarter, was it because of these sort of delayed shipments or any working progress inventory that increased from particularly from the industrial solutions.
Speaker Change: Do you repeat that we were asking about inventory?
Damir: Well, I would say only partially the real driver there is
Speaker Change: You know, we're beginning tower production again in Manitwok and it's a rather large tower design
Speaker Change: So we've been increasing our inventory during Q1 to accommodate that we're going to begin shipments in Q2 related to that.
Damir: that tower of builds. We have a, you know, the lion's share of that increase is related to the man at walk. I'd also say that.
Damir: We're seeing a slight increase in ablign as well because we're moving to a bigger tower design with a higher material content so it's really driving up some of the inventory that you're seeing but but this is also contributing factor as well, industrial solutions that is.
and then one last one on the PRS.
Damir: When we talked about the demand in clean fields and also the L-70 low flow,
Damir: which is performing well. Do you have a sort of aspirational goal or revenues for 2026 from this particular product line or industry?
Damir: Certainly, we have said before we see that to be about 10% of our revenue, so I would say between $15 and $20 million.
Damir: should be a comfortable assumption for that product line, we're starting to see some more
Damir: and two things, the International in South America for that product line, which we believe we've got certainly an innovative solution for that geography, but also some increased demand for rentals. So, if a customer takes on a new job and it's a short-term job...
Damir: and they're not comfortable with investing in capital, they'll often take advantage of one of our rental units or unit processes and eventually that can turn into a buy. So with all that, we think I feel comfortable with about 10% of our revenue being out of the PRS line.
Damir: and will you expect the growth margins to be a similar higher for this going forward?
Speaker Change: Yes, we do, the L70 has an attractive pricing point, but that doesn't mean that we're replacing Gross Margin.
Got it, Anastasia
Sir. Thanks. I will turn it on.
Thank you. Thanks, Mark.
Speaker Change: Our next question comes from Eric Stein with Craig Hallum Capital Partners. Please proceed with your question.
Hi, Eric. Hi, Tom.
Hi Eric, good morning.
Tom Ciccone: Good morning, so we just dig into wind a little bit more, so interesting starting power production for a new opportunity advantage while I come at you.
Speaker Change: Do you see that? It's kind of indicative of something changing in the market or more of a one-off.
Tom Ciccone: and then also just want to think about, you know, kind of your longer-term view in 26 and you talked about...
Tom Ciccone: seeing elevated coding activity. When you're talking about that being flat year over year, are you anticipating that that coding activity turns to orders? Do you need that for it to be flat year over year, or is it kind of flat year over year based on what's in hand today?
Tom Ciccone: Well, I'll take the second part of your question. Well, the first part of your question has to do with meant to what?
Tom Ciccone: As you know, wind is basically a project based, whether the north, whether it be in the north or the south, that's why we have the two plans to address it.
Tom Ciccone: What's happening in the north are a couple of sizeable projects that our customers are taking advantage of our capacity there in the north and that's one of the reasons why we're building repowering adapters in both plants to keep those capabilities and the workforce ready for a tower build.
So I would say that would be project-based
Tom Ciccone: Again, I think demand is still stronger in the south and general than it is in the north.
Tom Ciccone: But regarding 2026, I do believe that to be the volume to be consistent in 26 versus 25.
Tom Ciccone: The backlog that we have now that is partially because of the long-term agreement we signed a couple of years ago takes us through the end of 2025, so in the end of 2026 those would be new orders with consistent customer base.
Speaker Change: and then did you, and I can't remember if you do this on the call or if it's in the queue, but did you call out the 45x tax credit that you recognized in Q1?
Speaker Change: We didn't that, but it's about $2.5 million for Q1 is what we've recorded.
Speaker Change: Okay, now that's helpful. Yeah, thanks for that. And then maybe last thing for me, just...
Speaker Change: I want to make sure I understand it so I know that you had identified $4 million in cost reductions for 2025 and I guess my understanding was that most of that had been put in place or achieved but in your commentary it seemed as if you may be considering
Targeted Costs, Reductions, and other areas in my-
Speaker Change: Am I hearing that right? And if so, you know, could you just provide a little bit more? Yeah, sure. What we did last year was general cost to actions and really that was a result of the overall reduction in
Speaker Change: and Wind Output from 23 into 24. Those cost reductions are being maintained. They're in place and they remain in place. What I mentioned in the prepared remarks is with hearing capacity utilization and gearing.
Speaker Change: We've taken some cross-actions in gearing to balance, to balance our output.
Speaker Change: Capability with demand. And I expect that to kind of return back as we expect.
Speaker Change: in order to increase throughout this year for these target markets I mentioned earlier, such as power generation and infrastructure and whatnot.
Speaker Change: Defense and even Aerospace out of that division, but that's what I'm referring to in the remarks is we took further actions in gearing to balance our capacity with demand.
Okay, that's helpful. Thank you.
Thank you.
Speaker Change: 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.
Speaker Change: Yeah, thanks everyone. I appreciate your interest and look forward to executing our strategy in Q2 and coming back before you at the end of Q2 to talk about our results.
Thank you.