Q3 2025 Broadwind Inc Earnings Call
Tony Company's Vice President and Chief Financial Officer.
We issued a press release before the market opened today detailing our third quarter results.
Speaker #2: Additionally , please note that you can find reconciliations of the historical non-GAAP financial measures during our discussed in call release issued today at the conclusion prepared of our remarks , we will open the line for questions .
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 Companys control.
[Analyst] (H.C. Wainwright & Co.): Understood. The PRS sort of is showing some weakness in this quarter. Is that because of just timing, or is there a general lack of demand for that?
Speaker #2: With turn the call that , I'll over to Eric
Although these forward looking statements are based on management's current expectations and beliefs.
Speaker #2: . Thanks ,
Speaker #3: Tom , and welcome to our call . This quarter . We continue to transform broadband into a leading manufacturing precision partner of choice for global OEMs .
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.
Eric Blashford: Well, we like to think it's timing. We talk with our customers about it when we're on road shows and demos, and they really like the specifications of that. What they say is, at least right now, the price of oil is restricting their ability to increase capital. Once that turns a bit for them with new budget season, we should expect a resurgence in volume from that product line.
Speaker #3: advance As we our priorities to high focus on value end markets while becoming a leaner , more diversified business equipped to deliver profitable growth through the cycle .
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.
Speaker #3: Recent actions to consolidate our manufacturing footprint fixed , reduce overhead , and strengthen balance sheet the have created a strong foundation . positions us One that well entering 2026 .
At the conclusion of our prepared remarks, we will open the line for questions.
That I will turn the call over to Eric.
[Analyst] (H.C. Wainwright & Co.): Great. Thanks. Thanks for that, brother.
Thanks, Tom and welcome to our call.
Eric Blashford: Thank you.
Speaker #3: This quarter . Our performance was driven by strong demand across our power generation and renewables markets , with third quarter orders increasing 90% year over year , supported by broad based growth across all of our reporting segments .
This quarter, we continued to transform <unk> into a leading precision manufacturing partner of choice for global Oems.
Tom Ciccone: Our next question comes from Eric Stein with Craig-Hallum Capital Group. Please proceed with your question.
Eric Stein: Hi, Eric. Hi, Tom. Good morning.
As we advance our priorities to focus on high value end markets.
Eric Blashford: Morning.
Eric Stein: Good morning. Maybe it sounds like you're clearly making investments for growth across the business. I just want to specifically look at industrial solutions given where the backlog is. I guess first, could you just talk about what you've done? It sounds like quite a few. You've got more upgrades planned. What that might mean from a CapEx perspective, but also how quickly can that come on? Your backlog would imply that you could have a pretty meaningful step up in revenues once those investments kind of come to bear.
Speaker #3: Importantly , orders from our power generation customers more than doubled versus last year . And now represent nearly 20% of revenue , driven by strong demand natural for our gas turbine product offerings .
Ill, becoming a leaner more diversified business equipped.
Equipped to deliver profitable growth through the cycle.
Recent actions to consolidate our manufacturing footprint reduced fixed overhead and strengthened the balance sheet have created a strong foundation.
Speaker #3: In early September, we completed the sale of our industrial fabrication operations in Wisconsin, resulting in a net gain of $8.2 million.
One that positions us well entering 2026.
This quarter, our performance was driven by strong demand across our power generation and renewables markets.
Speaker #3: consolidating our By heavy Fabrications operations into our Abilene , Texas we continue to facility , asset enhance utilization and position Brodwin to capitalize on opportunities with higher value growing end markets where our technical expertise in 100% domestic manufacturing footprint are in high demand , along with closing the sale in Manitowoc , we announced $3 million share a repurchase program , underscoring our continued confidence in our long term value creation potential customer activity remains robust with incoming orders rising up to $44 million , 90% year over year , and doubling sequentially , led by strong demand from power generation , increasing demand from oil and gas and industrial customers , combined with strong wind orders .
With third quarter orders, increasing 90% year over year.
Supported by broad based growth across all of our reporting segments.
Importantly orders from our power generation customers more than doubled versus last year and now represent nearly 20% of revenue.
Eric Blashford: Yeah. I think to answer your question about CapEx, we've made some investment this year. They've been relatively modest. We don't expect anything that would move the needle from a consolidated perspective. As we look forward, historically, we've been about 2% to 3% of revenue as CapEx. We don't anticipate exceeding that in 2026 or Q4 2026. What I will tell you is we do intend to expand that plant into another portion of a larger building, which we can get into. It increases our floor space by about 35% going into the second half of 2026. That, along with the increase we're making in staffing and equipment, we should be able to respond to this demand. The demand is there and is coming. It is there and it is continuing. We definitely need to make these investments to keep up with it.
Driven by strong demand for our natural gas turbine product offerings.
In early September we completed the sale of our industrial fabrication operations in Wisconsin.
Resulting in a net gain of $8 $2 million.
By consolidating our heavy fabrications operations into our Abilene, Texas facility.
We continued to enhance asset utilization and positioned <unk> to capitalize on opportunities with higher value.
Growing end markets.
Where our technical expertise in 100% domestic manufacturing footprint are in high demand.
Speaker #3: These market dynamics reinforce the importance of our diverse customer base and our strategy to pursue the capabilities and quality certifications required to expand in growing markets , specifically , power generation .
Along with closing the sale in Manitowoc.
We announced the $3 million share repurchase program under.
Underscoring our continued confidence in our long term value creation potential.
Speaker #3: Orders within our heavy fabrications business reflect an increase in orders for our wind products , by offset softness in our natural gas pressure , reducing systems or price gearing orders continue to rebound nicely , increasing 260% to nearly $16 million .
Customer activity remains robust.
Eric Stein: Right. Okay. Second half, it should be more of the expectation potentially for a step up there.
With incoming orders rising to $44 million up 90% year over year and doubling sequentially.
Eric Blashford: Sure.
Eric Stein: I mean, maybe a good segue just on, I mean, obviously, it's no secret what's going on in energy markets, demand, need for resiliency, etc. I would think that this is a tailwind for your business for multiple years. Curious if you agree with that first. Secondly, you mentioned what you're doing in industrial solutions, but even in gearing. Do you have kind of additional ways to expand capacity as you think about that, not just for Q2 2026, but as you look at 2027, 2028, and beyond, given these trends?
Led by strong demand from power generation.
Increasing demand from oil and gas and industrial customers.
And bind with strong wind orders.
Speaker #3: As we continue to seek strength in power generation resurgence in the wind and oil and gas and some aftermarket . In Q3 2025 , orders within our Industrial Solutions business continued to be strong , increasing 86% to nearly $14 million , driven by strong demand for both new turbine installations and upgrades and aftermarket services gas .
These market dynamics reinforce the importance of our diverse customer base.
And our strategy to pursue the capabilities and quality certifications required to expand in growing markets spin.
Specifically power generation.
Orders within our heavy fabrications business reflect an increase in orders.
For our wind products offset by softness in our natural gas pressure, reducing systems or Prs.
Speaker #3: We are pleased to have set yet another record for backlog in this . Operationally , segment we continue to invest in equipment technology to improve our process capabilities , reduce costs and improve our profitability .
Gearing orders continued to rebound nicely increasing 260%.
Nearly $16 million as we continued to see strength in power generation.
Eric Blashford: Sure. Well, first of all, the demand for electricity is going to keep on going up, and we all know that. The demand for data center is projected to go from 22 gigawatts up to 35 gigawatts through 2030 just for data centers alone. We know that's a demand driver for us. Regarding capacity—I'm sorry. The visibility that we have for the gas turbine market goes beyond 2026 into 2027 and even into 2028. We do expect that tailwind to be behind us for the next certainly two or three years, which is as far as we can see out right now. Gas turbines sold are about 30% up year over year, 2025 versus 2024. 2024 was a strong year. The basics are there for the growth. Regarding the capacity, we're really only still about 45% full in our gearing facility.
And some resurgence in the wind and oil and gas aftermarket.
Speaker #3: In the third quarter 2025 , of margins were impacted by production temporarily process inefficiencies relating to a unique low volume tower build at our Manitowoc and Abilene facilities , as well as lower capacity utilization levels within our gearing segment .
In Q3 2025.
Orders within our industrial solutions business continued to be strong.
Increasing 86% to nearly $14 million.
Driven by strong demand for both new gas turbine installations in aftermarket upgrades and services.
Speaker #3: production As normalizes , we anticipate improved operating through the duration of the year leverage and into 2026 . Industrial Solutions In the segment , we are investing in additional manufacturing capacity to address our growing backlog and meet future customer demand and the gas powered equipment generation market within our heavy fabrication segment , Q3 revenue grew by 43% year over year , primarily due to an increase in wind towers and repowering adapters sold , offset by lower demand for our proprietary PPS .
We are pleased to have set yet another record for backlog in this segment.
Operationally, we continue to invest in equipment technology to improve our process capabilities reduce costs.
And improve our profitability.
In the third quarter of 2025.
Margins were temporarily impacted.
By production process inefficiencies relating to a unique low volume tower build at our Manitowoc in Abilene facilities.
As well as lower capacity utilization levels.
Eric Blashford: We have plenty of capacity to fill there as this business grows. What we're doing is specifically adding technology to bring more in-house. That was the balancing equipment I mentioned. The more we can bring in-house, the more control we have over quality, over timing, over price. Those are where you're going to see our investments made going forward.
Within our gearing segment.
As production normalizes, we anticipate improved operating leverage through the duration of the year and into 2026.
Speaker #3: Revenue and our gearing segment fell 23% year over year due to lower demand in mining and from the industrial sectors, partially offset by power generation and steel within industrial revenue solutions, which grew 37% year over year, primarily driven by stronger shipments into the new gas turbine equipment market, both domestically and internationally.
In the industrial solutions segment, we are investing in additional manufacturing capacity to address our growing backlog and meet future customer demand.
Eric Stein: Yep. Okay. That is helpful. Just on heavy fab and specifically wind, I would assume we should expect this to be the new norm now that you have satisfied that long-term contract. I mean, not that you would turn down an order of that magnitude should it happen. I mean, this is going to be a—maybe not quarter to quarter, but this is going to be a—you get a large order, it's probably going to mean that you're at elevated levels for the next few quarters. No one should expect necessarily that heavy fab backlog is meaningfully higher until wind really picks up. I mean, is that a fairly—
And the gas power generation equipment market.
Within our heavy fabrications segment Q3 revenue grew by 43% year over year, primarily due to an increase in wind towers and Repowering adaptors sold.
Speaker #3: In the summary , team and business perform well continue to as we sharpen our focus within higher margin precision manufacturing verticals . Recent strategic actions to divest our Manitowoc facility position us for increased strength and optionality sheet improving our capacity utilization at facility and overhead Despite the volatile trade .
Offset by lower demand for our proprietary Prs.
Revenue in our gearing segment fell 23% year over year.
Due to lower demand from the mining and industrial sectors.
Partially offset by power generation and steel.
Within industrial solutions revenue grew 37% year over year.
Speaker #3: environment , our costs 100% domestic manufacturing base remains a key competitive advantage , positioning us to partner with tier who one OEMs our deep value expertise , commitment to time technical quality .
Primarily due to stronger shipments into the new gas turbine equipment market.
Both domestically and internationally.
Eric Blashford: Yeah, you're correct. Our customers like to issue us ratable POs because it also helps them, as they don't necessarily know the turbine they're going to sell that far out. We know they want our capacity. We've got good visibility through the first half of 2026, and really good customer indications beyond that. When it comes to which turbine they sell and which tower goes under it, they really can't look out that far. Yes, what we saw this quarter, you should expect to see going forward.
In summary, the team and business continued to perform well.
Speaker #3: and on With that , the call over to I'll turn Tom for our third quarter financial a discussion of performance .
As we sharpen our focus within adjacent higher margin precision manufacturing verticals.
Recent strategic actions to divest our Manitowoc facility.
Speaker #2: Thank you . . five for an Turning to slide overview of our third quarter performance . consolidated Third quarter revenues were 44.2 million , representing a versus 25% increase the prior year period .
Position us for increased balance sheet strength and optionality.
While improving capacity utilization at our Abilene facility and reducing overhead costs.
Despite the volatile trade policy environment are 100% domestic manufacturing base.
Eric Stein: Yeah, okay. Thank you.
Speaker #2: The third quarter from restarting benefited Manitowoc Tower production , as well as increased repowering our revenue in both Manitowoc and Abilene facilities . Outside of our heavy segment , fabrication Lower gearing deliveries were more than offset increased revenue within our industrial Solutions segment .
Eric Blashford: Thanks, Eric. Very good. Thank you.
Remains a key competitive advantage positioning us to partner with tier one Oems who value our deep technical expertise commitment to quality and on time service.
Tom Ciccone: 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: Yeah, thanks, everyone, for listening. We look forward to coming back to you again early next year to talk about our full year 2025, and how 2026 looks. Thank you for your interest.
With that I'll turn the call over to Tom.
Speaker #2: Reflective of the strong order levels we've experienced recently by , sequentially , revenue increased nearly primarily to the increase in heavy 13% due fabrication shipments .
For a discussion of our third quarter financial performance.
Thank you Eric.
Turning to slide five for an overview of our third quarter performance.
Tom Ciccone: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Third quarter consolidated revenues were $44 2 million.
Speaker #2: Adjusted EBITDA declined 2.4 million versus the prior year of 3.4 million . This decrease was primarily due to lower capacity utilization within our gearing segment associated .
Representing a 25% increase versus the prior year period.
Third quarter benefited from restarting Manitowoc tower production as well as increased Repowering revenue in both our Manitowoc and Abilene facility.
Speaker #2: with unplanned machine downtime and manufacturing Costs inefficiencies related to the production of a unique low volume tower build within our heavy fabrication segment .
Outside of our heavy fabrication segment lower gearing deliveries were more than offset by increased revenue within our industrial solutions segment.
Speaker #2: Third quarter orders were strong at nearly 44 million . This represents an increase of 90% versus the prior year quarter , and 108% sequentially .
Collective of the strong order levels, we have experienced recently.
Sequentially revenue increased nearly 13% due primarily to the increase in heavy fabrication shipments.
Speaker #2: Orders increased across all of our segments versus the prior year and were up or flat across all segments . sequentially The $44 million of orders highest represents the quarterly order level since 2022 .
Adjusted EBIT declined $2 4 million versus the prior year of $3 4 million.
This decrease was primarily due to lower capacity utilization within our gearing segment.
Speaker #2: Turning to slide six for a discussion of our heavy Fabrication segment . Third quarter were orders nearly 14 million , 25% increase versus the prior year quarter .
Costs associated with unplanned machine downtime and manufacturing inefficiencies related to the production of unique low volume power builds within our heavy fabrication segment.
Speaker #2: Just a reminder , during the second quarter , we received purchase order releases satisfying the volume associated with the long term customer supply agreement that we announced in January of 2023 .
Third quarter orders were strong at nearly $44 million. This.
This represents an increase of 90% versus the prior year quarter and 108% sequentially.
Orders increased across all of our segments versus the prior year and were up or flat across all segments sequentially.
Speaker #2: As such , the growth in Q3 was primarily attributable to resuming the recognition of new tower orders . With this customer , partially offset by the decrease attributable to winding down the industrial fabrication operations at our Manitowoc facility .
A $44 million of orders represents the highest quarterly order level since 2022.
Turning to slide six for a discussion of our heavy fabrication segment.
Speaker #2: Third quarter revenues of 29.4 million are up 43% versus the prior year quarter , driven by an increase in wind power section sold .
Third quarter orders were nearly 14 million, 25% increase versus the prior year quarter.
Just a reminder, during the second quarter, we received purchase order releases satisfying the volume associated with a long term customer supply agreement that we announced in January of 2023.
Speaker #2: As we restarted Manitowoc Tower production in the previous quarter . On a limited run , which was completed during the third quarter and increased repowering revenue .
Speaker #2: This was partially offset by a decrease in the industrial fabrication shipments as we wound down the Manitowoc operations , and had fewer shipments of our PRS units .
As such the growth in Q3 was primarily attributable to resuming the recognition of new tower orders with this customer.
Partially offset by the decrease attributable to winding down the industrial fabrication operations.
Speaker #2: Despite the increase in revenue, third quarter segment adjusted EBITDA was down versus the prior year due to the manufacturing headwinds and unplanned machine downtime previously mentioned.
At our Manitowoc facility.
Third quarter revenues of $29 4 million or up 43% versus the prior year quarter.
Speaker #2: Turning to slide seven . Q3 orders increased $11.5 million year over year to 16 million , a level almost three times the average quarterly total over the past two two years .
Driven by an increase in wind power sector consoles as we restarted Manitowoc power production in the previous quarter and a limited run which was completed during the third quarter.
And increased Repowering revenue.
Speaker #2: Most notably , Q3 included a $6 million follow on from a leading OEM in the natural gas turbine segment of the power generation end market , which we announced in July .
This was partially offset by a decrease in the initial fabrication shipments as we wound down the.
The Manitowoc operations had fewer shipments of our Prs units.
Despite the increase in revenue third quarter segment, adjusted EBITDA was down versus the prior year.
Speaker #2: This represents the year one volume of a multiyear supply agreement for gearing products. In addition, during the quarter, oil and gas orders remained elevated relative to prior year levels.
So the manufacturing headwinds that unplanned machine downtime previously mentioned.
Turning to slide seven Q.
Speaker #2: As we are benefiting from reshoring and reaction to recent US trade policies . Segment revenue was 7.1 million , down over 2 million versus the prior year .
Q3, gearing orders increased $11 $5 million year over year to $16 million.
A level almost three times the average quarterly total over the past two years.
Speaker #2: quarter We recognized adjusted EBITDA of 0.1 million , down 0.5 million versus the prior year period , driven by lower revenue and reduced capacity utilization .
Most notably Q3 included a $6 million follow on order from a leading OEM in the natural gas turbine segment of the power generation end market, which we announced in July.
Speaker #2: Turning to slide eight . Industrial solutions book nearly $14 million of orders during the third quarter , maintaining the strong demand seen this year .
This order represents the year, one volume of a multi year supply agreement for gearing products.
In addition, during the quarter oil and gas orders remained elevated relative to prior year levels.
Speaker #2: The segment participates in the natural gas Power equipment industry , which is experiencing resurgence driven by the significant increasing demand for reliable and flexible power supply .
As we are benefiting from re shoring and reaction to recent U S trade policy.
Segment revenue was $7 1 million down over $2 million versus the prior year quarter.
Speaker #2: backlog Segment hit a new record of almost 36 million at the end of the third quarter . Eclipsing the previous record of 30 million set in Q2 this quarter represents the fourth straight quarter , setting a record backlog level Q3 segment revenue was 7.9 million , up both sequentially and versus the prior year quarter , reflective of strong the commercial environment .
We recognized adjusted EBITDA of $1 million down $5 million versus the prior year period, driven by lower revenue and reduced capacity utilization.
Turning to slide eight.
Industrial solutions book, nearly $14 million of orders during the third quarter, maintaining the strong demand seen this year.
Speaker #2: Revenue is up 37% versus the prior year quarter, but adjusted EBITDA is flat versus the prior year due to a lower mix of product margins sold, as well as additional support overhead to increased production volumes.
The segment participates in the natural gas power equipment industry, which is experiencing significant resurgence driven by the increasing demand for reliable and flexible power supply.
Segment backlog hit a new record.
Speaker #2: Turning to slide nine , we ended the with third quarter total and availability on our cash credit facility of nearly $27 million . Liquidity was boosted in the quarter by the September closing of the sale of our Manitowoc Fabrication Industrial operations , which resulted in over $13 million in cash .
Of almost $36 million at the end of the third quarter.
Eclipsing the previous record of $30 million set in Q2.
This quarter represents the fourth straight quarter setting a record backlog levels.
Q3 segment revenue was $7 9 million up both sequentially and versus the prior year quarter reflective of the strong commercial environment.
Speaker #2: We used that cash to pay off a portion of our term loan, which reduced our balance on the line of credit from $17.6 million down to $3.8 million.
Revenue is up 37% versus the prior year quarter, but adjusted EBITDA of six <unk>.
Flat versus the prior year due to a lower margin mix of products sold as well as additional overhead to support increased production volume.
Speaker #2: During Q3 , also boosting liquidity was a decrease in our operating working capital of almost 5 million , primarily driven by reduced inventory levels .
Turning to slide nine.
We ended the third quarter with total cash and availability on our credit facility of nearly $27 million.
Speaker #2: We anticipate that working capital levels will decrease again during the fourth quarter . Finally , with respect to our financial today , we are guidance updating our full year 2025 guidance .
Liquidity was boosted in the quarter by the September closing of the sale of our Manitowoc industrial fabrication operations, which resulted in over $13 million in cash.
Speaker #2: increasing We're our full year 2025 revenue expectations to be in the range of 155 to 160 million , up from 145 to 155 million .
We use that cash to pay off a portion of our term loans with a balance applied to our line of credit which decreased from $17 $6 million down to $3 8 million during Q3.
Speaker #2: And the adjusted EBITDA range is maintained at 9 to $10 million , which excludes the $8.2 million gain on the sale of our Manitowoc Industrial Fabrication operations .
Also boosting liquidity with a decrease in our operating working capital almost $5 million.
Merrily driven by reduced inventory levels.
Speaker #2: As a reminder, in 2024, the Manitowoc facility generated over $25 million in revenue with an adjusted EBITDA margin rate of approximately 8% to 9%.
We anticipate that working capital levels will decrease again during the fourth quarter.
Finally, with respect to our financial guidance today, we are updating our full year 2025 guidance.
Speaker #2: The majority of that 2024 revenue was industrial fabrication work that we do not anticipate replacing organically in 2026 . We expect to provide more detail around the full year 2026 outlook on our fourth quarter conference call .
We're increasing our full year 2025 revenue expectations to be in the range of $155 million to $160 million up from $145 million to $155 million.
And the adjusted EBITDA range is maintained at $9 million to $10 million.
Speaker #2: That concludes my remarks. I will turn the call back over to Eric to continue the discussion.
This excludes the $8 $2 million gain on the sale of our Manitowoc industrial fabrication operations.
Speaker #3: Thanks , Tom . Now , allow me to provide some thoughts as we move into Q4 and 2026 . We continue to make a decisive shift toward increasingly stable , growing power generation markets , with an emphasis on oil and gas , renewables potentially , and nuclear .
As a reminder, in 2020 for Manitowoc facility generated over $25 million of revenue.
Is that an adjusted EBITDA margin rate of approximately 8% to 9%.
The majority of that 2024 revenue was industrial fabrication work.
Speaker #3: Our strategic emphasis is on pursuing the highest growth and the highest margin opportunities that leverage our precision manufacturing expertise , our facilities in Abilene , Texas , Cicero , Illinois , near Chicago .
We do not anticipate replacing organically in 2026.
We expect to provide more detail around the full year 2026 outlook on our fourth quarter conference call.
That concludes my remarks I will.
Speaker #3: Pittsburgh , Pennsylvania . And Sanford , North Carolina , near Raleigh , have more than 600,000ft² of manufacturing space ready to serve our customers .
I will turn the call back over to Eric continue our discussions.
Thanks, Tom.
Now allow me to provide some thoughts as we move into Q4 and 2026.
Speaker #3: Given the consolidation of our manufacturing base , we anticipate BROADWIND, INC. be on pace to materially improve capacity utilization going forward . Recent wins within the gearing and industrial Solutions segments , from power generation , specifically within distributed power , as well as growing opportunities in utility scale natural gas turbines , support our strategy to expand in this market .
We continue to make a decisive shift toward increasingly stable growing power generation markets.
With an emphasis on oil and gas renewables and potentially nuclear.
Our strategic emphasis is on pursuing the highest growth in the highest margin opportunities that leverage our precision manufacturing expertise.
Our facilities in Abilene, Texas, Cicero, Illinois, near Chicago, Pittsburgh, Pennsylvania, and Sanford North Carolina near Raleigh.
Speaker #3: We continue to see activity in both gearing and industrial solutions generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers growing in this.
Have more than 600000 square feet of manufacturing space ready to serve our customers.
Speaker #3: Accordingly, we are expanding resources to meet this demand and are gearing our segment. We continue to execute our strategy beyond to move traditional gearing markets for new opportunities and other precision machine products.
Given the consolidation of our manufacturing base, we anticipate broad one should be on pace to materially improve capacity utilization going forward.
Recent wins within the gearing and industrial solutions segments.
From power generation, specifically within distributed power.
Speaker #3: The recent sizable orders we received from the power generation sector are exciting , with more expected to come next year . We're pleased with the increasing level of customer activity we're seeing in various new infrastructure related markets , such as road maintenance , cement plants and aggregate material processing , among others .
As well as growing opportunities in utility scale natural gas turbines.
Our strategy to expand in this market.
We continue to see robust quote activity in both gearing and industrial solutions.
Generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market.
Speaker #3: Additionally , we're seeing an increase in orders from our traditional oil and gas customers , partially due to reshoring efforts . Accordingly , we continue to expand our capabilities to serve the high speed gear segment , with additions to our dynamic balancing capabilities as we bring more key processes in-house in industrial solutions .
Accordingly, we are expanding resources to meet this demand.
And our gearing segment, we continued to execute our strategy to move beyond traditional gearing markets.
For new opportunities in other precision machine products.
The recent sizable orders we received from the power generation sector are exciting with more expected to come next year.
Speaker #3: Continued growth in the natural gas turbine industry , driven by the global demand for power , is having a positive impact on our business Q3 , we had near in record bookings , which led to a new record quarterly backlog .
We're pleased with the increasing level of customer activity, we are seeing in various new infrastructure related markets, such as road maintenance cement plants in aggregate material processing among others.
Speaker #3: New data center installations are driving increased demand for distributed power solutions , including those that provide redundancy , and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand .
Additionally, we're seeing an increase in orders from our traditional oil and gas customers, partially due to re shoring efforts.
Accordingly.
We continued to expand our capabilities to serve the high speed geared segment with additions to our dynamic balancing capabilities.
As we bring more key processes in house.
In industrial solutions.
<unk> growth in the natural gas turbine industry, driven by the global demand for power.
Is having a positive commercial impact on our business.
In Q3, we had near record bookings.
Which led to a new record quarterly backlog.
New data center installations are driving increased demand for distributed power solutions.
Including those that provide redundancy and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand.
Accordingly.
We are expanding our internal capabilities and production fulfillment.
And the customer response team.
To address this growing opportunity and better serve our customers.
Expanding on the investments made in robotics coatings and machining made earlier this year, we added another vertical vertical machining center in Q3.
To expand our fabrication capability.
In our heavy fabrication segment, we believe that domestic onshore wind tower activity will continue at its present pace through 2026.
We are encouraged by the continued momentum in the wind Repowering market.
As we are seeing sustained demand from our OEM customers for the adapters, we manufacture which are required to upgrade most legacy turbines.
Okay.
We have good visibility for tower production through the first half of 2026 and good customer indications beyond that.
In summary.
I am pleased with the order growth.
And strategic actions, we've taken this year as we continued to demonstrate strong execution of our strategic priorities.
Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long term opportunities for us.
Our quality quick response.
And ability to solve complex manufacturing challenges for our customers.
Continued to help us win new opportunities were.
We're reducing our cost structure investing wisely and taking strategic actions to refocus our resources toward higher value and growing end markets.
We value our people and are committed to keeping them safe fulfilled and productive.
100% U S based plants are expanding capabilities to take advantage of opportunities afforded by the pro domestic manufacturing policy backdrop afforded by the current administration.
Accordingly.
We're expanding our internal capabilities and production fulfillment and.
We are encouraged that our order intake continues to grow.
And the customer response team.
To address this growing opportunity and better serve our customers.
Positioning us for improved utilization of our manufacturing footprint for the rest of the year in.
Expanding on the investments made in robotics coatings and machining made earlier this year, we added another burden vertical machining center in Q3.
And into 2026.
As we strengthen our foundation for steady profitable growth, serving the power generation critical infrastructure and other key markets with high quality precision components and proprietary products to capitalize on improved demand in the years ahead.
To expand our fabrication capability.
In our heavy fabrication segment, we believe that domestic onshore wind tower activity will continue at its present pace through 2026.
With that.
I will turn the call over to the moderator for the Q&A session.
We are encouraged by the continued momentum in the wind Repowering market.
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.
As we are seeing sustained demand from our OEM customers for the adapters, we manufacture which are required to upgrade most legacy turbines.
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.
Yeah.
We have good visibility for tower production through the first half of 2026 and good customer indications beyond that.
One moment, please while we poll for questions.
In summary.
I am pleased with the order growth.
Our first question comes Amit Dayal with H C. Wainwright. Please proceed with your question.
And strategic actions, we've taken this year as we continued to demonstrate strong execution of our strategic priorities.
Thank you Bob good morning, everyone.
Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long term opportunities for us.
Good morning, Amit Greenfield Hey.
Hey, guys.
Looking into 2026, a little bit.
It looks like you know you're having very good traction on the industrial solutions side with the power infrastructure.
Our quality quick response.
And ability to solve complex manufacturing challenges for our customers.
That is underway.
Continue to help us win new opportunities.
Is that going to be the key driver for you guys next year.
Reducing our cost structure investing wisely and taking strategic actions to refocus our resources toward higher value and growing end markets.
In terms of growth.
Yes, I think power I think well in terms of division, yes, but I think in terms of market power Gen and critical infrastructure are going to lift.
Our people and are committed to keeping them safe fulfilled and productive.
Our 100% U S based plants are expanding capabilities to take advantage of opportunities afforded.
Both industrial solutions and gearing in 2026.
Okay. So that's why I was wondering why gearing was soft.
While the protium mastic manufacturing policy backdrop afforded by the current administration.
You indicated.
We're encouraged that our order intake continues to grow.
Some sort of organic near term issues, but is the general business environment the gearing segment.
Positioning us for improved utilization of our manufacturing footprint for the rest of the year.
Positive I guess, given some of the headlines we're seeing about maybe an economic slowdown et cetera.
And into 2026.
As we strengthen our foundation for steady profitable growth, serving the power generation critical infrastructure and other key markets with high quality precision components and proprietary products to capitalize on improved demand in the years ahead.
Well again with certain markets.
We're seeing we are seeing a lift we're seeing power generation with distributed power, primarily with reciprocal turbines below maybe 50 50 megawatts. So thats the status of strength for US. We're all seeing also seeing some strength in aggregates.
With that.
I'll turn the call over to the moderator for the Q&A session.
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And even road maintenance of all things so we're seeing some general.
Infrastructure lift as well as power generation in gearing now gearing reminder, does have a bit of a lead time. So what we're seeing in softness in revenues because of a lack of orders we had couple of three quarters ago.
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One moment, please while we poll for questions.
These orders that we're receiving now we will be delivering in 2026.
Okay understood.
Our first question comes from Matt I met Danielle with H C. Wainwright. Please proceed with your question.
And then just last one for me.
Are you seeing any sort of cost increases.
Are you fairly confident about sort of the margin profile for 2026 with the level of visibility you have right now.
Oh, Thank you good morning, everyone.
Good morning.
Zero.
Hey, guys I'm looking into 'twenty 'twenty six a little bit you know is it looks like you know you're having pretty good traction on the industrial solutions side with the power infrastructure.
It's pretty stable, we are having some increases because of tariffs we were able to pass those on some of our sourcing has to come from those countries that do primarily for industrial solutions that are subject to tariffs.
That is underway.
Is that going to be the key driver for you guys next year.
But we do we are able to pass those on with a timing difference to our customers. So I would expect the margin profile to be about the same in 2006 as it is as it is in 'twenty five however, the increasing capacity utilization does help us.
In terms of growth.
Yeah, I think power I think well in terms of division, yes, but I think in terms of market power Gen and critical infrastructure are going to lift.
Yes, I think the only thing I'd add there is that we did have some operational headwinds in 2005 here and I think maybe all else being equal we could expect a marginal improvement just due to the absence of those headwinds.
Both industrial solutions and gearing in 2026.
Okay. So that's why I was wondering why gearing was soft you know I know you indicated.
Some sort of organic near term issues, but.
Okay, guys. That's all I have thank you so much.
Is the general business environment, the gearing segment.
Thank you.
Our next question comes from Sameer Joshi with H C. Wainwright. Please proceed with your question.
Positive I guess, given some of the headlines we're seeing about maybe some economic slowdown et cetera.
Hey, Tom just following up with some.
Well again with where certain markets. We are seeing we are seeing a lift for seeing power generation with distributed power primarily with reciprocal turbines below maybe 50 50 megawatts. So that's that's a strength for US. We're all seeing also seeing some strength in aggregates.
Some more questions on the cost front now that <unk> had.
Although Billy.
Do you expect.
Higher gross margins.
Going forward.
Yes, I would say, it's probably more to do yes. The answer is yes, and I think it probably has more to do with the again with the lack of operational headwinds that we had.
And even road maintenance of all things so we're seeing some general.
Infrastructure lift as well as power generation in gearing now gearing reminder, does have a bit of a lead time. So what we're seeing in softness in revenues because of a lack of orders we had couple of three quarters ago.
The Abilene facility is an owned facility versus Manitowoc being ramped.
A rented facility. So we do see slightly higher margins out of that facility and I think I think capacity utilization is a big factor here is the more we can run.
These orders that we're receiving now we will be delivering in 2026.
Okay understood.
<unk> across that plant.
And then just last one for me you know.
We should see some some some good returns on that.
Are you seeing any sort of cost increases are you fairly confident about sort of the margin profile for 2026 with the level of visibility you have right now.
Understood.
<unk>.
The others.
It's showing some weakness just in this quarter is that because of this timing or is there a general.
It's pretty stable are we we are having some increases because of tariffs we were able to pass those on some of our sourcing has to come from those countries that do primarily for industrial solutions that are subject to tariffs but.
Lack of demand for that.
Well, we like to think it's timing, we talk with our customers about lunar on Roadshows.
But we do we are able to pass those on what the timing difference to our customers. So I would expect the margin profile to be about the same in 'twenty six as it is as it is in 'twenty five however, the increasing capacity utilization does help us.
And demos and they really like.
The specifications of that but what they say is at least lease right now the price of oil is restricting their ability to increase capital.
Once that turns a bit for them with new budget season, we should expect a resurgence in volume from that from that product line.
Yeah, I think the only thing I'd add there is that we did have some operational headwinds in 'twenty five here and I think maybe all else being equal if we could expect a marginal improvement just due to the absence of those headwinds.
Great. Thanks, Thanks for that color.
Thank you.
Our next question comes from Eric Stine with Craig Hallum Capital Group. Please proceed with your question.
Understood. Okay. That's all I have thank you so much.
Thank you.
Hi, Eric Hi, Tom Good morning.
Our next question comes from Sameer Joshi with H C. Wainwright. Please proceed with your question.
Good morning, good morning.
So maybe it sounds like I mean, you're clearly making investments for growth across the business I just wanted to specifically.
Hey, Tom just following up with some more questions on the cost front.
Look at industrial solutions.
The mental Oh Oh.
Given where the backlog is I guess first could you just talk about.
Oh, the Lilly or do you expect.
Higher gross margins.
You've done it sounds like quite a few you've got more upgrades planned what that might mean from a capex perspective, but also.
Going forward.
Yeah, I would say, it's probably more to do yes. The answer is yes, and I think it probably has more to do with the again with the lack of operational headwinds that we had the Abilene facility is an owned facility versus Manitowoc being a rented facility. So we do see slightly higher margins out of that facility and I think.
How quickly can that come on because your backlog would imply that you could have a pretty.
A pretty meaningful step up in revenues once those investments kind of come to bear.
Okay.
Yes, I think I think to answer your question about Capex. We've made some investments this year they've been relatively modest we don't expect anything that would move to move the needle from a consent from a consolidated perspective.
I think capacity utilization is a big factor here as you know the more we can.
Run across that plant, we should see some some some good returns on that.
As we look forward historically, we've been about 2% to 3% of revenue is capex, we don't anticipate.
Understood.
But the others are sort of it's showing some.
Exceeding that in 'twenty, six or Q4 or 26, but what I will tell you is we do expect we do intend to expand that plant until another portion of the larger building, which we can get into it increases our floor space by about 35%.
Weakness Houston this quarter is that a because it's just timing or is there a general lack of demand for that.
Well, we like to think it's timing, we talked with our customers about it when we're on Roadshows.
Going into the second half of 2026, so that along with.
And demos and they really like the <unk>.
Pacification of that but what they say is at least at least right now the price of oil is restricting their ability to increase capital at.
The increases were making in staffing and equipment, we should be able to respond to this demand.
Once that turns a bit for them with new budget season, we should expect a resurgence in volume from that from that product line.
With the demand out there in his comments. It is there is it is continuing so we definitely need to make these investments to keep up with it.
Great Thanks for that color.
Right and.
And okay. So second half is it should it should be more of the expectation potentially for a step up there.
Thank you.
Our next question comes from Eric Stine with Craig Hallum Capital Group. Please proceed with your question.
Yes, I mean, maybe a good segue just on I.
I mean, obviously its no secret what's going on in.
Hi, Eric Hi, Tom Good morning.
In energy markets demand need for resiliency et cetera.
Good morning, good morning.
So maybe it sounds like I mean, you're clearly making investments for growth across the business I just want us specifically.
But I mean I would think that this is a tailwind for your business for multiple years and.
Look at industrial solutions.
So curious if you agree with that first but then secondly, I mean do you have you mentioned, what you're doing in industrial solutions.
Given where the backlog is I guess first could you just talk about you know.
You've done it sounds like quite a few you've got a more upgrades planned what that might mean from a capex perspective, but also you know how quickly can that come on because your backlog would imply that you could have a pretty.
But even in gearing I mean, do you have kind of additional.
Ways to expand capacity.
As you think about that not just for <unk> 2026, but as you look at 27 2008 and beyond given these trends.
You know a pretty meaningful step up in revenues are once those investments kind of come to bear.
Sure well.
First of all the demand for electricity is going to keep on going up and we all know that the demand for data center.
Yeah.
Yeah, I think I think to answer your question about Capex. We've made some investment this year they've been relatively modest we don't expect anything that would move to move the needle from a consent from a consolidated perspective, you know as we look forward historically, we've been about 2% to 3% of revenue is capex, we don't anticipate.
It's projected to go from 22 Gigawatts up to 35 Gigawatts through 2030, just for data centers alone. So we know that that's a demand driver for us regarding capacity.
Im sorry, the visibility that we have for the gas turbine market goes beyond 26 into 2007 and even into 2008. So we do expect.
Exceeding that in 'twenty, six or Q4 or 26, but what I will tell you is we do expect we do intend to expand that plant into another portion of a larger building, which we can get into it increases our floor space by about 35%.
That tailwind to be behind us.
For the next certainly two or three years, which as far as we can see out right now.
Gas turbine sold are about 30% up year over year 25 versus 2024, and 24 was a strong year. So.
Going into the second half of 2026, so that along with the increase that we're making in staffing and equipment, we should be able to respond to this demand.
If the basics are there for the growth regarding the capacity, we're really only still about 45 ish percent full in our gearing facility. So we have plenty of capacity to fill.
With the demand out there in his comments. It is there is it is continuing so we definitely need to make these investments to keep up with it.
Phil there as this business grows but what we're doing is specifically, adding technology to bring more in house that was the balancing equipment I mentioned because the more we can bring in house the more control, we hope we have over quality over timing over price.
Right and.
And okay. So second half is it should it should be more of the expectation potentially for a step up there I mean, maybe a good segue just on you know I mean, obviously its no secret what's going on in <unk>.
So those are where you're going to see our investments pay going forward.
In energy markets demand need for resiliency et cetera, but I mean, I would think that this is a tailwind for your business for multiple years and so curious if you agree with that first but then secondly, I mean do you have you meant.
Yep Okay.
That is helpful. And then just on heavy fab and specifically wind.
I would assume we should expect this to be the new norm now that you have satisfied that long term contract I mean, not that you would.
Turn down in order of that magnitude should it happen.
And what Youre doing in industrial solutions, but even in gearing I mean do you have kind of additional.
This is going to be a maybe not quarter to quarter, but this is going to be a.
Ways to expand capacity.
You'll get a large order, it's probably going to mean that you are at elevated levels for the.
As you think about that not just for <unk> 2026, but as you look at 27 28 and beyond given these trends.
The next few quarters, and but no one should expect necessarily that heavy fab backlog.
Sure well first of all the demand for electricity is going to keep on going up and we all know that the demand for data center.
Hmm is meaningfully higher until wind really picks up I mean is that a yes you.
It's projected to go from 22 Gigawatts up to 35 Gigawatts through 2030, just for data centers alone. So we know that that's a demand driver for us regarding capacity.
Yes, you are correct, what our customer our customers liked it to issue as ratable pose because it also helps helps them because they don't necessarily know the turbines are going to sell that far out.
They know that we know they want our capacity we've got good visibility through the first half of 'twenty, six and really good customer indications beyond that but when it comes to which turbine they sell in which tower goes under it they really can't look out that far so yes, what we saw this quarter you should expect to see going forward.
And I'm sorry, the visibility that we have for the gas turbine market goes beyond twenty-six into 'twenty seven and even at the 28. So we do expect that tailwind to be behind us for.
For the next certainly two or three years, which is as far as we can see out right now.
Okay. Thank you.
Gas turbine sold are about 30% up year over year 25 versus 'twenty 'twenty, four and 'twenty four it was a strong year. So.
Thanks, Eric very good thank you.
We have reached the end of the question and answer session I would now like to turn the call back over to Eric Blatchford for closing comments.
If the basics are there for the growth regarding the capacity, we're really only still about 45 ish percent full in our in our gearing facility. So we have plenty of capacity to to fill there as this business grows but what we're doing is specifically, adding technology to bring more in house that was the balancing equipment.
Yeah. Thanks, everyone for listening, we look forward to coming back to you again early next year to talk about our full year 2025, and <unk> 22026 folks. Thank you for your interest.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
I mentioned because the more we can bring in house the more control, we hope we have over quality over timing over price.
So those are where you're going to see our investments pay going forward.
Yep Okay.
That is helpful. And then just on heavy fab and specifically wind.
Now I would assume we should expect this to be the new norm now that you have satisfied that.
A long term contract I mean, not that you would [laughter] turned down in order of that magnitude should it happen. I mean, this is going to be a maybe not quarter to quarter, but this is going to be a you know you get a large order, it's probably going to mean that you're at elevated levels for.
The next few quarters, and you know, but no one should expect necessarily that heavy fab backlog.
Is meaningfully higher until wind really picks up I mean is that a yes.
Yeah, Youre correct, dark what our customer our customers liked it to issue us ratable pose.
Because it also helps helps them because they don't necessarily know the turbine they're going to sell that far out.
They know that we know they want our capacity we've got good visibility through the first half of 'twenty, six and really good customer indications beyond that but when it comes to which turbine they selling which tower goes under it are they really can't look out that far so yes.
We saw this quarter you should expect to see going forward.
Okay. Thank you.
Thanks, Eric very good thank you.
We have reached the end of the question and answer session I'd now like to turn the call back over to Eric Blatchford for closing comments.
Yeah. Thanks, everyone for listening, we look forward to coming back to you again early next year to talk about our full year 2025, and <unk> 20, 2026 books. Thank you for your interest.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.