Broadwind, Inc.

Greetings and welcome to the Broadwind second quarter 2021 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Bonfit, Chief Financial Officer. Thank you. You may begin.

Good morning and welcome to the Broadwind second quarter 2021 results conference call. Leading the call today is our CEO, Eric Blashford, and I'm Jason Bonfit, the company's CFO. We issued a press release before the market opened today detailing our second quarter 2021 results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements. which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest annual and quarterly filings with the SEC. Please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued this morning. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Eric.

Thanks, Jason, and welcome to those joining us today. After a challenging first quarter, our business and global supply chain began to stabilize in the second quarter. As expected, we delivered a sequential increase in revenue but were impacted by year-over-year decline in wind tower sections sold as higher raw material costs dampened near-term investments by wind tower customers. The net result was that towers we expected to ship in Q2 have been pushed into the second half of the current year. We have now booked approximately 50% of our 2021 optimal wind tower capacity for the second half of 2021 and through July 21 have received orders for about 15% of our 2022 tower production. As I mentioned on our last earnings call, in December 2020, Congress approved an additional year of the production tax credit, or PTC, at the 60% subsidy level, together with a new 30% ITC for offshore wind, creating the potential for increased tower demand over the medium term. In June 2021, the U.S. Treasury Department published the Biden administration's tax proposals for the fiscal year 2022. These proposals include a provision for an extension of the PTC including onshore and offshore wind projects from 2022 through 2026. If passed into law, the company expects the administration's planned multiyear extension of the PTC would provide a significant catalyst for tower demand. As a result of the favorable policy backdrop and continued decline of the levelized cost of wind energy, Wood McKenzie, a leading provider of commercial intelligence for the world's natural resource sector, recently raised its onshore wind insulation forecast by nearly 30% to over 100 gigawatts installed over the next decade. As we have done throughout the pandemic, we continue to produce and ship products that meet and often exceed our customers' precise fabrication requirements. Pandemic related supply chain constraints, while still present, eased in Q2. Cost inflation on key materials remains a headwind for our customers and one that has dampened near-term capital investment in wind. This is particularly acute with respect to the cost of steel, which has increased significantly in the past year. While Broadwind absorbs only minimal direct commodity price risk, we believe some customers are waiting for raw material costs to normalize. This, when balanced against wind developers' efforts to align projects with a potential PT extension, has pushed tower orders into next year. Our diverse end market strategy performed as intended during the quarter as growth in non-wind markets helped to offset softness in tower orders. Our gearing segment generated significant year-over-year growth in both revenue, orders, and backlog supported by demand from energy and steel markets. We believe our non-wind end markets are recovering as our industrial and energy customers are placing orders to replenish their inventories. Our total orders declined by a third year over year, primarily attributable to the delay in the tower orders I previously mentioned. Quoting activity in our non-wind markets continues to be strong, and we expect good order flow for the remainder of the year, especially from gearing and industrial fabrications. The full impact of the pandemic remains uncertain at this time as the world deals with new variants, but we continue to take actions to keep our people safe and our facilities open. We anticipate that our current cash and availability under our line of credit provides us with adequate liquidity to support our business through this period of uncertainty. Within our heavy fabrication segment, revenue declined $7.8 million. We continue to quote and produce from multiple turbine OEMs in the U.S., which gives us good customer diversification in the tower market. Within gearing, revenue increased 7% year over year, while orders more than doubled. to nearly $8 million as the anticipated improvement in customer activity continues, particularly in the energy and steel sectors. Revenue for our industrial solutions segment declined 19% on a year-over-year basis, driven by lower demand for gas-driven components and a delay in the delivery of an international order due to global logistics delays. In summary, I'm pleased with how our business stabilized between the first and second quarters. I'm pleased at how our team is responding to the still present, albeit reduced, supply chain challenges we've seen in recent quarters to achieve better factory throughput, all while keeping our people safe and our customers' needs met. We fully expect wind development activity to ramp up materially over the next 24 to 36 months, particularly should we see a multi-year extension of the PTC, which looks as if it has a solid chance of being passed into law under the current administration. As before, we continue to actively evaluate both on acquisitions and joint venture partnerships that seek to leverage our existing manufacturing expertise and exposure to cleantech markets. We continue to consider opportunities for accretive acquisitions of assets or businesses with high revenue and or cost synergies, complementary product lines, and a well-established diverse customer base that further support our diversification strategy. With that, I'll turn the call back over to Jason for a discussion of our second quarter financial performance.