TPI Composites, Inc.

Good afternoon and welcome to TPI Composites, fourth quarter and full year 2020 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Christian Eden in Investor Relations for TPI Composites. Thank you. You may begin.

Thank you, operator. I'd like to welcome everyone to TPI Composites' fourth quarter and full year 2020 earnings call. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risk and uncertainties. Actual results could differ materially from our forward-looking statements. If any of our key assumptions are incorrect because of other factors discussed in today's earnings news release and the comments made during this conference call or in our annual report on Form 10-K filed with the Securities and Exchange Commission or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, tpicomposites.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. With that, let me turn the call over to Bill Siwek, TPI Composites President and CEO.

Bill Siwek Thanks, Christian, and good afternoon, everyone. Thank you for joining our call. In addition to Christian, I am joined today by Brian Shoemaker, our CFO. I'll briefly review our full-year results and activities, discuss the current operational status of our manufacturing facilities, including our supply chain, give an update on our global service and transportation businesses, and then a quick update on the wind energy market. Brian will then review our quarterly and full-year financial results in detail, our 2021 guidance, and then we will open up the call for Q&A. Please turn to slide five. We finished 2020 strong with 27 percent growth in adjusted EBITDA in the fourth quarter while expanding this margin by 120 basis points year-over-year to 8.8 percent. For the full year 2020, With the backdrop of a difficult operating environment due to COVID-19, we achieved double-digit revenue and adjusted EBITDA growth. We delivered net sales of $1.67 billion, a 16.3% increase over 2019, and adjusted EBITDA of $94.5 million or 5.7% of net sales, notwithstanding the estimated impact of COVID-19 on adjusted EBITDA during the year of just over $60 million. These results speak to our business model and our team's ability to adapt and stay nimble in a dynamic macro landscape. We delivered approximately 12 gigawatts of wind blades during 2020. We started wind blade production in India for Vestas and added Nordex as a customer in India as well with production starting for them this quarter. We extended contracts with GE and Vestas and in the fourth quarter we extended a contract with Nordex in Turkey. We continue to make progress in transportation, including hitting key milestones under the Super Truck 2 program with Navistar, production of commercial delivery vehicles for Workhorse, and we're now producing components for multiple passenger EV platforms under technology development and pilot production arrangements. We continue to refresh our board of directors by adding global operations and finance experience, independence, and diversity. We published our first ESG report last March, and plan to publish our second annual report this March. We remain committed to operating our business safely while continuing to mitigate the impacts of COVID-19 and ensuring that we are prepared to deal with the resurgence of the virus in any of our global locations. We have and will continue to adapt our operating procedures in order to enable our associates to work safely and continue to meet our customers' demands. We also continue to drive the operational imperatives we outlined in 2020 and recommitted to in 2021 to reduce cost and improve our operations globally. We are making very good progress on these imperatives, notwithstanding the challenges created by COVID-19. Turning to slide six, I'll now give you a quick update of our global operations as well as a market update. During the fourth quarter, we continued to operate all of our facilities at normal levels. In China, we delivered more volume than our original 2020 plan, demonstrating what an outstanding group of associates we have there. However, at the start of 2021, five lines were removed from production, and we expect the remaining lines will run at lower utilization during 2021, and therefore our volumes will be down year over year in China. We will continue to explore opportunities for that capacity, including Chinese OEMs, but the shifting of capacity from geography to geography over time is consistent with our strategy to manage risk and optimize our footprint to enable the highest utilization and competitive advantage for TPI and our customers. In India, we ramped up the first four lines of the facility for Vestas, and we are starting production on two lines for Nordex as we speak. The Vestas ramp went remarkably well, even though we were in the middle of a pandemic. In Turkey, production continued as normal while we started the transition of three lines during the fourth quarter. That transition is continuing into the first quarter of 2021. In Mexico, production also continued at normal levels. We are currently in the midst of a transition of two lines in Matamoros, as well as one line in Juarez, and we plan on having as many as seven more lines in transition in Mexico during 2021. In the U.S., blade and transportation production has continued uninterrupted. On the service side of the business, we made very nice progress in 2020 securing new deals with OEMs as well as asset owners and are working hard to build out our global service team to execute our growth strategy in 2021 and beyond. To accelerate our growth and to deal with the shortage of qualified technicians, we opened a new training center in Santa Teresa, New Mexico to increase our training capabilities and support our rapidly growing need for qualified blade service technicians. We are also continuing to evaluate blade recycling options and look forward to being able to share more on this effort during 2021 as some significant progress was made during 2020. The global transportation industry is working to rapidly increase the electrification of vehicles to reduce the impact on the environment. According to Bloomberg NEF, electric bus sales are anticipated to grow almost threefold in the US from 2021 to 2025, The sales of commercial electric vehicles are expected to grow into the hundreds of thousands by 2030 as e-commerce continues to rapidly rise and consumers are driving demand higher for passenger electric vehicles. We expect there will be an increased demand for composite components and structures for electric vehicles as composite material systems can be the key material building blocks for purpose-built vehicles. Our composite solutions are ideally suited for transportation applications because of the benefits resulting from weight reduction and therefore extended range for EVs, corrosion resistance, strength, durability, the ability to scale production with lower upfront production investment, and lower total cost of ownership for end users. The level of interest in our capabilities continues to grow. We are collaborating with our customers to develop innovative composite solutions for vehicles across passenger automotive, bus, truck, and delivery vehicles. Today, we are building composite bodies for buses and delivery vehicles, collaborating on Class 8 vehicle programs, and manufacturing components for multiple passenger EV platforms. Since 2018, we have invested approximately $50 million in our transportation business, and we expect to invest upwards of $20 million more in 2021 to continue to build our team, technology, and infrastructure to capitalize on the accelerating EV and lightweighting trends. With respect to our supply chain, we did not experience any significant supply issues during the fourth quarter. We continue to monitor the material markets closely. There are still some logistics challenges. For example, there is congestion at Los Angeles area ports that we're working through, but nothing that has materially impacted our production thus far. We will continue to diversify our supply chain geographically to reduce risk, provide for security of key materials, and drive down cost. Turning to slide seven, we expect the long-term trend for wind energy to continue to strengthen based on the current cost of wind energy, continued efforts to drive down cost, and strengthening of political will around the world to decarbonize and reverse climate change. Since our last call, the production tax credit in the US was extended through the end of 2021, and we believe that the tone the Biden administration is setting on climate change bodes very well for renewables over the coming years. In the last month, for example, President Biden committed to rejoin the Paris Climate Agreement, announced up to $100 million in funding for transformative clean energy technology research and development via the Advanced Research Projects Agency, and announced several executive orders to promote renewable energy. A climate task force was created to set in motion a government-wide action plan for reducing emissions, directing all federal agencies to consider climate and their decision-making, driving federal procurement to renewable energy, targeting federal lands and water for clean energy development, and accelerating the permitting of clean energy and transmission projects. As you can see on slide seven, Wood Mackenzie's onshore and offshore forecasts continue to strengthen both globally and in the U.S. In addition, we have layered in two scenarios to illustrate the potential of the accelerating energy transition. On the global chart, Bloomberg NEF's climate scenario shows what global wind installations would collectively need to be to meet a well below two degree scenario. As you can see, it's substantial. On the U.S. chart, These are the wind installations needed to enable the U.S. to reach 50% renewable electricity by 2030. This scenario, created by Wood Mackenzie and the American Clean Power Association, demonstrates how the U.S. wind market can strengthen over time and be a critical factor in reducing U.S. emissions and creating a stronger economy. One of the key findings from the Wood Mack and ACP work is that administrative actions alone can potentially double renewable energy penetration within the next decade with transmission-focused policies to unlock renewables potential. While it is still the early days in the Biden administration, this scenario shows the strong growth potential of the U.S. wind market over the coming years. In Europe, the support for the European Green Deal is strengthening, and European leaders are working to finalize a strengthened plan to cut emissions beyond the original target in the European Green Deal to 55% by 2030 compared to 1990 levels. We believe recent global initiatives to promote wind and renewable energy elsewhere will also fuel long-term renewables growth, including the announcement of net zero targets from China in 2060, Japan, South Korea, and Canada, all 2050, and of course, power to the X, or the creation of synthetic fuels for use in heating, transportation, and power generation, by producing green hydrogen through the electrolysis of water using renewable energy. These are a few examples of the accelerating energy transition we are seeing on a global basis with additional drivers included on slide eight. We believe the future for wind energy will continue to strengthen given the initiatives and goals to promote the acceleration of the energy transition. Our long-term goals that we have discussed publicly, including 18 gigawatts capacity, 20% market share, and $2 billion of wind revenue have not yet been updated to reflect the potential impact of the acceleration of the energy transition. As we discussed on the last call, we are working with our customers, developers, utilities, and asset owners to estimate the magnitude and timing of demand, both on and offshore, to make sure we are aligned geographically with the capacity of each of our customers' needs over the next decade. While we are not ready to present updated numbers today, we believe the long-term opportunity for us in wind is significant. and we will update our targets when we have better clarity. Finally, while the health and safety of our associates remains our primary objective, we remain focused on our operating imperatives and our ESG activities to drive profitable growth and long-term shareholder value. With that, let me turn the call over to Brian.