TPI Composites, Inc.

Good afternoon and welcome to TPI Composites' first quarter 2021 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, Investor Relations for TPI Composites. Thank you. We may begin.

Thank you, Operator. I'd like to welcome everyone to TPI Composites' first quarter 2021 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.

Thanks, Christian, and good afternoon, everyone. Thank you for joining our call. In addition to Christian, I'm joined today by Brian Shoemaker, our CFO. I'll briefly review our first quarter 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 financial results in detail, and then we'll open the call for Q&A. Please turn to slide five. We had a strong first quarter in which we delivered net sales of $404.7 million, a 13.5% increase over Q1 of 2020, and adjusted EBITDA of $13.1 million, or 3.2% of net sales, an 11.8 million increase over Q1 of 2020. We started wind blade production in India for Nordex. We published our second ESG report where we laid out specific goals related to safety, gender and racial ethnicity for our board of directors and leadership teams, as well as a pledge to become carbon neutral by 2030 with 100% of our energy being procured from renewable sources. We remain focused on operating our businesses safely while continuing to mitigate the impacts of COVID-19 and ensuring that we are prepared to deal with continued resurgences 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' demand. Turning to slide seven, I'll now give you a quick update of our global operations as well as a market update. During the first quarter, we continued to operate all of our facilities at normal levels. In China, production continued as normal. We are still working on backfilling the five lines that were taken out of production at the end of last year. Stay tuned. In India, production for Vestas continued uninterrupted and we started production on two lines for Nordex. The country of India is currently experiencing a significant increase in COVID cases, but this is not currently having a material impact on our operations. We will continue to monitor the situation very closely, including the impact on our supply chain and work to protect our associates and their families as we have through the entire pandemic. In Turkey, production continued as normal while we continued the transition of three lines during the first quarter. Turkey also experienced an increase in COVID cases late in Q1 and into Q2, so we are monitoring the situation very closely and continuing our measures to protect our associates and their families. There's been no disruption to our operation as a result of the spike in cases. In Mexico, production also continued at normal levels. We are currently in the midst of a transition of two lines in Matamoros, and we plan to have four lines in transition in Juarez and Q2, with four more lines in transition in Mexico during 2021. In the U.S., blade and transportation production has continued uninterrupted. We have already conducted multiple mass vaccination events for our associates in Newton, Iowa, and are working with state and local authorities in Rhode Island to offer the same to our associates there. On the service side of the business, we are continuing to build out the team in order to support the growing customer opportunities we have and are securing, and now have approximately 250 technicians, an increase of over 30% since the beginning of 2020. Our training facility in Santa Teresa, New Mexico, is up and operating, and we plan to open another training facility in Europe this year to support our European service operations. From a transportation perspective, during the quarter, we continue to deliver parts for multiple passenger electric vehicle manufacturers. We are pleased with the progress and experience that we are gaining with the automated production line in Rhode Island to demonstrate cycle times, quality, repeatability, scalability, and cost for our customers, and to expand our product portfolio with these advanced technology solutions. We are now collaborating with six OEMs on cabin body structures, and with nine OEMs related to electric vehicle component parts. Examples of cab and body structures are buses, Class 8 cabs, and delivery vehicles that enable lightweighting, reduced upfront capital investments, and are highly durable structures. Examples of electric vehicle components include underbody protection, battery enclosures, and body panel parts to enable lighter weight, high durability, and thermal resistance. We are continuing to build our transportation team and plan to continue to add leadership with deep automotive experience to accelerate the execution of our strategy. With respect to our supply chain, no issues materially impacted our production in Q1, but we have seen cost increases, some availability issues, and logistics challenges over the last quarter. In addition to fabrics, which include fiberglass and carbon, and consumables, we experienced both price increases and supply constraints related to epoxy resin feedstocks due to the extreme cold weather in Texas in February, factory fires, plant closures, and unplanned extended maintenance outages in China and Europe. We continue to manage through the congestion in the Los Angeles area ports and a global container shortage causing increases in logistics costs. Brian will speak to the financial impact in a moment, but as they have demonstrated during the pandemic and prior material challenges, our supply chain team has done a phenomenal job of finding alternative sources, securing enough materials, and finding new logistics routes to enable minimal disruptions to our operations and deliveries to our customers. We see early signs of supply constraints easing and expect market pricing to improve beginning in Q3. And finally, we are actively engaged in evaluating multiple opportunities to build out and add to our current technologies and capabilities and are excited about the opportunities we see to accelerate the growth and expand the breadth and strength of our business. As it relates to the wind market, since our last call, the Biden administration has made several significant announcements that could positively impact our business over the long term. First, the proposed infrastructure bill has many components that have the potential to help accelerate the growth of wind installations in the U.S. To highlight a few, first, the energy efficiency and clean electricity standard would aim to achieve 100% carbon-free electricity by 2035. Second, transmission-targeted investment tax credit that incentivizes the build-up of at least 20 gigawatts of high-voltage capacity lines. And third, a 10-year extension of the production tax credit and potential for direct pay option. Separately, Senator Wyden reintroduced a bill with a technology-neutral framework that would allow power producers to qualify for either a production tax credit or an investment tax credit for facilities with zero or negative carbon emissions. Relating to offshore wind, the Biden administration announced a government-wide goal to install 30 gigawatts of offshore by 2030. Finally, as part of the climate summit, the administration announced a new goal for the U.S. to cut its greenhouse gas emissions in half by 2030 as part of the Paris Climate Agreement. Other countries, including Canada, Japan, Brazil, the UK, and South Korea, increased their commitments as well, while the EU Parliament and member states passed legislation requiring a 55% reduction in carbon emissions by 2030, compared with 19 levels, and that's up from 40%. Since our last call, Woodmac has increased its onshore U.S. forecast for 2021 through 2025, by approximately 19%, and that includes a 50% increase for 2022 alone. This forecast suggests that the competitiveness and strength of the wind markets continues to improve, as we've been discussing for some time. While these policy announcements may not cause the short-term installations to increase, and in some cases we may see installations pushed out due to additional potential time for developers and other stakeholders to recognize the benefits of incentives such as the PTC, These are clearly very strong positive signals as we look out over the longer term period. 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, including 18 gigawatts of capacity, 20% market share, and $2 billion of wind revenue do not yet reflect the potential impact of the accelerating energy transition. We believe the long-term opportunity for us in wind is significant. and we will update our targets as we develop better clarity through discussions with our customers, developers, utilities, and asset owners. Finally, we remain focused on the health and safety of our associates while executing on our operating imperatives and ESG activities to drive profitable growth and long-term shareholder value. With that, let me turn the call over to Brian.