TPI Composites, Inc.

and welcome to the TPI Composites First Quarter 2024 Earnings Conference Call. At this time, I'd like to turn the conference over to Jason Wegman, Investor Relations for TPI Composites. Thank you. You may begin.

Thank you, operator.

I would like to welcome everyone to TPI Composites First Quarter 2024 Earnings Call. We will be making forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, ppicomposites.com. Today's presentation will include 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 Cywick, TPI composites resident and CEO.

Thanks, Jason, and good afternoon, everyone, and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. Please turn to slide five. I'm pleased to announce the publication of our 2023 sustainability report in March of this year. We remain committed to our publicly stated goals of fostering a zero harm culture and achieving carbon neutrality by 2030 through 100% renewable energy procurement. Wind blades produced by us in 2023 are estimated to prevent approximately 346 million metric tons of CO2 emissions over their 20 year lifespan. We're advancing towards our 2030 goal of carbon neutrality, achieving an 18% reduction in overall market-based Scope 1 and 2 CO2 emissions. In Turkey, we invested in two wind turbines and additional solar panels. Further, to enhance on-site renewable energy use, we signed a power purchase agreement in India. We reduced total annual waste generated by 12%. Our behavior based safety program continued to yield safety results, outperforming industry standards and our internal goals. And we have fully embraced our IDEA program and were recognized with numerous awards for our commitments to inclusion and diversity around the globe. In the U S our leap for women program was recognized with a grid award for best affinity group. In Mexico, we were recognized as a top employer in India. We were recognized as one of the a hundred best companies for women. And in Turkey, we were awarded the Silver Stevie Great Employers Award for Achievement in Diversity and Inclusion. Advancing our sustainability goals remains a priority in 2024. We're actively negotiating a purchase power agreement in Mexico to ensure 100% renewable energy for our facilities there. Additionally, we're working to expand on our recent PPA in India. These investments go beyond environmental benefits. They also make strong economic sense, contributing directly to the improvement of our financial performance. Please turn to slide seven. Consistent with the guidance we provided during our 2023 fourth quarter earnings call, sales and adjusted EBITDA in the first quarter of 2024 were lower than in the prior year due to the timing of production line startups and transitions across several of our facilities. However, they were slightly ahead of our plan, so we are still on track for the full year. Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year after we get through the process of ramping up the 10 lines that are in startup or transition in the first half of the year. I'm confident in our ability to achieve mid-single-digit adjusted EBITDA margins in the second half of the year, given the excellent operational execution we are seeing today in most of our plans. The $23 million adjusted EBITDA loss in the first quarter included $22 million related to startup and transition costs, $9 million of unanticipated losses from the Nordex Matamoros plant due to temperature and humidity issues, as well as decreased volume requirements. And we recorded an $8 million charge to account for the inflationary impact of completing pre-existing warranty claims. Without these items, our adjusted EBITDA margin would have been over 5%, and that's at a 67% factory utilization level. I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the third and fourth quarters when our utilization climbs well above 80%. Activities to transition the Matamoros plant back to Nordex are in full swing, and we are on track to return the facility by June 30 as planned. Our use of cash in the quarter was primarily to fund our startups and transitions and was aligned with our expectations. We believe our quarter-end cash balance of $117 million, along with access to existing credit facilities and the significant impact of the strategic refinancing with Oaktree, provides us ample liquidity to navigate current market conditions and ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year. Please turn to slide eight. Turning to our wind business performance, our blade facilities in India and Turkey continued to be profitable, delivering 241 blade sets representing 1.4 gigawatts of capacity during the quarter. Most of our Mexico operations performed well, even while going through numerous transition startups and volume adjustments. Overall, our operating performance is benefiting from our renewed focus on lean. Embracing lean practices and ensuring they are part of our day-to-day culture will enable us to deliver greater value to our customers while optimizing our cost structure, maximizing productivity, and manufacturing the highest quality blades in the industry. Moving on to our field service business, as anticipated, our global service revenue declined year over year. This reflects a temporary reduction in technicians assigned to revenue-generating projects due to the warranty campaign announced last year. We expect our technicians to return to normal levels of revenue-generating work by mid-year. Despite continued progress building the automotive segment's order pipeline and operational execution, and notwithstanding growth in non-Proterra revenue, Q1 revenue fell year over year due to the Proterra bankruptcy. The growth in non-Proterra revenue was largely due to the launch of a new product line for our largest passenger EV customer. While we've made significant investments in expanding our automotive business over the past years, and continue to see strong growth potential for composite products and electric vehicles, we're prioritizing capital allocation towards the wind business. To ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives and expect to finalize a transaction by the end of the second quarter. Our supply chain execution and cost performance remain very stable. Raw material costs have decreased compared to this time in 2023, with further savings expected due to excess manufacturing capacity in China. Logistics around the Red Sea situation remain well managed, with no operational or significant cost impacts to date. Now, with respect to the wind market, we are seeing the beginnings of an onshore wind rebound driven by ambitious government action, including the Inflation Reduction Act in the U.S. and the EU Green Deal and repower EU policies in response to the need for greater energy independence and security to address climate change and to meet the increasing global electricity demand fueled by factors like generative artificial intelligence and data centers, EVs, and the electrification of buildings. Excluding China, expectations are for global onshore installations to hold steady in 2024 with a growth inflection point in 2025, followed by continued expansion throughout the decade. And the U.S. BNEF is projecting onshore wind installations in 2024 of 8.4 gigawatts and to be nearly 20 gigawatts per year by the end of the decade. While favorable long-term policies like those in the U.S. and the EU provide optimism and have helped to accelerate orders for our customers, we still don't anticipate increased wind installations in our primary markets to fully materialize until 2025. The industry still awaits some critical details on implementing key components of the Inflation Reduction Act, such as the domestic content adder, prevailing wage and apprenticeship clarifications, 45Z, and the transition from PTC and ITC to the new tech-neutral version. Also, elevated interest rates, inflation, the cost and availability of capital, permitting hurdles, and transmission bottlenecks are also contributing to near-term delays. There are, however, encouraging signs that the U.S. and the EU are addressing permitting and transmission bottlenecks. FA Win recently announced that permits for projects in Germany soared to a record high in the first quarter of 2024, nearly 40% higher than the same period last year. This progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects overriding public interest status. In the U.S., the Department of Energy released a Transmission Interconnection Roadmap, I2X, to tackle challenges in connecting renewable energy to the grid. This roadmap aims to streamline the process by 2030, focusing on faster approvals and more consistent costs while maintaining grid stability. Additionally, the White House Council on Environmental Quality has finalized a rule to reform, simplify, and modernize the federal environmental review process under the National Environmental Policy Act. The new rule will build on more than $1 billion from President Biden's Inflation Reduction Act to expedite federal agency permitting. Technical advances are also being made. Recent research shows reconductoring existing transmission lines with advanced conductors can double capacity on existing rights-of-way in just 18 to 36 months. Now, before I turn it over to Ryan, our financial outlook hasn't changed over the past couple of quarters, as we still expect 2024 to be a year of transition. We're currently running 36 production lines, including those for Nordex and Matamoros, which are on track to transition back to them by the end of the second quarter. We are progressing nicely on the start of some transitions, all of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half as these lines achieve serial production. Despite lower utilization in 2024 compared to 2023, we still expect strong improvement in profitability as we have addressed the operational challenge faced in 2023. As such, we are reconfirming our 2024 revenue guidance of $1.3 to $1.4 billion with an EBITDA margin between 1% and 3%. In 2025, we continue to expect a significant step up in profitability, EBITDA exceeding $100 million, putting us back on track to achieve our high single-digit EBITDA margin target in 2026 and beyond. With that, I'll turn the call over to Ryan to review our financial results.

Thanks, Bill. Please turn to slide 10. In the first quarter of 2024, net sales were $299.1 million compared to $404.1 million for the same period in 2023, a decrease of 26%. Net sales of wind blades, tooling, and other wind-related sales, which hereafter I'll refer to as just wind sales, decreased by $98.7 million in the first quarter of 2024, or 25.5% compared to the same period in 2023. Light sales this quarter were negatively affected by startup and transition activities at our Mexico and Turkey facilities, expected volume declines based on market activity levels, and a decrease in average sales prices due to changes in the mix of wind blade models produced. This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startups and transition. Field service revenue declined by $1.1 million in the first quarter of 2024 compared to the same period in 2023. Our first quarter is typically a low point for service revenue due to seasonal weather patterns and the nature of the work performed, and this year was also impacted by the warrants campaign announced last year. We expect a full transition back to revenue-generating activity by the second half of this year. Automotive sales decreased by $5.3 million in the first quarter of 2024 compared to the same period in 2023. This decrease was primarily due to a reduction in bus body deliveries due to Proterra's bankruptcy, RTF set by an increase in sales of other automotive programs, and the launch of a new product line for our largest passenger EV customer. Adjusted EBITDA for the first quarter of 2024 was a loss of $23 million compared to adjusted EBITDA of $8.4 million during the same period in 2023. The decrease in adjusted EBITDA for the first quarter of 2024 as compared to the same period in 2023 was primarily driven by lower sales, higher startup and transition costs, and changes in estimate for pre-existing warranty claims, partially offset by favorable foreign currency fluctuations. Moving to slide 11. We ended the quarter with $117 million of unrestricted cash and cash equivalents and $510 million in net debt. As planned, we had negative free cash flow of $47.3 million in the first quarter of 2024 compared to negative free cash flow of $87.1 million in the same period in 2023. The year-over-year improvement was primarily driven by the absence of payments tied to the closure of our operations in China and the growth of contract assets in the first quarter of last year. The net use of cash in the first quarter of 2024 was primarily due to our EBITDA loss, capital expenditures, and interest in tax payments. As previously communicated, we expect the second quarter to be the low-water mark for cash. We've had much success improving the efficiency of our balance sheet over the past couple quarters, and we will remain focused on preserving cash and optimizing working capital to ensure we have the resources to execute key initiatives and restart idle capacity moving forward. A summary of our financial guidance for 2024 can be found on slide 12. There are no changes to our original financial guidance provided earlier in the year, and I want to reiterate that the results from the first quarter for sales, adjusted EBITDA, and cash flow were in line with our plans. We continue to anticipate sales from continuing operations in the range of $1.3 to $1.4 billion for the year. We also continue to believe 2024 will be the tail of two halves. In the first half, we will be ramping up 10 lines that are either in startup or transition. We expect the first half's volume to be a fair amount lower than the second half, and the first quarter will be lower than the second quarter. As we work through these transitions in startups, we are generating modest losses and consuming cash. In the first half of the year, we are still expecting our adjusted EBITDA margin to be a mid-single-digit loss. The first quarter was likely our low point for profitability this year, and we should improve somewhat in the second quarter as volumes ramp to serial production. Our adjusted EBITDA margin improves to mid-single digits in the second half of the year, and we expect to be generating positive cash flow. For the full year, we anticipate capital expenditures of $25 to $30 million. These investments are driven by our continued focus on achieving our long-term growth targets and restarting our idle lines. We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oak Tree preferred shares into a term loan. We believe our balance sheet, along with the improvement in our liquidity and operating results, will enable us to navigate another transition year and will also allow us to invest to achieve our mid- and long-term growth, profitability, and cash flow targets. With that, I'll turn the call back over to Bill.

Thanks, Ryan. Please turn to slide 14. The numerous government policy initiatives aimed at expanding the use of renewable energy, the need for energy independence and security, and growing OEM backlogs give us confidence in the wind industry's short and long-term growth. We are an integral part of the ENTRE wind growth story, and we remain focused on managing our business, with an acute focus on reinforcing lean principles to enhance our operational and financial performance. We are committed to partnering with our customers by aligning our factories to support their next generation turbine models, while also actively evaluating new geographies and sites to meet their expected needs in the future. The process of startups and transitions is progressing well, and we remain confident in our full-year financial expectations. as we are planning a return to mid-single-digit adjusted EBITDA margins and positive free cash flow in the second half of 2024. Long-term prospects for TPI remain strong, and we are ready to get back to adjusted EBITDA north of 100 million in 2025. Finally, I want to thank all of our TPI associates for their continued commitment, dedication, and loyalty to TPI. I'll now turn it back to the operator to open the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

The first question comes from Mark Strauss with JP Morgan.

Please go ahead.

Yes, good afternoon. Thank you very much for taking our questions. Yeah, congrats on the progress.

Sounds like we're getting closer and closer here. I did want to ask something on the guidance outlook. I think before you said the utilization percentage was on 36 lines. Now it's on 34. I'm sorry if I missed that, but what drove the difference in two lines? Yeah, so we have, Mark, I'm glad to hear from you. We have a couple lines that we're kind of working through the contract on that through the first quarter. And there are two lines in our India location where demand has come down and they're no longer under contract. So still working through filling that up, but it's two lines in our India site that they came down for. It didn't impact our guidance or our sales or anything, all of our sales volume and everything still remains the same for 24.

Okay. Got it.

And then just following up on the last call, you mentioned some damages that you were seeking from the bad supply that you got. Is there any update on that timing or magnitude?

Yeah, Mark. Okay. I'm not going to give you the magnitude, but that claim has been filed and it's in process right now. I would expect that we would have it resolved before the end of the second quarter, and it'll be positive.

Okay.

And then lastly for me, the GE Juarez ramp, I believe you said that that's still on track. My understanding is that that ramps in 2Q.

Is that still correct?

Yeah, so we were, yes, so the Mexico 2 facility is ramping as we speak, so that'll be ramping through Q2 and into Q3, yep. Yeah, okay.

I'll take the rest offline. Hey, Mark, just to clarify, we got two lines up and running today, and then the other two lines, there are two more lines that'll come up in Q2. It'll be in sale production in the second half of the year in that plan.

Okay, thanks, Ryan. Thanks, Mark.

The next question is from . I'm sorry. Raymond James. Please go ahead.

Yeah, thanks for taking the question. Let me start with kind of a housekeeping question. Interest expense in Q1, $21 million, seemed rather high. Is that going to be the run rate going forward?

Yeah, Pavel, so because we took the, we had the fair value, the debt that we had with Oak Tree in the fourth quarter last year and refinanced that, if you recall, we had $118 million discount. And so there's really two components of interest and why it's at that elevated level. One is just the interest that we're picking. And so that, for this year, that will probably be in the neighborhood of 46-ish million or so for the full year. and then the discount amortization will be around 31 million. And so you will see an elevated level of interest because we need to increase that discount up. So full year, I'd expect that our interest expense on Oaktree, including that discount, is going to be in the neighborhood of 77 million.

Okay. Okay. That's very helpful. On the EV business, you mentioned you're still kind of contemplating its future. Anything changed from the last time we spoke three months ago in that regard?

No, not really. We're in advanced discussions and our plan is to have a transaction completed by the end of the second quarter.

Oh, okay. We will look forward to that. And last question, we've seen a lot of input costs you know, across the clean tack value chain subsiding, you know, certainly including steel and others, carbon fiber that are relevant from your perspective. What kind of role is that playing in the margin uplift that you're envisioning for the second half of the year? Yeah, I mean, it's,

That we are seeing, you know, we have seen decreases in overall raw material costs year over year from last year to this year for sure. Clearly a portion of that we benefit from. So that's a small portion, I would say, of the uplift. The bigger portion is just getting the lines out of transition and startup into serial production and driving our utilization up north. It's, you know, 80, 85%. That's the biggest driver. But there is some uplift from the commodity cost decline for sure. If you'll remember, Pavel, we share a bunch of that with our customers. So we get a piece of it, our customer gets a piece of it. But it is helpful for sure.

Understood. All right. Thanks very much. Thank you.

Again, if you have a question, please press star then 1. The next question is from Eric Stein with Craig Hallam. Please go ahead.

Hi, Bill. Hi, Ryan. Hey, Eric.

How are you? Hey, doing well. Thanks. So maybe just starting on the startup and transitions, given your commentary, obviously going to be heavy again in the second quarter. Is it a kind of a similar number in terms of startup and transition costs in Q2, and then I would think that as part of your guidance, that meaningfully subsides in the second half.

That's correct.

Okay, so the $22.2 million, I mean, I think, did you complete, I think it was either four or six. So it's, I mean, again, that's a representative number to think about. Yeah, so we had... six lines that we had started up by the end of the quarter, and yet the $22 million relates to those. We have four more lines yet to start up. I think the first quarter is, from our internal forecast, will probably be the heaviest quarter for startup and transition costs. So I don't expect it to be above that number that we saw in the first quarter and the second quarter. Okay. That is helpful. And then just on Nordex, good to hear that that's on track to for the handover at the end of June, you called out, I believe $9 million in kind of one-time expenses. And I know that's a big part of your confidence in what the second half looks like. Can you just remind us though? I mean, is there a number, I mean, what are the expenses above and beyond what maybe you would call one time that hit you in the first quarter?

I'm not sure I would characterize them as one time. What they really, what they actually were was underutilization of the plant as a result of us having to halt production for a period of time due to temperature and humidity issues in the facility, as well as their, you know, reduced demand, reduced volume needs from the customer. And as a result, you know, you know this is a pretty fixed cost business. So that's what's created the challenge in the first quarter. We see that... Okay, so there's not a... Go ahead.

Sorry. Yeah, I was just going to say, so it's not 9 million plus, you know, a number. It's more that's just kind of a good number to use that will not be there when you get into the second half.

That's correct. That's correct.

Okay. Okay. All right, and then last one for me just on the EV business. So strategic alternatives, and you're talking about targeting a transaction. I mean, that implies, at least to me, that that might no longer be part of your business going forward, or is that saying transaction kind of a catch-all? It could mean an investment. It could mean partnering that includes an investment. Which is the better way to think about it?

Yeah, it could be any one of those, Eric. Okay. All right. You'll know by the end of the quarter.

All right. Thank you. Yeah, thank you.

The next question is from Jeffrey Osborne with T.D. Cowan. Please go ahead.

Hey, good afternoon, Bill. Just a couple questions on my end. On the Iowa facility, as part of the CapEx guidance, can you just remind us what you'll be producing for GE there? Is that a repowering product or one of their newer blades? And then what would be the timing of when that revenue would start?

Yeah, so not sure yet, Jeff. That's still to be determined. And timing is, I would say, most likely as early 2025. would be my best guess at this point in time. But don't have a final blade type nor a final start date yet. That's still in discussion.

But it's in the CAPEX guidance, just to be clear?

No, that's not in the CAPEX guidance. Quite frankly, Jeff, it'll depend on the blade, right? If it's The same blade we've been building to CapEx is pretty light. If it's a new blade, depending on the size of the blade, then that'll be a different CapEx number. So until we understand what blade type, it's hard to predict that.

Is there a way to put bookends on that, like what the upside number to CapEx would be, just given the strain balance sheet with the low water point here? Is that an extra $10 million? Probably no more.

Yeah, it's probably no more than 10 million would be my guess. Again, it'll depend on the blade type ultimately and how many lines.

Got it. The building is what, suitable for, is it five, six lines?

Right now it's got, the last blade we built was a 62 meter blade and we had six lines in there.

Got it. And then I'm, You spoke super fast when you had the three items around the EBITDA translation. So $9 million was the Nordex that we talked about just before. I think $8 million was the inflation on the pre-existing warranty claims. What was the $22 million for?

That was the startup and transition costs that we incurred in the quarter.

Got it. All right, perfect. That's all I have. All right, cool. Thanks, Jeff.

The next question is from Tom Curran with Seaport Research Partners. Please go ahead.

Hi, guys. Hey, Tom.

You know, casting my view out a bit longer term here and allowing us to dream a bit, are you seeing any green shoots of potential interest that could lead you to reactivating the two idle lines in Turkey

And, you know, if you are, when might be the earliest we could see you do that?

We really don't have idle lines in Turkey right now. We have two idle lines in India. And the answer is, yeah, I mean, we're starting to see order books fill or backlog, you know, build. A lot of that backlog, as you probably know, is for, you know, 25 and 26 and beyond. But I think as things begin to open up a little bit more in Europe, as well as the U.S., you could see those lines fill. Now, there is a lot of activity around those lines, Tom. We are actively working or in discussions with multiple parties for those lines. So it's not that there's not activity. So we are optimistic that we fill not only those two lines that got idled, but there's two more lines there as well that we can activate. So we've got a total of four potentially to activate in India as we move forward through the year.

And those are all in Chennai, Bill?

Yeah, in Chennai, correct.

Yep. And sorry, I misspoke when I said Turkey. I did mean India. And could we, if all went well, would we expect to see the capex

and production contribution from those most likely in 25?

Given where we're at in the year, probably, it's most likely that it would be 25. You start to see the revenue in 25 as well as contribution. CapEx, again, depending on blade size, number of blades, et cetera, the CapEx will vary there. I mean, that's already an eight-line facility where we've built it out pretty nicely. So there shouldn't be a ton of CapEx as we activate those four lines.

Maybe like 2 to 4 million range?

Again, it'll depend on blade size, quite frankly. I hate to keep saying that, but that's pretty important is the blade size. So I mean, we sized it for 80 plus meter blades for eight lines. depending on who the customer is, you know, some of them take more room than others, depending on how the blade is constructed. But it should be relatively minor amount of capex if we fill all A-lines.

Got it. And then, you know, sticking with blade size and how important it is, you know, shifting back to Newton, Iowa, and how seriously GE seems to be deliberating whether to stick

with the 127 versus shifting to the new workhorse model, in part, from my understanding, because of its popularity for repowering, you know, especially given the share gains GE seems to have made in the U.S. market. As you look to the next upcycle in the U.S., you know, do you expect repowering to play a bigger role in this next upcycle than it did in the prior one?

Yeah, certainly than it did in the prior one. The numbers I've seen are fairly significant in the U.S. between now and kind of 2030 timeframe. So, yeah, I mean, the bulk of it will still be new install, but there is a fair amount of repowering that we're seeing in the marketplace. So I do think that it will play a much bigger role this time around than it did last time, for sure.

Got it. Thanks for taking my questions. Thanks, Tom.

The next question is from William Griffin with UBS. Please go ahead.

Hey, good evening. Thanks for the time. Just one for me here. Really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers. Just given the pullback in a lot of U.S. projects and perhaps is that maybe shift away from offshore, creating some opportunities for some of your onshore production?

So on the first part of the question, not having a lot of active discussions today in the offshore space, and I'm not sure that that really has an impact on what we're doing from an onshore perspective. I will tell you, as we look at where onshore growth may be, We're always keeping in mind the offshore side of it as well. And where we might think about different geographies, we would certainly keep in mind an offshore play at some point in time.

But today, that's certainly on the back burner. Got it. Thanks very much. Yep. Thanks, Will.

The next question is from Patrick Ouellette with Stifel. Please go ahead.

Hey, it's Pat. I'm Steven Jagara.

Thanks for taking the question. So just a quick one on the ASP side. Price came down from last year. Is the expectation still here that you get a rebound in ASP from the better mix of any of those lines coming on from the transition or a pickup in ASP from any of the lines that came on recently? Does the expected increase in ASP look like a step up and flat liner? Should we be anticipating somewhat of a gradual increase into 2025?

Patrick, I think this quarter was a little bit of an anomaly. I think, you know, we had material costs come down a little bit, so that also impacts ASPs for us. But it was really just a mixed issue with the mix of the blades. We had a pretty low volume quarter, so that mixed issue can be evaporated when that occurs. The new blades that we're bringing online, they're all bigger, longer, heavier, more expensive blades. They're all refreshed blades from the OEMs that we expect will be in production for many years to come. So because of that, they're bigger and longer. They'll be higher ASPs, which drove our guidance when we originally said our ASPs are expected to be up about $8,000 a blade or so. So I would expect that you'll see that gap close here in the second quarter. In the second half, you'll really see a differential there when we're in serial production on all the newer blades.

All right, thanks a lot. That's all for me.

This concludes the question and answer session. I would now like to turn the conference back over to Bill Zyluck for any closing remarks.

Yes, thank you. And thanks again for your time today and continued interest in support of TPI. Look forward to talking to you again soon. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. you Thank you.

Good afternoon and welcome to the TPI Composites first quarter 2024 earnings conference call.

At this time, I'd like to turn the conference over to Jason Wegman, Investor Relations for TPI Composites. Thank you. You may begin.

Thank you, Operator.

I would like to welcome everyone to TPI Composites' first quarter 2024 earnings call. We will be making forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.com. Today's presentation will include 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 Cywick, TPI Composites resident and CEO.

Thanks, Jason. Good afternoon, everyone, and thank you for joining our call. In addition to Jason, I'm here with Ryan Miller, our CFO. Please turn to slide five. I'm pleased to announce the publication of our 2023 sustainability report in March of this year. We remain committed to our publicly stated goals of fostering a zero-harm culture and achieving carbon neutrality by 2030 through 100% renewable energy procurement. Wind blades produced by us in 2023 are estimated to prevent approximately 346 million metric tons of CO2 emissions over their 20-year lifespan. We are advancing towards our 2030 goal of carbon neutrality, achieving an 18% reduction and overall market-based Scope 1 and 2 CO2 emissions. In Turkey, we invested in two wind turbines and additional solar panels. Further, to enhance on-site renewable energy use, we signed a power purchase agreement in India. We reduced total annual waste generated by 12%. Our behavior-based safety program continued to yield safety results, outperforming industry standards and our internal goals. And we have fully embraced our IDEA program and were recognized with numerous awards for our commitments to inclusion and diversity around the globe. In the U.S., our LEAP for Women program was recognized with a GRID Award for Best Affinity Group. In Mexico, we were recognized as a top employer. In India, we were recognized as one of the 100 best companies for women. And in Turkey, we were awarded the Silver Stevie Great Employers Award for Achievement in Diversity and Inclusion. Advancing our sustainability goals remains a priority in 2024. We're actively negotiating a purchase power agreement in Mexico to ensure 100% renewable energy for our facilities there. Additionally, we're working to expand on our recent PPA in India. These investments go beyond environmental benefits. They also make strong economic sense, contributing directly to the improvement of our financial performance. Please turn to slide seven. Consistent with the guidance we provided during our 2023 fourth quarter earnings call, sales and adjusted EBITDA in the first quarter of 2024 were lower than in the prior year due to the timing of production line startups and transitions across several of our facilities. However, they were slightly ahead of our plan, so we are still on track for the full year. Let me remind you that we expect to go back to positive EBITDA margins and positive free cash flow in the second half of the year after we get through the process of ramping up the 10 lines that are in startup or transition in the first half of the year. I'm confident in our ability to achieve mid-single-digit adjusted EBITDA margins in the second half of the year given the excellent operational execution we are seeing today in most of our plants. The $23 million adjusted EBITDA loss in the first quarter included a $22 million related to startup and transition costs, $9 million of unanticipated losses from the Nordex Matamoros plant due to temperature and humidity issues, as well as decreased volume requirements, and we recorded an $8 million charge to account for the inflationary impact of completing pre-existing warranty claims. Without these items, our adjusted EBITDA margin would have been over 5%, and that's at a 67% factory utilization level. I'm not expecting these items to impact us in the second half of the year, which is why we will return to solid margin performance in the third and fourth quarters when our utilization climbs well above 80%. Activities to transition the Matamoros plant back to Nordex are in full swing, and we are on track to return the facility by June 30 as planned. Our use of cash in the quarter was primarily to fund our startups and transitions and was aligned with our expectations. We believe our quarter-end cash balance of $117 million, along with access to existing credit facilities and the significant impact of the strategic refinancing with Oak Tree, provides us ample liquidity to navigate current market conditions and ultimately expand to meet our customers' growing needs as we target a return to positive cash flow in the second half of the year. Please turn to slide eight. Turning to our wind business performance, our blade facilities in India and Turkey continued to be profitable, delivering 241 blade sets representing 1.4 gigawatts of capacity during the quarter. Most of our Mexico operations performed well, even while going through numerous transition startups and volume adjustments. Overall, our operating performance is benefiting from our renewed focus on lean. Embracing lean practices and ensuring they are part of our day-to-day culture will enable us to deliver greater value to our customers while optimizing our cost structure, maximizing productivity, and manufacturing the highest quality blades in the industry. Moving on to our field service business, as anticipated, our global service revenue declined year over year. This reflects a temporary reduction in technicians assigned to revenue-generating projects and due to the warranty campaign announced last year. We expect our technicians to return to normal levels of revenue-generating work by mid-year. Despite continued progress building the automotive segment's order pipeline and operational execution, and notwithstanding growth in non-Proterra revenue, Q1 revenue fell year over year due to the Proterra bankruptcy. The growth in non-Proterra revenue was largely due to the launch of a new product line for our largest passenger EV customer. While we've made significant investments in expanding our automotive business over the past years and continue to see strong growth potential for composite products and electric vehicles, we're prioritizing capital allocation towards the wind business. To ensure our automotive segment has the resources and support to execute its growth strategies, we've been exploring strategic alternatives and expect to finalize a transaction by the end of the second quarter. Our supply chain execution and cost performance remain very stable. Raw material costs have decreased compared to this time in 2023, with further savings expected due to excess manufacturing capacity in China. Logistics around the Red Sea situation remain well managed, with no operational or significant cost impacts to date. Now, with respect to the wind market, we are seeing the beginnings of an onshore wind rebound driven by ambitious government action, including the Inflation Reduction Act in the U.S. and the EU Green Deal and repower EU policies in response to the need for greater energy independence and security to address climate change and to meet the increasing global electricity demand fueled by factors like generative artificial intelligence and data centers, EVs, and the electrification of buildings. Excluding China, expectations are for global onshore installations to hold steady in 2024 with a growth inflection point in 2025, followed by continued expansion throughout the decade. And the U.S. BNEF is projecting onshore wind installations in 2024 of 8.4 gigawatts and to be nearly 20 gigawatts per year by the end of the decade. While favorable long-term policies like those in the U.S. and the EU provide optimism and have helped to accelerate orders for our customers, we still don't anticipate increased wind installations in our primary markets to fully materialize until 2025. The industry still awaits some critical details on implementing key components of the Inflation Reduction Act, such as the domestic content adder, prevailing wage and apprenticeship clarifications, 45Z, and the transition from PTC and ITC to the new tech-neutral version. Also, elevated interest rates, inflation, the cost and availability of capital, permitting hurdles, and transmission bottlenecks are also contributing to near-term delays. There are, however, encouraging signs that the U.S. and the EU are addressing permitting and transmission bottlenecks. FA Win recently announced that permits for projects in Germany soared to a record high in the first quarter of 2024, nearly 40% higher than the same period last year. This progress is largely attributed to new laws and regulations that streamline the permitting process, including granting renewable energy projects overriding public interest status. In the U.S., the Department of Energy released a Transmission Interconnection Roadmap, I2X, to tackle challenges in connecting renewable energy to the grid. This roadmap aims to streamline the process by 2030, focusing on faster approvals and more consistent costs while maintaining grid stability. Additionally, the White House Council on Environmental Quality has finalized a rule to reform, simplify, and modernize the federal environmental review process under the National Environmental Policy Act. The new rule will build on more than $1 billion from President Biden's Inflation Reduction Act to expedite federal agency permitting. Technical advances are also being made. Recent research shows reconductoring existing transmission lines with advanced conductors can double capacity on existing rights-of-way in just 18 to 36 months. Now, before I turn it over to Ryan, our financial outlook hasn't changed over the past couple of quarters, as we still expect 2024 to be a year of transition. We're currently running 36 production lines, including those for Nordex and Matamoros, which are on track to transition back to them by the end of the second quarter. We are progressing nicely on the startups and transitions, all of which will impact production volume and utilization in the first half of the year, but significant improvement is expected in the second half as these lines achieve serial production. Despite lower utilization in 2024 compared to 2023, we still expect strong improvement in profitability as we have addressed the operational challenge faced in 2023. As such, we are reconfirming our 2024 revenue guidance of $1.3 to $1.4 billion with an EBITDA margin between 1% and 3%. In 2025, we continue to expect a significant step up in profitability, EBITDA exceeding $100 million, putting us back on track to achieve our high single-digit EBITDA margin target in 2026 and beyond. With that, I'll turn the call over to Ryan to review our financial results.

Thanks, Bill. Please turn to slide 10. In the first quarter of 2024, net sales were $299.1 million compared to $404.1 million for the same period in 2023, a decrease of 26%. Net sales of wind blades, tooling, and other wind-related sales, which hereafter I'll refer to as just wind sales, decreased by $98.7 million in the first quarter of 2024, or 25.5% compared to the same period in 2023. Light sales this quarter were negatively affected by startup and transition activities at our Mexico and Turkey facilities, expected volume declines based on market activity levels, and a decrease in average sales prices due to changes in the mix of wind blade models produced. This decrease was partially offset by favorable foreign currency fluctuations and an increase in tooling sales in preparation for manufacturing line startups and transitions. Field service revenue declined by $1.1 million in the first quarter of 2024 compared to the same period in 2023. Our first quarter is typically a low point for service revenue due to seasonal weather patterns and the nature of the work performed, and this year was also impacted by the warrants campaign announced last year. We expect a full transition back to revenue-generating activity by the second half of this year. Automotive sales decreased by $5.3 million in the first quarter of 2024 compared to the same period in 2023. This decrease was primarily due to a reduction in bus body deliveries due to Proterra's bankruptcy, RTF set by an increase in sales of other automotive programs, and the launch of a new product line for our largest passenger EV customer. Adjusted EBITDA for the first quarter of 2024 was a loss of $23 million compared to adjusted EBITDA of $8.4 million during the same period in 2023. The decrease in adjusted EBITDA for the first quarter of 2024 as compared to the same period in 2023 was primarily driven by lower sales, higher startup and transition costs, and changes in estimate for pre-existing warranty claims, partially offset by favorable foreign currency fluctuations. Moving to slide 11. We ended the quarter with $117 million of unrestricted cash and cash equivalents and $510 million in net debt. As planned, we had negative free cash flow of $47.3 million in the first quarter of 2024 compared to negative free cash flow of $87.1 million in the same period in 2023. The year-over-year improvement was primarily driven by the absence of payments tied to the closure of our operations in China and the growth of contract assets in the first quarter of last year. The net use of cash in the first quarter of 2024 was primarily due to our EBITDA loss, capital expenditures, and interest in tax payments. As previously communicated, we expect the second quarter to be the low-water mark for cash. We've had much success improving the efficiency of our balance sheet over the past couple quarters, and we will remain focused on preserving cash and optimizing working capital to ensure we have the resources to execute key initiatives and restart idle capacity moving forward. A summary of our financial guidance for 2024 can be found on slide 12. There are no changes to our original financial guidance provided earlier in the year, and I want to reiterate that the results from the first quarter for sales, adjusted EBITDA, and cash flow were in line with our plans. We continue to anticipate sales from continuing operations in the range of $1.3 to $1.4 billion for the year. We also continue to believe 2024 will be the tail of two halves. In the first half, we will be ramping up 10 lines that are either in startup or transition. We expect the first half's volume to be a fair amount lower than the second half, and the first quarter will be lower than the second quarter. As we work through these transitions and startups, we are generating modest losses and consuming cash. In the first half of the year, we are still expecting our adjusted EBITDA margin to be a mid-single-digit loss. The first quarter was likely our low point for profitability this year, and we should improve somewhat in the second quarter as volumes ramp to serial production. Our adjusted EBITDA margin improves to mid-single digits in the second half of the year, and we expect to be generating positive cash flow. For the full year, we anticipate capital expenditures of $25 to $30 million. These investments are driven by our continued focus on achieving our long-term growth targets and restarting our idle lines. We continue to be confident in our liquidity position, which has improved significantly since we refinanced the Oak Tree preferred shares into a term loan. We believe our balance sheet, along with the improvement in our liquidity and operating results, will enable us to navigate another transition year and will also allow us to invest to achieve our mid- and long-term growth, profitability, and cash flow targets. With that, I'll turn the call back over to Bill.

Thanks, Ryan. Please turn to slide 14. The numerous government policy initiatives aimed at expanding the use of renewable energy, the need for energy independence and security, and growing OEM backlogs give us confidence in the wind industry's short and long-term growth. We are an integral part of the ENTRE wind growth story, and we remain focused on managing our business, with an acute focus on reinforcing lean principles to enhance our operational and financial performance. We are committed to partnering with our customers by aligning our factories to support their next-generation turbine models, while also actively evaluating new geographies and sites to meet their expected needs in the future. The process of startups and transitions is progressing well, and we remain confident in our full-year financial expectations. as we are planning a return to mid-single-digit adjusted EBITDA margins and positive free cash flow in the second half of 2024. Long-term prospects for TPI remain strong, and we are ready to get back to adjusted EBITDA north of 100 million in 2025. Finally, I want to thank all of our TPI associates for their continued commitment, dedication, and loyalty to TPI. I'll now turn it back to the operator to open the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

The first question comes from Mark Strauss with JP Morgan.

Please go ahead.

Yes, good afternoon. Thank you very much for taking our questions. Yeah, congrats on the progress.

Sounds like we're getting closer and closer here. I did want to ask something on the guidance outlook. I think before you said the utilization percentage was on 36 lines. Now it's on 34. I'm sorry if I missed that, but what drove the difference in two lines? Yeah, so we have a couple lines that we're kind of working through the contract on that through the first quarter, and there are two lines in our India location where demand has come down, and they're no longer under contract. So still working through filling that up, but it's two lines in our India site that they came down for. It didn't impact our guidance or our sales or anything, all of our Sales volume and everything still remains the same for 24.

Okay. Got it.

And then just following up on the last call, you mentioned some damages that you were seeking from the bad supply that you got. Is there any update on that timing or magnitude?

Yeah, Mark. Okay. I'm not going to give you the magnitude, but that claim has been filed and it's in process right now. I would expect that we would have it resolved before the end of the second quarter, and it'll be positive. Okay.

And then lastly for me, the GE Juarez ramp, I believe you said that that's still on track. My understanding is that that ramps in 2Q.

Is that still correct? Correct.

Yeah, so we were, yes, so the Mexico 2 facility is ramping as we speak, so that'll be ramping through Q2 and into Q3, yep.

Yeah, okay. I'll take the rest offline.

Hey, Mark, just to clarify, we got two lines up and running today, and then the other two lines, there are two more lines that'll come up in Q2. It'll be in sale production in the second half of the year in that plan.

Okay, thanks, Ron. Thanks, Mark.

The next question is from . I'm sorry. Raymond James. Please go ahead.

Yeah, thanks for taking the question. Let me start with kind of a housekeeping question. Interest expense in Q1, $21 million, seemed rather high. Is that going to be the run rate going forward?

Yeah, Pavel, so because we took the, we had the fair value, the debt that we had with Oak Tree in the fourth quarter last year and refinanced that, if you recall, we had $118 million discount. And so there's really two components of interest and why it's at that elevated level. One is just the interest that we're picking. And so that, for this year, that will probably be in the neighborhood of $46-ish million or so for the full year. and then the discount amortization will be around $31 million. And so you will see an elevated level of interest because we need to increase that discount up. So full year, I'd expect that our interest expense on Oaktree, including that discount, is going to be in the neighborhood of $77 million.

Okay. Okay. That's very helpful. On the EV business, you mentioned you're still kind of contemplating its future. Anything changed from the last time we spoke three months ago in that regard?

No, not really. We're in advanced discussions and our plan is to have a transaction completed by the end of the second quarter.

Oh, okay. We will look forward to that. And last question, we've seen a lot of input costs you know, across the clean tack value chain subsiding, you know, certainly including steel and others, carbon fiber that are relevant from your perspective. What kind of role is that playing in the margin uplift that you're envisioning for the second half of the year? Yeah, I mean, it's,

We are seeing, you know, we have seen decreases in overall raw material costs year over year from last year to this year for sure. Clearly a portion of that we benefit from. So that's a small portion, I would say, of the uplift. The bigger portion is just getting the lines out of transition and startup into cereal production and driving our utilization up north. It's, you know, 80%, 85%. That's the biggest driver. but there is some uplift from the commodity cost decline for sure. If you'll remember, Pavel, we share a bunch of that with our customers. So we get a piece of it, our customer gets a piece of it, but it is helpful for sure.

Understood. All right. Thanks very much. Thank you.

Again, if you have a question, please press star then 1. The next question is from Eric Stein with Craig Hallam. Please go ahead.

Hi, Bill. Hi, Ryan. Hey, Eric.

How are you? Hey, doing well. Thanks. So maybe just starting on the startup and transitions, given your commentary, obviously going to be heavy again in the second quarter. Is it a kind of a similar number in terms of startup and transition costs in Q2? And then I would think that as part of your guidance that meaningfully subsides in the second half.

That's correct. That's correct. Okay.

So the 22.2 million, I mean, I think, did you complete, I think it was either four or six. So it's, I mean, again, that's a representative number to think about. Yeah. So we had six lines that we had started up by the end of the quarter and And, yeah, the $22 million relates to those. We have four more lines yet to start up. I think the first quarter is, from our internal forecast, will probably be the heaviest quarter for startup and transition costs. So I don't expect it to be above that number that we saw in the first quarter in the second quarter. Okay. That is helpful. And then just on Nordex, good to hear that that's on track for the handover at the end of June. Okay. You called out, I believe, $9 million in kind of one-time expenses, and I know that's a big part of your confidence in what the second half looks like. Can you just remind us, though, I mean, is there a number, I mean, what are the expenses above and beyond what maybe you would call one time that hit you in the first quarter?

I'm not sure I would characterize them as one time. What they really, what they actually were was, under-utilization of the plant as a result of us having to halt production for a period of time due to temperature and humidity issues in the facility, as well as their, you know, reduced demand, reduced volume needs from the customer. And as a result, you know, you know this is a pretty fixed-cost business. So that's what's created the challenge in the first quarter.

We see that... Okay, so there's not a... Go ahead.

Sorry. Yeah, I was just going to say, so it's not 9 million plus, you know, a number. It's more that's just kind of a good number to use that will not be there when you get into the second half.

That's correct. That's correct.

Okay. All right. And then last one for me, just on the EV business. So strategic alternatives, and you're talking about targeting a transaction. I mean, that implies, at least to me, that that might no longer be part of your business going forward, or is that same transaction kind of a catch-all? It could mean an investment. It could mean partnering that includes an investment. Which is the better way to think about it?

Yeah, it could be any one of those, Eric. Okay. You'll know by the end of the quarter.

All right. Thank you. Yeah, thank you.

The next question is from Jeffrey Osborne with TD Cowan. Please go ahead.

Hey, good afternoon, Bill. Just a couple questions on my end. On the Iowa facility, as part of the CapEx guidance, can you just remind us what you'll be producing for GE there? Is that a repowering product or one of their newer blades? And then what would be the timing of when that revenue would start?

Yeah, so not sure yet, Jeff. That's still to be determined. And timing is, I would say, most likely as early 2025 would be my best guess at this point in time. But don't have a final blade type nor a final start date yet. That's still in discussion.

But it's in the CAPEX guidance, just to be clear?

No, that's not in the CAPEX guidance. Quite frankly, Jeff, it'll depend on the blade, right? If it's The same blade we've been building to CapEx is pretty light. If it's a new blade, depending on the size of the blade, then that'll be a different CapEx number. So until we understand what blade type, it's hard to predict that.

Is there a way to put bookends on that, like what the upside number to CapEx would be, just given the strain balance sheet with the low water point here? Is that an extra $10 million? Probably no more.

Yeah, it's probably no more than 10 million would be my guess.

Again, it'll depend on the blade type ultimately and how many lines.

Got it. The building is what, suitable for, is it five, six lines?

Right now it's got, the last blade we built was a 62 meter blade and we had six lines in there.

Got it. And then I'm, You spoke super fast when you had the three items around the EBITDA translation. So $9 million was the Nordex that we talked about just before. I think $8 million was the inflation on the pre-existing warranty claims. What was the $22 million for?

That was the startup and transition costs that we incurred in the quarter.

Got it. All right, perfect. That's all I have. All right, cool. Thanks, Jeff.

The next question is from Tom Curran with Seaport Research Partners. Please go ahead.

Hi, guys. Hey, Tom.

You know, casting my view out a bit longer term here and allowing us to dream a bit, are you seeing any green shoots of potential interest that could lead you to reactivating the two idle lines in Turkey

And if you are, when might be the earliest we could see you do that?

We really don't have idle lines in Turkey right now. We have two idle lines in India. And the answer is, yeah, I mean, we're starting to see order books fill or backlog build. A lot of that backlog, as you probably know, is for 25 and 26 and beyond. But I think as things begin to open up a little bit more in Europe, as well as the U.S., you could see those lines fill. Now, there is a lot of activity around those lines, Tom. We are actively working or in discussions with multiple parties for those lines. So it's not that there's not activity. So we are optimistic that we fill not only those two lines that got idled, but there's two more lines there as well that we can activate. So we've got a total of four potentially to activate in India as we move forward through the year.

And those are all in Chennai, Bill?

Yeah, in Chennai, correct.

Yep. And, sorry, I misspoke when I said Turkey. I did mean India. And could we, if all went well, would we expect to see the capex

and production contribution from those most likely in 25?

Given where we're at in the year, probably, it's most likely that it would be 25. You start to see the revenue in 25 as well as contribution. CapEx, again, depending on blade size, number of blades, et cetera, the CapEx will vary there. I mean, that's already an eight-line facility where we've built it out pretty nicely. So there's, there shouldn't be a ton of CapEx, uh, as we activate those four lines.

Maybe like, like two to 4 million range.

Again, it'll depend on blade size, quite frankly. I hate to keep saying that, but then, but that's pretty important is the blade size. So, I mean, we sized it for, you know, 80, 80 plus meter blades for eight lines. Uh, depending on who the customer is, you know, some of them take more room than others depending on how the blade is constructed. But it should be relatively minor amount of capex if we fill all A lines.

Got it. And then, you know, sticking with blade size and how important it is, you know, shifting back to Newton, Iowa, and how seriously GE seems to be deliberating whether to stick

with the 127 versus shifting to the new workhorse model, in part, from my understanding, because of its popularity for repowering, you know, especially given the share gains GE seems to have made in the U.S. market. As you look to the next upcycle in the U.S., you know, do you expect repowering to play a bigger role in this next upcycle than it did in the prior one?

Yeah, certainly than it did in the prior one. The numbers I've seen are fairly significant in the U.S. between now and kind of 2030 timeframe. So, yeah, I mean, the bulk of it will still be new install, but there is a fair amount of repowering that we're seeing in the marketplace. So I do think that it will play a much bigger role this time around than it did last time, for sure.

Got it. Thanks for taking my questions. Thanks, Tom.

The next question is from William Griffin with UBS. Please go ahead.

Hey, good evening. Thanks for the time. Just one for me here. Really curious if you have any comments around what you're seeing in terms of offshore wind discussions with your customers. Just given the pullback in a lot of U.S. projects, and perhaps is that maybe shift away from offshore, creating some opportunities for some of your onshore production?

So on the first part of the question, not having a lot of active discussions today in the offshore space, and I'm not sure that that really has an impact on what we're doing from an onshore perspective. I will tell you, as we look at where onshore growth may be, We're always keeping in mind the offshore side of it as well. And where we might think about different geographies, we would certainly keep in mind an offshore play at some point in time.

But today, that's certainly on the back burner. Got it. Thanks very much. Yep. Thanks, Will.

The next question is from Patrick Ouellette with Stifel. Please go ahead.

Hey, it's Pat. I'm Steven Jagara. Thanks for taking the question.

So just a quick one on the ASP side. Price came down from last year. Is the expectation still here that you get a rebound in ASP from the better mix of any of those lines coming on from the transition or a pickup in ASP from any of the lines that came on recently? Does the expected increase in ASP look like a step up in flat liner? Should we be anticipating somewhat of a gradual increase into 2025?

Patrick, I think this quarter was a little bit of an anomaly. I think, you know, we had material costs come down a little bit, so that also impacts ASPs for us. But it was really just a mixed issue with the mix of the blades. We had a pretty low volume quarter, so that mixed issue can be evaporated when that occurs. The new blades that we're bringing online, they're all bigger, longer, heavier, more expensive blades. They're all refreshed blades from the OEMs that we expect will be in production for many years to come. So because of that, they're bigger and longer. They'll be higher ASPs, which drove our guidance when we originally said our ASPs are expected to be up about $8,000 a blade or so. So I would expect that you'll see that gap close here in the second quarter. In the second half, you'll really see a differential there when we're in serial production on all the newer blades.

All right, thanks a lot. That's all for me.

This concludes the question and answer session. I would now like to turn the conference back over to Bill Zyluck for any closing remarks.

Yes, thank you, and thanks again for your time today and continued interest in support of TPI. Look forward to talking to you again soon. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.