TPI Composites, Inc.

Stand by, we're about to begin. Good afternoon, everyone, and welcome to the TPI Composite second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing star 2. Also, today's call is being recorded, and if you should need any assistance during the call today, please press star zero. And now at this time, I would like to turn things over to Jason Wegman, Investor Relations for TPI Composites. Mr. Wegman, please go ahead, sir.

Thank you, Operator. I would like to welcome everyone to TPI Composites' second 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. In addition, please note that our financial statements now report our former automotive business as discontinued operation. In June, we divested the automotive business to Clear Creek Investments LLC. Accordingly, the historical results of our automotive business have been presented as discontinued operations in our condensed consolidated statements of operations and condensed consolidated balance sheets. As we discuss the year-over-year comparisons, please note we will refer to continuing operations only. With that, let me turn the call over to Bill Cywick, PPI Composites President and CEO.

Thanks, Jason. Good afternoon, everyone, and thank you for joining our call. In addition to Jason, I am here with Ryan Miller, our CFO. Please turn to slide five. We knew coming into the year that it would be a tale of two halves. As we've been discussing for some time, the first half of the year will be heavily impacted by startups and transitions, with the back half benefiting from the exit of the Nordex Metamorris facility, the disposition of our automotive business, and increased utilization at our plants as we complete the transitions and startups. The year is playing out largely as expected, and we are on track to have a profitable second half of the year after a challenging first half. Sales in adjusted EBITDA were lower than expectations in Q2 due to a couple of factors. First, the heightened emphasis on quality related to new blade models slowed our startup and transition timelines at two of our facilities, impacting our sales by about $20 million in the quarter. However, we do anticipate a recovery of most of this volume in the second half of the year and set this up nicely to enter 2025 at full speed. Second, Nordex unexpectedly canceled purchase orders for the Matamoros facility and requested that we wind down the factory and cease production prior to quarter end. As a result, Q2 revenue and adjusted EBITDA from this plant fell short of our expectations. While Nordex ultimately funded all the severance related to the shutdown early in the third quarter, we were burdened with significantly less volume than expected and the inefficiencies of hastily shutting down a factory while maintaining our contractual commitments to deliver blades to Nordex. The good news is that we now have the losses from this plant in the rearview mirror. The $24.9 million adjusted EBITDA loss in the second quarter included $20.7 million in startup and transition costs and $21.9 million in losses from the now-closed Nordex Matamoros facility. Excluding these amounts, our adjusted EBITDA was nearly 5%. With the losses from the Nordex Matamoros plant and the automotive business behind us, and as lines in startup and transition reach serial production, and we make up most of the lost volume from the first half of the year, we anticipate at least mid-single-digit adjusted EBITDA margins in Q3 and Q4, as well as positive free cash flow as factory utilization approaches 90%. Please turn to slide six. Our blade facilities in India and Turkey continue to be profitable, delivering 257 blade sets, representing 1.2 gigawatts of capacity during the quarter, while our Mexico plans are beginning to show performance improvement driven by the renewed focus on lean and quality initiatives implemented over the past year. We expect all regions to be profitable in the second half, including Mexico, as the lines in transition and startup as well as lean and quality initiatives mature. We believe we are truly at a pivotal point in time for TPI, and our second half will serve as a great launching point for 2025, where we plan to achieve at least $100 million of adjusted EBITDA and generate free cash flow for the year. Our supply chain continues to operate efficiently, with costs remaining steady. Raw material prices have declined year over year and are expected to be stable to slightly down as Chinese manufacturing capacity surpasses demand. While logistics expenses have seen a modest increase recently, our management strategies have mitigated any operational or financial impact. With respect to the wind market, we remain optimistic about the long-term recovery of onshore wind energy, though we remain cautious about the exact timing for the overall market. The structural foundation for sustained growth in onshore wind is in place and robust, and global demand for clean energy continues to rise. driven by factors such as the growing power needs for data centers, semiconductor chip manufacturers, the adoption of electric vehicles, and the electrification of just about everything. Global onshore wind installations, excluding China, are expected to bottom out in 2024 before beginning to accelerate in 2025. Wood McKenzie forecasts U.S. onshore wind installations to reach 6 gigawatts in 2024 and nearly 15 gigawatts annually by the end of the decade. Although there are very promising long-term prospects driven by supportive policies in the US and EU, we expect significant growth within our key markets to likely be pushed to the back half of 25 or into 2026. Challenges such as high interest rates, inflation, capital constraints, permitting issues, grid access, and uncertainties in the US around the upcoming election are hindering certain project timelines. With that said, given the strong position of our primary customers, We do anticipate volume growth for TPI in the U S in 2025. This growth will be supported by blade lines that will be in full production throughout the year, including the four new lines for GE that are in startup today, along with being bolstered by the guidance from the U S treasury and IRS on the inflation reduction acts, domestic content bonus, supporting the competitiveness of our Mexico plants. Our U S growth will be partially offset by a modest decline in demand. for our blades in the EU as we work with our customers on future blade models and optimization of our blade footprint to cost-effectively serve the EU as market demand and wider Europe recovers. Before I turn it over to Ryan, our financial outlook for the full year remains unchanged with 2024 being a year of transition. With the loss-making operations wrapped up, lines in transition and startup maturing, and operational improvements implemented, we are looking forward to a strong second half of 2024 and putting us on track for our targeted EBITDA of at least $100 million in 2025. With that, I'll turn the call over to Ryan to review our financial results.