TPI Composites, Inc.

Good afternoon, and welcome to the TPI Composites fourth quarter and full year 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now 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' fourth quarter 2023 earnings call. We will be making forward-looking statements during this call that are subject to risk 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 gas financial measures. With that, let me turn the call over to Bill Cywick, TPI Composite President and CEO.

Bill Cywick, TPI Composite President and CEO. Bill Cywick, TPI Composite President and CEO. Bill Cywick, TPI Composite President and CEO. Bill Cywick, TPI Composite President and CEO. Bill Cywick, TPI Composite President 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. I'll discuss our results and highlights from the fourth quarter and full year, our global operations, and the wind energy market more broadly. Ryan will then review our financial results, and then we'll open the call for Q&A. Please turn to slide five. As we indicated on our third quarter earnings call, we expected our fourth quarter sales and adjusted EBITDA to be down as we started line transitions across our plants and lowered inventory levels to optimize cash. Our strategies to preserve cash in the fourth quarter were successful as we ended the year with $161 million of cash, which was flat with where we ended the third quarter. I'm very happy with how our team executed our cash flow initiatives to prioritize liquidity through the quarter, given some of the headwinds we were facing. As Ryan has been discussing the last few quarters, we believe we had opportunities to harvest cash out of our balance sheet, and that's exactly what we did. During the quarter, our sales were negatively impacted at one of our plants due to out-of-spect material received from a supplier that resulted in a significant production slowdown over a 10-week period, including a shutdown for four weeks. while we resolved the issue with both the supplier and our customer. This reduced our fourth quarter sales by approximately $23 million and adjusted EBITDA by $8 million. But we do expect to recover the missed lay volume, revenue, and adjusted EBITDA, along with liquidated damages from the supplier in 2024. I was pleased with how our team reacted to this issue, shut down production, and engaged with our customer quickly to ensure we didn't have a quality issue. As we announced in mid-December, we refinanced our Series A preferred shares by converting the $350 million of Series A, along with $86 million of accrued paid in-kind dividends, through a cashless exchange for $393 million of senior secure term loan and the issuance of 3.9 million shares of common stock. This refinancing improved our liquidity by about $190 million over the term of the loan, and we permanently reduced our obligations to Oak Tree by about $99. We can now pick up to 100% of interest payments through December 31, 2025, and up to 50% of interest payments from January 1, 2026 through the maturity on March 31, 2027. This agreement provides us with significantly greater financial flexibility and along with the $132.5 million convertible green bond we issued earlier in 2023, provided us with the liquidity we expect to need to fill our existing capacity, manage through the current market conditions, and ultimately grow to serve our customers' capacity needs. From a customer perspective, we finalized several contract extensions and expansions to provide significantly enhanced visibility into our sales volumes in 2025 and beyond. We signed a new supply agreement with GE in Mexico to provide their workhorse turbine, which will facilitate GE's ability to competitively serve the U.S. market while building on a long and productive relationship. We will start at four lines of the new blade this year, and production will ramp up in the second quarter to be at full serial production over the second half of the year. With the addition of this blade, we now support GE's three primary turbine models for the U.S. market. To expand its reach in the European wind energy market, we established two new production lines in Turkey for Nordex, increasing our total capacity for them in Turkey to eight lines or approximately 3.2 gigawatts. This expansion secures production for up to three years through 2026. We also extended our supply agreements with Vestas through 2024 in Mexico and India and continue to work with Vestas to align our footprint with their long-term needs. Please turn to slide six. Before I jump into our operating results, I would like to formally welcome Chuck Strode, our COO of Wynn. Chuck comes to us having spent 24 years in the aerospace industry, most recently as Vice President of Operations for Power and Controls within Collins Aerospace, a multibillion-dollar business. With a track record of leading large, complex organizations, Chuck brings deep operational expertise and leverages his passion for lean principles to drive operational excellence and consistently deliver results. We are thrilled to have Chuck join the TPI team and look forward to his contributions to our ultimate success. Also joining us this past year as our Chief Quality Officer was Neil Jones. Neil brings over 25 years of experience in quality and engineering positions in the wind and automotive industry. Neil spent more than 13 years with Vestas in a variety of quality leadership roles, with the last five as senior vice president, quality, health, safety, and environmental. Before joining Vestas, Neil spent over 20 years in the automotive industry, including engineering and quality leadership roles with TRW and his senior quality leadership role with Eaton Automotive. I'm excited with the transformative strength of our new and improved executive team, as each member brings exceptional talent, diverse perspectives, and a proven record of success, making them well-equipped to guide our company through the next exciting chapter. Now moving on to the business. Our blade facilities in India and Turkey continue to excel operationally, driving our global utilization rate to 87% while delivering 602 sets or 2.6 gigawatts during the quarter. As expected, revenue from our global service business declined year-over-year due to fewer technicians deployed on revenue-generating projects due to the warranty campaign we announced in the second quarter. That will turn around in 2024. While the automotive business has made significant progress with the order pipeline and operational execution initiatives, 2023 revenue was down year-over-year due primarily to Proterra's bankruptcy. As you know, we have made meaningful investments to expand the automotive business during the last several years. While we believe there is increasing demand for composite products for electric vehicles, and we have made significant progress with the automotive business, we intend to prioritize capital for growth in the wind business in the near term, which is why we have been exploring strategic alternatives to ensure our automotive business is sufficiently funded to execute on its growth strategies. Our intent is to complete this process no later than June 30th of this year. Our supply chain costs have improved significantly compared to the past two years. Raw material costs continue to decline from 2023 levels, and we anticipate that excess capacity of key inputs and reduced Chinese demand should create further cost savings in 2024. While logistics costs had returned to pre-pandemic norms, we have seen a spike in rates due to the ongoing Red Sea situation. While the situation remains fluid, we've mitigated delivery impacts through alternative suppliers and multimodal logistics solutions and will continue to closely monitor events for potential effects on our cost and availability of critical raw materials. Now, with respect to the wind market, globally we have seen a surge in government support for renewables in recent years, exemplified by the U.S. Inflation Reduction Act, and the EU's policy push for streamlined regulations, faster permitting, and cross-border cooperation. These initiatives fuel our optimism for long-term wind industry growth. This momentum was further bolstered at COP28, where parties made history by agreeing to a transition away from fossil fuels and the global stocktake. The Renewable Energy Directive, a key part of the European Green Energy Deal, was amended in early 2023 and adopted by all EU countries in November raising its 2030 renewable energy target to 42.5%. In addition, the wind power package was launched aiming to double wind capacity by 2030 and to strengthen Europe's competitiveness in wind energy manufacturing. While favorable long-term policies like the IRA and Net Zero Industry Act provide optimism, we still don't anticipate increased wind industry installations as the wind industry awaits some critical details on implementing key components of the Inflation Reduction Act and the execution of the more robust European policies. Additionally, permitting hurdles, transmission bottlenecks, elevated interest rates, inflation, and the cost and availability of capital all contribute to delaying the full-fledged market recovery. We expect 2024 to be a year of transition, with sales declining slightly from 2023, but with a significant EBITDA improvement. Currently, we are operating 37 lines, including the four for Nordex and Matamoros that will transition back to them in mid-2024, as well as six new lines starting up and four lines transitioning all in 2024. This will impact utilization and output in the first half of the year, with the second half projected to improve markedly as the lines in startup and transition achieve serial production levels. So notwithstanding slightly lower utilization in 2024 compared to 2023, We expect a significant improvement in EBITDA and EBITDA margin, as many of the operational and quality challenges we experienced in 2023 are now behind us. We expect our 2024 EBITDA margin to be in the range of 1 to 3% for the full year, but on a trajectory to get back to EBITDA levels north of $100 million in 2025 and to our target EBITDA margin in the high single digits. With that, I'll turn the call over to Ryan to review our financial results.