Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Broadwind Inc (BWEN, Financial) delivered a solid Q2 with a double-digit EBITDA margin, consistent with prior year results despite reduced revenue.
- The company booked $18 million of orders in the second quarter, showing resilience despite reduced demand across all segments.
- Broadwind Inc (BWEN) continues to expand its product mix within higher-margin adjacent markets, with the new clean fuels L70 low-flow PRS unit expected to attract high customer interest.
- Operational investments in cutting-edge technology have improved process capabilities, reduced costs, and enhanced profitability.
- The company has achieved a 56% reduction in its recordable incident rate in 2024, reflecting a strong focus on team member safety and resulting in financial benefits from reduced costs.
Negative Points
- Heavy fabrication saw reduced demand for pressure reduction systems, partially offset by increased orders from the wind repowering market.
- Gearing orders were reduced year-over-year due to decreased demand from the industrial and steel sectors.
- Industrial Solutions segment orders softened compared to the unusually strong aftermarket orders seen last year.
- Total revenue declined versus year-ago levels due to lower tower demand, despite stable non-wind activity levels.
- Q2 revenue for the Heavy Fabrication segment was down 42% from a year ago, primarily due to the decline in tower production and PRS shipments.
Q & A Highlights
Q: Can you elaborate on the higher value sales mix in Q2 and the expected changes in sales mix impacting EBITDA margins in Q3?
A: The first half benefited from a higher margin sales mix, particularly from more profitable aftermarket sales. However, we anticipate margins to decrease in the second half of the year due to a less favorable sales mix. - Thomas Ciccone, CFO
Q: What is the status of the long-term wind order and its impact on utilization levels?
A: The order is expected to support about 25% utilization through the end of 2025. We have good visibility through most of 2025 and are discussing follow-on orders. - Eric Blashford, CEO
Q: What level of interest are you seeing for your Manitowoc facility in terms of wind towers?
A: We have interest from two customers for Manitowoc, but this is more towards the end of 2025. We expect a ramp-up in utilization levels towards the second half of 2025 into 2026. - Eric Blashford, CEO
Q: When do you expect customers to start booking capacity for orders to be delivered in 2025?
A: We expect orders to start coming in towards the end of 2024 into the first quarter of 2025 to secure capacity for the end of 2025 and into 2026. - Eric Blashford, CEO
Q: What is the available capacity for wind production?
A: Assuming both plants are available for wind, we are at 25% booked through most of 2025, leaving 75% capacity available for additional orders. - Eric Blashford, CEO
Q: Are you making new investments to capture non-wind opportunities?
A: Yes, we have a three-year plan that includes investments in technology and capabilities improvements to accommodate growth in various markets, including material handling, steel, marine, and defense. - Eric Blashford, CEO
Q: How big could revenues potentially be for the gearing segment with current infrastructure?
A: We could reach north of $70 million within our present four walls, nearly doubling our current capacity. - Eric Blashford, CEO
Q: Have all the $4 million in annualized cost savings been implemented?
A: The vast majority of the cost-saving measures have been implemented, and we expect to see the full benefit in the second half of the year. - Thomas Ciccone, CFO
Q: Is there potential for a follow-on wind order that could impact 2025 capacity?
A: Yes, we could see a ramp-up of production towards the end of 2025, leading into 2026, based on indications of interest from customers. - Eric Blashford, CEO
Q: Can you size the aerospace and defense opportunity for the gearing segment?
A: The opportunity is significant, potentially reaching seven figures by the end of 2025. However, the timing of FAA and customer qualifications can be lengthy. - Eric Blashford, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
