BWEN Broadwind Inc

Highlights:

Broadwind Energy, Inc. (NASDAQ: BWEN) reported sales of $41.7 million in Q1 2019, up 39% compared to $30.0 million in Q1 2018. The sharp increase was due primarily to a $10.1 million increase in Towers and Heavy Fabrications segment sales as a result of a 31% increase in tower sections sold, in support of a strengthening Tower market and a higher average sales price driven by increases in steel prices. Additionally, Gearing segment sales were up $1.2 million, or 14% compared to Q1 2018, due primarily to strong demand from mining, wind and other industrial customers.   

The Company reported a net loss of $1.0 million, or $.07 per share, in Q1 2019, compared to a net loss of $4.8 million, or $.32 per share, in Q1 2018. The current year loss narrowed as a result of the increased in sales and improved operating performance.

The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $1.7 million in Q1 2019, compared to non-GAAP adjusted EBITDA loss of $1.6 million in Q1 2018 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release). The $3.3 million improvement was mainly attributable to significantly higher production volume in the Towers and Heavy Fabrications segment and improvements in Gearing operating performance.

Broadwind CEO Stephanie Kushner stated, “Gearing continues to deliver strong operating results, reflecting growth in the customer base, stable operations and good cost management.  The changes in the organizational structure and investments in process changes have dramatically improved the performance of this business for the long term.”  

Kushner continued, “Capacity utilization at our tower plants is rising, and we expect it to remain strong for the medium term.  Margins have been impacted by higher steel prices, but the team continues to deliver operational improvements to help offset this pressure.  Our expansion into other heavy fabrications remains paramount, and order activity continues to be strong.”

Kushner concluded, “In Q2, we expect revenue to exceed $40 million with approximately $1.3 -$1.8 million of EBITDA.  Our full year outlook on the business is unchanged.  We continue to expect quarterly revenues to exceed $40 million and EBITDA generation of approximately $8 million for the year.”

Orders and Backlog

The Company booked $24.0 million of net new orders in Q1 2019, compared to $28.1 million in Q1 2018. Towers and Heavy Fabrications orders rose to $12.5 million in Q1 2019, up from $9.8 million in Q1 2018. Gearing orders totaled $7.1 million in Q1 2019, down from $15.4 million Q1 2018, following a surge in oil and gas orders to secure production slots in the prior year, and reflecting reduced near-term demand for frack gears linked to a pause in development activity in the Permian Basin. Process Systems orders totaled $4.4 million in Q1 2019 compared to $3.0 million in Q1 2018 as a result of higher new gas turbine content demand from an international customer.

At March 31, 2019, total backlog was $81.1 million, compared to $96.5 million at December 31, 2018, a reduction that reflects the final year of a 3-year tower supply agreement.  Future orders are expected to be on a spot basis, reflecting a shift in procurement practices in the industry.

Segment Results

Towers and Heavy Fabrications Broadwind Energy produces fabrications for wind, oil and gas, mining and other industrial applications, specializing in the production of wind turbine towers.  In Q1 2019, the Company revised and retroactively adjusted the financial statements of its segment reporting by moving the Abilene CNG and Fabrication business to the Towers and Heavy Fabrications segment from the Process Systems segment. 

Towers and Heavy Fabrications segment sales totaled $28.3 million in Q1 2019, compared to $18.2 million in Q1 2018. The significant improvement was due primarily to a 31% increase in tower sections sold and a higher average sales price on the product mix sold due primarily to the rise in steel prices.  

The Towers and Heavy Fabrications segment operating loss totaled $.2 million in Q1 2019 compared to an operating loss of $2.1 million in Q1 2018. The significant improvement was due primarily to higher plant utilization and improved plant efficiencies including the absence of significant start-up costs related to the quick production ramp up from near shutdown levels in the prior year. The net loss narrowed for the Towers and Heavy Fabrications segment to $.2 million in Q1 2019, from a net loss of $1.7 million in Q1 2018. Non-GAAP Adjusted EBITDA in Q1 2019 was $1.1 million compared to an EBITDA loss of $.5 million in Q1 2018 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release).  The increase was due primarily to the factors described above.

GearingBroadwind Energy engineers, builds and remanufactures precision gears and gearboxes for oil and gas, mining, steel, wind and other specialized applications.

Gearing segment sales totaled $10.0 million in Q1 2019, compared to $8.8 million in Q1 2018. The $1.2 million increase was due primarily to higher mining, wind and other industrial shipments, partially offset by lower demand from oil and gas customers, which is expected to continue in the near-term. The operating profit increased to $1.4 million in Q1 2019, compared to a $.6 million loss in Q1 2018. The significant improvement was due primarily to the increase in revenue noted above, continued improvements in operating efficiencies and the absence of residual impact of supply chain delays and higher manufacturing variances in the prior year.  The net income for the Gearing segment totaled $1.3 million in Q1 2019, compared to a net loss of $.6 million in Q1 2018. The Gearing segment reported $2.0 million of Non-GAAP adjusted EBITDA for Q1 2019 compared to a near breakeven Non-GAAP adjusted EBITDA in Q1 2018 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release).  The $2.0 million improvement was due primarily to the factors described above.

Process SystemsBroadwind Energy provides contract manufacturing services that include build-to-print, kitting, and inventory management for customers, primarily supporting the natural gas electrical generation market.

Process Systems revenue totaled $3.3 million in Q1 2019 compared to $3.0 million in Q1 2018, due primarily to higher sales for aftermarket natural gas turbine content.  The operating loss was $.3 million in both periods, as the favorable impact of lower amortization expense was offset by a lower margin revenue mix.  The net loss for the Process Systems segment was $.3 million in Q1 2019, compared to a net loss of $.1 million in Q1 2018. The Process Systems segment reported $.2 million of Non-GAAP adjusted EBITDA loss for Q1 2019 compared to Non-GAAP adjusted EBITDA of $.1 million in Q1 2018 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release).

CorporateCorporate and other expenses totaled $1.4 million in Q1 2019, down from $1.5 million in Q1 2018. The decrease was due primarily to lower insurance expense, partly offset by increased incentive compensation expense.  

Cash and Liquidity

During Q1 2019, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) increased to $17.6 million from $5.0M at year end 2018, as production levels increased to support higher scheduled tower deliveries. The cash conversion ratio increased sequentially, from 16 days at year end 2018 to 41 days, predominantly driven by the increase in operating working capital.

Capital expenditures, net of disposals, in Q1 2019 totaled $.6 million.

Debt and capital leases totaled $25.7 million at March 31, 2019.  The Company’s $35 million line of credit with CIBC had a balance of $22.2 million at March 31, 2019 and $7.5 million of availability.

The Company adopted Accounting Standards Codification 842, related to new lease accounting standards, on January 1, 2019, recognizing operating lease liabilities totaling $19.1 million and a corresponding right of use asset of $17.2 million. 

Cash assets (cash and short-term investments) remained near zero as expected because the Company’s cash and receipts are automatically applied to the outstanding credit line balance consistent with the terms of the line.

About Broadwind Energy, Inc.Broadwind Energy (NASDAQ: BWEN) is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. From gears and gearing systems for wind, oil and gas and mining applications, to wind towers and industrial weldments, we have solutions for the clean tech, energy and infrastructure needs of the future. With facilities throughout the U.S., Broadwind Energy's talented team is committed to helping customers maximize performance of their investments—quicker, easier and smarter. Find out more at www.bwen.com

Forward-Looking StatementsThis release contains “forward looking statements”—that is, statements related to future, not past, events—as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. Forward looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward looking statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “plan” and similar expressions, but these words are not the exclusive means of identifying forward looking statements.

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards; (ii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units; (iii) our ability to continue to grow our business organically and through acquisitions; (iv) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows; (v) the sufficiency of our liquidity and alternate sources of funding, if necessary; (vi) our ability to realize revenue from customer orders and backlog; (vii) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (viii) the economy and the potential impact it may have on our business, including our customers; (ix) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (x) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xi) the effects of the change of administrations in the U.S. federal government; (xii) our ability to successfully integrate and operate companies and to identify, negotiate and execute future acquisitions; (xiii) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended; (xiv)  the limited trading market for our securities and the volatility of market price for our securities; and (xv) the impact of future sales of our common stock or securities convertible into our common stock on our stock price. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change.

BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(IN THOUSANDS)(UNAUDITED)

						March 31,				December 31,
							2019				2018
	ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents				$	37			$	1,177
		Accounts receivable, net					22,509				17,455
		Inventories, net					32,944				22,670
		Prepaid expenses and other current assets					1,706				1,776
			Total current assets				57,196				43,078
	LONG-TERM ASSETS:
		Property and equipment, net					48,472				49,087
		Other intangible assets, net					6,399				6,602
		Other assets					357				398
		Operating lease right-of-use assets					17,155				-
	TOTAL ASSETS					$	129,579			$	99,165
	LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Line of credit and other notes payable				$	23,199			$	11,930
		Current portion of finance lease obligations					894				967
		Current portion of operating lease obligations					1,726				-
		Accounts payable					20,091				11,618
		Accrued liabilities					4,127				3,806
		Customer deposits					17,755				23,507
		Current liabilities held for sale					26				27
			Total current liabilities				67,818				51,855
	LONG-TERM LIABILITIES:
		Long-term debt, net of current maturities					1,185				1,408
		Long-term finance lease obligations, net of current portion					408				571
		Long-term operating lease obligations, net of current portion					17,341				-
		Other					65				1,969
			Total long-term liabilities				18,999				3,948
	COMMITMENTS AND CONTINGENCIES
	STOCKHOLDERS' EQUITY:
		Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued
		or outstanding					-				-
		Common stock, $0.001 par value; 30,000,000 shares authorized; 16,259,642
		and 15,982,622 shares issued as of March 31, 2019 and
		December 31, 2018, respectively					16				16
		Treasury stock, at cost, 273,937 shares as of March 31, 2019 and December 31, 2018,
		respectively					(1,842	)			(1,842	)
		Additional paid-in capital					381,883				381,441
		Accumulated deficit					(337,295	)			(336,253	)
			Total stockholders' equity				42,762				43,362
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY					$	129,579			$	99,165

BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

					Three Months Ended March 31,
						2019				2018
	Revenues				$	41,660			$	29,967
	Cost of sales					38,111				29,984
	Restructuring					12				115
	Gross profit (loss)					3,537				(132	)
	OPERATING EXPENSES:
	Selling, general and administrative					3,828				3,898
	Intangible amortization					203				471
	Restructuring					-				36
		Total operating expenses				4,031				4,405
	Operating loss					(494	)			(4,537	)
	OTHER (EXPENSE) INCOME, net:
	Interest expense, net					(536	)			(298	)
	Other, net					(2	)			(3	)
		Total other income (expense), net				(538	)			(301	)
	Net loss before provision (benefit) for income taxes					(1,032	)			(4,838	)
	Provision (benefit) for income taxes					11				(27	)
	LOSS FROM CONTINUING OPERATIONS					(1,043	)			(4,811	)
	INCOME (LOSS) FROM DISCONTINUED OPERATIONS					1				(27	)
	NET LOSS				$	(1,042	)		$	(4,838	)
	NET LOSS PER COMMON SHARE - BASIC:
	Loss from continuing operations				$	(0.07	)		$	(0.32	)
	Income (loss) from discontinued operations					0.00			$	0.00
	Net loss				$	(0.07	)		$	(0.32	)
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC					15,786				15,257
	NET LOSS PER COMMON SHARE - DILUTED:
	Loss from continuing operations				$	(0.07	)		$	(0.32	)
	Income (loss) from discontinued operations					0.00				0.00
	Net loss				$	(0.07	)		$	(0.32	)
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED					15,786				15,257

BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS)(UNAUDITED)

					Three Months Ended March 31,
						2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(1,042	)	$	(4,838	)
	Income (loss) from discontinued operations					1			(27	)
	Loss from continuing operations					(1,043	)		(4,811	)
Adjustments to reconcile net cash used in operating activities:
		Depreciation and amortization expense				1,761			2,357
		Deferred income taxes				(9	)		(27	)
		Stock-based compensation				255			262
		Allowance for doubtful accounts				(14	)		(15	)
		Common stock issued under defined contribution 401(k) plan				187			167
		Gain on disposal of assets				(1	)		-
		Changes in operating assets and liabilities, net of acquisition:
			Accounts receivable			(5,040	)		(2,266	)
			Inventories			(10,274	)		(2,577	)
			Prepaid expenses and other current assets			70			21
			Accounts payable			8,132			2,956
			Accrued liabilities			321			1,653
			Customer deposits			(5,752	)		197
			Other non-current assets and liabilities			57			(1,210	)
Net cash used in operating activities of continued operations						(11,350	)		(3,293	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment					(577	)		(229	)
	Proceeds from disposals of property and equipment					1			-
Net cash used in investing activities of continued operations						(576	)		(229	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from line of credit					42,440			32,886
	Payments on line of credit					(31,191	)		(29,202	)
	Payments on long-term debt					(228	)
	Principal payments on capital leases					(236	)		(187	)
Net cash provided by financing activities of continued operations						10,785			3,497
									-
DISCONTINUED OPERATIONS:
	Operating cash flows					1			(27	)
Net cash provided by (used in) discontinued operations						1			(27	)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						(1,140	)		(52	)
CASH AND CASH EQUIVALENTS beginning of the period						1,177			78
CASH AND CASH EQUIVALENTS end of the period					$	37		$	26
Supplemental cash flow information:
	Interest paid				$	274		$	233
Non-cash activities:
	Issuance of restricted stock grants				$	255		$	262

BROADWIND ENERGY, INC. AND SUBSIDIARIESSELECTED SEGMENT FINANCIAL INFORMATION(IN THOUSANDS)(UNAUDITED)

			Three Months Ended
			March 31,
				2019				2018
ORDERS:
	Towers and Heavy Fabrications		$	12,510			$	9,804
	Gearing			7,135				15,366
	Process Systems			4,361				2,971
	Total orders		$	24,006			$	28,141
REVENUES:
	Towers and Heavy Fabrications		$	28,294			$	18,196
	Gearing			10,027				8,805
	Process Systems			3,339				2,966
	Corporate and Other			-				-
	Total revenues		$	41,660			$	29,967
OPERATING (LOSS)/PROFIT:
	Towers and Heavy Fabrications		$	(222	)		$	(2,096	)
	Gearing			1,387				(626	)
	Process Systems			(285	)			(301	)
	Corporate and Other			(1,374	)			(1,514	)
	Total operating (loss)/profit		$	(494	)		$	(4,537	)

Non-GAAP Financial Measure The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, and stock compensation) as supplemental information regarding the Company’s business performance. The Company’s management uses adjusted EBITDA when it internally evaluates the performance of the Company’s business, reviews financial trends and makes operating and strategic decisions. The Company believes that this non-GAAP financial measure is useful to investors because it provides investors with a better understanding of the Company’s past financial performance and future results allows investors to evaluate the Company’s performance using the same methodology and information as used by the Company’s management. The Company's definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

BROADWIND ENERGY, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURES (IN THOUSANDS)(UNAUDITED)

	Consolidated			Three Months Ended March 31,
					2019				2018
	Loss from continuing operations			$	(1,043	)		$	(4,811	)
	Interest Expense				537				299
	Income Tax Provision/(Benefit)				12				(27	)
	Depreciation and Amortization				1,761				2,357
	Share-based Compensation and Other Stock Payments				436				428
	Restructuring Costs				12				152
		Adjusted EBITDA (Non-GAAP)		$	1,715			$	(1,602	)

 

	Towers and Heavy Fabrications Segment		Three Months Ended March 31,
				2019				2018
	Net Loss		$	(235	)		$	(1,708	)
	Interest Expense			66				31
	Income Tax (Benefit)			(53	)			(419	)
	Depreciation and Amortization			1,095				1,320
	Share-based Compensation and Other Stock Payments			165				152
	Restructuring Expense			12				152
	Adjusted EBITDA (Non-GAAP)		$	1,050			$	(472	)

 

	Gearing Segment		Three Months Ended March 31,
				2019				2018
	Net Income/(Loss)		$	1,300			$	(631	)
	Interest Expense			83				3
	Income Tax Provision			4				2
	Depreciation and Amortization			482				591
	Share-based Compensation and Other Stock Payments			92				66
	Adjusted EBITDA (Non-GAAP)		$	1,961			$	31

 

	Process Systems		Three Months Ended March 31,
				2019				2018
	Net Loss		$	(278	)		$	(51	)
	Interest Expense			1				-
	Income Tax (Benefit)			(9	)			(253	)
	Depreciation and Amortization			122				387
	Share-based Compensation and Other Stock Payments			13				19
	Adjusted EBITDA (Non-GAAP)		$	(151	)		$	102

 

	Corporate and Other		Three Months Ended March 31,
				2019				2018
	Loss from continuing operations		$	(1,830	)		$	(2,421	)
	Interest Expense			387				265
	Income Tax Provision/(Benefit)			70				643
	Depreciation and Amortization			62				59
	Share-based Compensation and Other Stock Payments			166				191
	Adjusted EBITDA (Non-GAAP)		$	(1,145	)		$	(1,263	)

BWEN INVESTOR CONTACT: Jason Bonfigt, 708.780.4821 jason.bonfigt@bwen.com